The embattled UK oil and gas sector faces further cuts after two-thirds of businesses have already shed staff this year but signs are starting to emerge of improving confidence, a report today suggests.
The 25th Oil and Gas Survey found there has been no slowing in the job losses in the industry in 2016 and that more contractors have reduced both their permanent and contract staff than at any other point in the history of the research.
People are slightly more optimistic but the improvement is from a very low pointUisdean Vass
Fewer are also working at or above optimum levels than ever before according to the study, undertaken by Aberdeen & Grampian Chamber of Commerce alongside the Fraser of Allander Institute.
Although more than two-thirds of employers cut staff over the past year – by 15 per cent for operators and 7 per cent for contractors – there are some positive signs that the rate of job losses could slow in the year ahead. Six months ago, operators were predicting a 17 per cent reduction in numbers which has now fallen to 5 per cent, with a similar reduction from 2 per cent to 1 per cent by contractors.
Confidence levels have also improved for both the UK Continental Shelf (UKCS) and internationally over the past 12 months, albeit from the lowest point since the first survey in 2004.
Some 12 per cent of contractors are more confident about their activities in the UKCS in the current year, compared with 7 per cent in May, while 47 per cent – down from 75 per cent – are less confident.
Optimism over international activities has also improved in the past six months. Two out of three respondents believe the sector has already reached the bottom of the current cycle, or will do so within the next year, and a further 25 per cent feel it will be within the next one to two years.
The survey results came as a report by KPMG forecast a “modest upturn” in oilfield services M&A activity in 2017-18 as businesses move out of survival mode and look to the future.
Uisdean Vass, oil and gas partner at Bond Dickinson, which sponsored the oil and gas survey, said the findings suggested “the green shoots of recovery may be beginning to push through”.
“People are slightly more optimistic about the future for both the UKCS and the international oil industry but the improvement is from a very low point,” he said.
“The industry has had to adapt and embrace change and agility and companies are emerging from the oil slump as far leaner operations that are more competitive on price and performance.”
Meanwhile, oil giant BP yesterday announced it had acquired interests in two North Sea exploration projects.
It has acquired a 25 per cent interest in two Statoil-operated licences east of Shetland, which include the Jock Scott prospect and a 40 per cent interest in a Nexen-operated licence, which includes the Craster prospect, west of Shetland.