North Sea Confidence At "All Time Low"
26 November 2015, 06:00
Confidence levels among oil and gas contractors working in the North Sea have hit an all-time low, with a large majority believing job losses will continue over the next year, an industry report has found.
Four in five contractors surveyed say they are less confident in their prospects than they were a year ago, compared to just 1% who were more confident.
Almost six out of 10 firms (58%) 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 in 2004, they also detected "some glimmers of hope'' and insisted a long-term future still exists for the sector.
The results were contained in the 23rd Oil and Gas Survey, conducted by Aberdeen and Grampian Chamber of Commerce, along with the Fraser of Allander Institute and sponsored by law firm Bond Dickinson.
The survey found some 64% of firms reduced their workforce this year compared to just 14% who increased numbers.
Overall, 85% 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%) agree the cuts were a strategic response to make the industry fit for the future, a similar percentage - 58% - 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% of contractors report working at or above optimum levels, down from 21%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% of firms questioned 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 work.
James Bream, research and policy director at the Chamber of Commerce, 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: "This is probably the most negative survey we have ever had and while there is little to be positive about in the short-term, there are some glimmers of hope.
"Over the next three years 28% of contractors expect their numbers of core staff to increase. Neither contractors nor operators see the North Sea disappearing.''
The survey was carried out between September 7 and 25. It represents the views of 132 firms employing a total of 78,000 employees in the UK.