Confidence levels across North Sea fall to lowest ever

Four in five contractors questioned for the 23rd Oil and Gas Survey said they are less confident in their prospects than they were a year ago, compared to just 1 per cent who were more confident.

Almost six out of ten firms (58 per cent) believe the number of jobs axed in the wave of redundancies across the sector was excessive, risking the loss of key skills and competitive advantage.

While experts said the survey’s findings were the most negative since it began, they also detected “some glimmers of hope” and insisted a long-term future still exists for the sector.

The survey, conducted by Aberdeen and Grampian Chamber of Commerce, along with the Fraser of Allander Institute and sponsored by law firm Bond Dickinson, found some 64 per cent of firms reduced their workforce this year compared to just 14 per cent who increased numbers. Overall, 85 per cent of respondents said they think job losses will continue over the next year.

The response to the wave of redundancies across the industry was mixed. While more than half of firms (54 per cent) agree the cuts were a strategic response to make the industry fit for the future, a similar percentage – 58 per cent – also believe the level of redundancies was excessive.

In other findings, the report recorded the lowest level of firms working at or above optimum levels in the UK Continental Shelf (UKCS) since the survey started.

Just 16 per cent of contractors report working at or above optimum levels, down from 21 per cent in the previous survey. In the face of the challenging economic environment, North Sea businesses are said to be giving serious consideration to alternative revenue streams.

Some 78 per cent of firms said they expect to be more involved in decommissioning work in the next three to five years while nearly half expect greater involvement in renewables.

James Bream, research and policy director at the chamber, said: “The low confidence levels being reported come as no surprise and the outlook suggests there will be more pain ahead for the sector.

“However, if we are not complacent, a long-term future still exists for the sector and players such as the Oil & Gas Authority will have a major role alongside the industry itself.

“The fact is that the UKCS is a frontier basin and always has been. This provides a unique set of opportunities which can continue to allow our supply chain to be active around the globe, but this success is not guaranteed.”

Uisdean Vass, oil and gas partner at Bond Dickinson, said there were “some glimmers of hope”, noting: “Over the next three years 28 per cent of contractors expect their numbers of core staff to increase. Neither contractors nor operators see the North Sea disappearing.”