THE North Sea is facing a potential economic triple-whammy and may need to make “complex and difficult” changes in light of the plummeting price of oil, a new report has warned.
The sector is in a “painful situation” as a result of low oil prices being “sustained for longer than anticipated”, the PwC report said.
The authors warned continued falling prices could lead to less investment, culminating in accelerated decommissioning at oil fields.
The report argued there could still be long-term opportunities for the oil and gas industry, but added that companies would need to “transform the way they operate to meet the challenge”.
Brian Campbell, oil and gas capital projects director at PwC and co-author of the report, said: “The stark reality is that firms need to be able to operate in an environment where oil averages at $50 per barrel – only then can it be truly fit for the future.
“We’ve been talking about cost reduction and restructuring within the industry for several years now and the harsh truth is that if many larger exploration and production and oil field services firms had implemented programmes before the oil price crisis hit, then the industry would be in a much better place to weather the storm that is currently raging.
“But it’s not too late to glean some good out of adversity and for businesses to work together to create their own new dawn for the North Sea.”
With energy companies looking to cut costs in the wake of lower prices per barrel, firms have been considering measures such as reducing staff numbers, along with renegotiating rates with contractors and oil services providers, the report said.
Companies must answer “hard questions” about whether they can continue to invest in the sector, or instead “move on”.