Engineering news
Three in four North Sea oil & gas contractors are less confident about their prospects than they were a year ago, according to a new industry report.
The survey found that 75% of contractors surveyed said they were less confident in their prospects on the UK Continental Shelf (UKCS) compared to just 7% that are more confident.
The findings, from the 24th Oil and Gas Survey conducted by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute, also revealed a bleak employment situation in the sector.
Oil & gas operators say they have seen a 15% reduction in their UK-based headcount over the past 12 months, and expect a further reduction of 17% over the coming year.
Meanwhile, 42% of firms in the sector cite increasing efficiency and productivity as their main priority, 23% cite cutting costs as their number one priority.
Just 14% of contractors report that they are working at or above optimum levels in the UKCS, a huge decline since the 79% reported just three years ago.
Russell Borthwick, chief executive at Aberdeen & Grampian Chamber of Commerce, said: “Respondents have reported falls in activity, but a slightly higher number are working at capacity internationally. Looking a year ahead, there is perhaps a shard of light as confidence looks relatively higher for international markets.
“In the previous two surveys we carried out, we found confidence had hit record lows, with an all-time low in November 2015. This time, while the figure is still firmly in negative territory, it has marginally improved, which may perhaps show we are near the bottom of the curve.”
The survey found that 85% of contractors expect to increase their involvement in decommissioning work over the next three to five years, up from 79% in the previous survey and the highest figure since this question was first asked in 2010.
Level of demand (94%), commodity price (95%) and economic climate (95%) are seen as the most important factors constraining contractors’ UKCS activity, followed by complex regulations (68%), taxation issues (70%) and costs of capital (71%).
Skills shortages were seen as a limiting issue by 50% of contractors, and the loss of staff to other companies by 43%.
These constraints have contributed to a decline in investment expenditure. In the past 12 months, 44% of contractors have reduced their overall investment against just 11% who have increased it.
This trend is expected to continue, with 42% of contractors expecting to reduce their investment over the next two years, compared to just 12% who expect to increase it.
Nearly half of respondents (45%) said it is difficult to reach a clear view about whether a vote in favour of exiting the European Union would be a positive development for the oil & gas sector or not, and a further 20% said it would make little difference to the sector.
Of those who expressed a firm opinion, the feeling was that remaining in the EU would be the best outcome, with 27% of respondents saying a Brexit would be unhelpful, compared to 8% who believed it would be a positive development.