Confidence in the North Sea oil and gas industry has plummeted to a record low with two- thirds of operators being forced to cancel projects because of the fall in the price of oil, a new survey has revealed.
The bleak picture is outlined in the 22nd Oil and Gas study conducted by Aberdeen and Grampian Chamber of Commerce, which claims the industry is in a “mid-life crisis”.
It shows that confidence in the UK Continental Shelf (UKCS) was now at its lowest ever point since the influential twice-yearly survey began in 2004.
The drastic fall in oil prices, it says, has been the major contributory factor to the reduction in activity levels within the sector.
James Bream, research and policy director at the Chamber of Commerce, said: “Confidence levels are at an all-time low and we are now experiencing our first ‘recession of confidence’, and it looks gloomy in the year ahead, too.
“However, we have seen positive tax changes. There is lots to build on and just perhaps it is possible that we are seeing the start of the next phase in our role at the frontier of the oil and gas sector.”
He added: “Can we grasp the opportunity to lead the way in decommissioning practices and become a new high-efficiency basin as we mature faster than others? This is a mid-life crisis in the UKCS but as some people say life begins at 50.”
The oil price yesterday remained at around $60 a barrel, compared to well over $100 a year ago.
Earnings for companies that have made record profits in recent years have fallen, forcing them to decommission rigs and sharply cut investments in exploration and production. Thousands of jobs have also been lost as a result.
The price of a barrel of oil, which has been cut roughly in half since last June, has reached levels which were last seen during the depths of the 2009 recession.
The Chamber of Commerce survey, carried out in partnership with law firm Bond Dickinsons, does however reveal an increase in decommissioning activity, which is described as a “bittersweet positive”.
The survey approached 700 operator, contractor and service companies in March and April. It asked about the consequence of the falling oil price on the behaviour of companies, with two-thirds of operators and one-third of contractors selecting the “cancel projects” option.
The percentage of firms that report working at or above optimum levels in the UKCS has also fallen to its lowest level since the survey began in 2004.
Just one in five contractors (21 per cent) is working at or above optimum levels, down from 47 per cent in the previous survey and just over half (52 per cent) report working at or above optimum levels in overseas markets, down from 72 per cent.
Exploration has been a big casualty of the challenges facing the industry.
One respondent cautioned that further stimulus for exploration and investment was required, “without which there will be no new projects and decommissioning will accelerate thus removing infrastructure and opportunity for good”.