UK oil and gas sector cautiously optimistic and 'on cusp of dramatic transformation'

Newly-revealed data on the UK oil and gas industry shows it is “on the cusp of dramatic transformation” as it both rebounds from the impact of the coronavirus pandemic and positions itself for a greener future.

The 33rd Oil and Gas survey, conducted by Aberdeen & Grampian Chamber of Commerce’s Research Chamber in partnership with the Fraser of Allander Institute and KPMG UK, “paints a picture of fragile optimism and strong leadership” among firms in the sector.

It found that two fifths of businesses surveyed said they plan to accelerate their diversification post Covid-19 with interest in the renewables sector reaching a ten-year high, while about half expect to recruit in the next 12 months.

The survey was conducted in March, representing the views of 100 firms with 27,400 employees altogether across the UK and more than 183,000 globally.

The survey by Aberdeen & Grampian Chamber of Commerce 'shows that the industry remains resilient and proactive in embracing change'. Picture: Craig Stephen.

The survey highlighted how the challenges faced over the past year are mirrored in the reduced level of reported activity in production and exploration work. The net balance reported for production-related activity came in at -15 per cent, although that marked an improvement from the -47 per cent reported in 2020.

However, the findings, which cover the six months to April, show contractor confidence in the UK Continental Shelf (UKCS) has significantly improved from a net balance of -76 per cent reported six months ago – when nearly six in ten contractors expected the outlook to worsen – to +6 per cent.

Martin Findlay, senior partner at KPMG in Aberdeen, deemed the improvement in this metric “incredibly reassuring”.

He also said it was a “common misconception” that oil and gas was behind “much of the climate crisis we face, when it’s actually often the driving force behind a potential renewables revolution”.

Additionally, he pointed out that 75 per cent of contractors surveyed said they’re likely to become more involved in UKCS renewables work over the coming three to five-year period.

“That’s the highest level recorded since the question was introduced in 2015,” he said.

"Contractors also told us oil and gas activity would account for less than three quarters of their business activity by 2025 – down from the current average of 86 per cent.”

Targets

When asked about plans to reach net zero, around a quarter of firms have set their own carbon neutral target, with 3 per cent already having achieved it.

Mr Findlay said: “The industry is on the cusp of transformation and much of our findings reflect the collective sense of anticipation. It certainly feels that in Aberdeen we are heading towards the ‘new normal’ after a long period of reliance on carbon-based energy sources.”

Shane Taylor, policy manager at Aberdeen & Grampian Chamber of Commerce, said: “We expect the outlook to strengthen as government and industry look to invest in the sector’s pivotal role in achieving our net-zero ambitions."

Furthermore, UK Government Minister for Scotland David Duguid welcomed the report, stating: “Scotland's energy sector is vital, not just to the north-east of Scotland, but to the wider UK economy.

"The industry's focus on diversification will help ensure we are able to meet our net-zero target, while protecting jobs across the country as part of our plan to build back better with a greener, cleaner economy.”

A message from the Editor:

Thank you for reading this article. We're more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers.

If you haven't already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription.