The Courier & Advertiser (Angus and Dundee)
Growth on radar after tough times for oil and gas Improved conditions for energy firms despite cost concerns
The UK’s oil and gas industry is eyeing a growth rebound despite concerns over rising costs and the impact of Brexit uncertainty.
Nearly 60% of businesses expect to expand this year, while optimism has surged to 39% from 2% in 2016, according to the Bank of Scotland’s latest Oil and Gas Report.
Companies in the energy sector have seen their financial performance suffer and have been forced to slash their work forces after the oil price failed to recover from a collapse three years ago.
However, the report said the rate of job losses was starting to ease, with the number of companies looking to trim staff over the next 12 months dropping to a fifth from a third last year.
More than half of companies are also looking to create more jobs in the year ahead, it added.
Stuart White, Bank of Scotland regional director for mid markets North of Scotland, said the jump in optimism proved the industry was one of the most resilient in the UK.
He said: “The expression of confidence in this year’s survey reflects an industry that appears to be turning a corner, with conditions for growth more favourable than they have been in recent times.”
Despite the brighter outlook, firms flagged a number of factors that could threaten growth.
Nearly half of companies said rising production costs posed the greatest challenge to the industry, while 35% warned over the fallout of Britain’s Brexit negotiations and 44% expressed concern about sterling’s slump.
“There are still choppy waters to navigate, with political uncertainty at home and abroad, but we remain confident in the sector,” Mr White added.
The price of oil has plummeted from its peak of $115 US dollars in 2014 to its current level of around $46 US dollars.
The Opec oil cartel and big producers such as Russia have tried to support prices by curbing production, but the cost of Brent crude dived back below $50 a barrel in recent weeks due to political tensions in the Middle East.
Close to a third of firms said the weak oil price hit their business “severely or quite badly” in the past year, the report said.
However, 27% of companies are still expecting to grow organically this year, while 22% are looking to expand via diversification and 9% through mergers and acquisitions.
Focusing on the North Sea, 15% of firms said they would bolster their operations in the area over the course of the next one to two years.
Paul de Leeuw, director of the Oil and Gas Institute, added: “The relentless focus on cost and efficiency inevitably moved the agenda towards short-term delivery.
“This year’s survey is showing a more positive outlook for the UK oil and gas industry.”