The Press and Journal (Aberdeen and Aberdeenshire)
Subsea sector warning of pressure on margins
Oil and gas: Operators are told squeezing ‘fragile’ firms is unsustainable
Subsea technology and service firms could turn their backs on oil and gas work if customers keep heaping pressure on margins, an industry chief has warned.
Neil Gordon, chief executive of industry body Subsea UK, said operators and large contractors were, in some
“A growing malaise and accusations of bad behaviours”
cases, seeking large pricing and rates reductions from suppliers during the latest downcycle.
He said the approach was “unsustainable”, “shortsighted” and added to a “growing malaise and accusations of bad behaviours”.
Mr Gordon highlighted the risk of pushing “fragile” firms, which are only just emerging from the downturn which struck in 2014, to “breaking point”.
A number of oil industry figures have spoken out about the need to protect the interests of suppliers.
He urged smaller subsea firms ill-equipped to deal with unreasonable discount demands to “get better at selling their value and articulating their compelling proposition”.
But he warned that the oil and gas industry, which has an “image problem among the public”, could not afford to “further alienate” its subsea supply chain.
He said the subsea sector was increasing its foothold in other industries every year and could “shift away” from oil and gas if behaviours don’t improve.
Mr Gordon said: “The latest findings in our Subsea Business Review revealed that almost a quarter of the sector’s £7.8 billion output is generated from renewables, with revenues from aquaculture, defence and subsea mining also rising.”
He called for more constructive contract discussions, adding: “The focus should be more around cost efficiency and generating additional value, and much less about squeezing margins, especially when there is nothing left to squeeze.”