Oil And Gas Firms Planning Expansion

13 March 2015, 06:00

Nine out of 10 gas firms operating in the UK are planning to expand in the next year, despite the slump in prices, a new report has revealed.

Research by the Bank of Scotland found that companies on average expected the price of Brent Crude to increase to 55 US dollars (£36) a barrel by January next year, but said this was "not necessarily the most significant challenge facing the industry as a whole''.

While some major firms in the sector had already announced job losses in the wake of the plunging oil price, the bank's latest oil and gas report said firms expected just under 8,000 jobs to be created in the sector in the next two years.

A total of 101 oil and gas companies with operations in the UK were surveyed for the research, with 92% saying they were planning to grow their business during 2015 - up from 69% the previous year.

A quarter of firms are looking to merge with or acquire another firm, up from a tenth 12 months ago.

At the same time all but 9% of firms are looking to expand their international business in 2015.

A total of 73 of the 101 firms questioned expected to increase their workforce, with only nine expecting this to fall and 19 not anticipating any change in headcount.

The report added: "Four companies expected to create between 500 and 1,000 jobs, and one firm more than 1,000 posts.

"When the estimates of net job gains and losses by the 101 firms surveyed are summed, a net total of just under 8,000 jobs is expected to be created.''

While this contrasts with concerns of "gloomy employment prospects in the industry'', the total is down by a fifth from the 9,725 jobs that have been created in the last two years.

Although it is obvious "that the North Sea industry faces serious challenges'', the research found that when firms were asked to identify their three biggest worries for the future, commodity price was fifth, with 28% of companies mentioning it.

The most common concern was the increased cost of production, with this raised by 35% of firms, followed by the lack of skilled workers and the exchange rate, which were both cited by 30%, while 29% of firms are concerned about the ageing workforce.

"Despite the price of Brent crude at the time of the survey being at a six-year low of 50 US dollars (#33) per barrel, this was not necessarily the most significant challenge facing the industry as a whole,'' the report suggested.

A fifth (21%) of firms also said the taxation regime was one of their worries.

Stuart White, area director of commercial banking at Bank of Scotland, said: "While it is obvious the North Sea is facing some serious challenges, this research paints a clear picture of a global industry which, having dealt with similar commodity price challenges in the past, is determined to come through fitter and stronger.

"Firms continue to be concerned by an ageing workforce and a lack of skills, which explains why the industry is determined to get through the current storm without major workforce reductions.

"North Sea firms are seen as world-leading, so it is therefore not surprising they are looking at international expansion opportunities where they can enjoy continued growth backed by the strong expertise they have developed here in the UK.''

He added: "Our client base mirrors these trends and we have seen a significant increase in our support to the industry in recent years to facilitate international expansion and this is something we expect to continue.

"Bank of Scotland will continue to work closely with the industry as it seeks to overcome the current challenges and ensure that this key UK industry continues to make its mark both at home and on the global stage.''