Optimism returns to North Sea energy sector as ‘corner turned’

The Cromarty Firth has long been used as an anchorage point for oil rigs. Picture: PA
The Cromarty Firth has long been used as an anchorage point for oil rigs. Picture: PA
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Optimism is returning to North Sea energy operators, with trends in “upstream” exploration and production activity the highest since 2014, an authoritative report out today shows.

UK Continental Shelf (UKCS) contractor investment is outweighing cost reductions, with firms also now equally optimistic about the North Sea and international markets for the first time since 2013, according to the 28th Oil and Gas survey, conducted by Aberdeen & Grampian Chamber of Commerce, KPMG and the Fraser of Allander Institute.

Overall, almost two thirds (64 per cent) of contractors are more confident about doing business than they were a year ago, with only 8 per cent being less confident.

This net balance of +56 per cent is greater than the +39 per cent recorded in the previous survey and the highest net positive balance since spring 2013. Seven in ten contractors (71 per cent) expect the momentum to continue.

The Oil and Gas report showed 70 per cent of firms are forecasting an increase in profits in 2018.

Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, said: “The oil and gas sector has faced up to some significant and structural challenges over recent years and is beginning to emerge fit for the future.

“Companies have and continue to adapt and adjust their approach to ensure the industry’s future viability with collaboration and co-operation as well as the implementation of new technology to improve efficiency being cited.

“It does appear that a corner has been turned but we must avoid complacency.”

For the first time since 2014 a net balance of +20 per cent of North Sea operators said there had been a a rise in the value of production activities, with 46 per cent forecasting a further increase in the year ahead.

The report said investment had recovered, with 41 per cent of contractors now working at or above optimum levels in the UKCS – the highest figure since autumn 2014. Meanwhile, more firms (30 per cent) increased their investment in the region in the last year than those who reduced their spend (21 per cent).

Today’s survey looked at work in the six months to March 2018, asking about firms’ plans in the year ahead as well as the next three to five years, to assess trends in exploration and production, decommissioning and other related oil and gas extraction activities both in the UK and internationally.

Moray Barber, partner at KPMG, said: “It is heartening to note the rising confidence the respondents have in the UKCS with nearly three quarters of the firms forecasting an increase in business optimism in the region.

“Over the last couple of years, the survey has showed us that firms have been more focused on international markets for business growth. However, the latest set of survey results indicates that there is now a rebalancing taking place, with our region becoming just as important again in terms of securing future growth.”

The report said most operators were forecasting a continuing slowdown in job reduction, while contractors in the supply chain reported a marginal rise (0.2 per cent) in headcount.