Confidence among North Sea players stages turnaround

● Report suggests ‘worst is likely to be over’ but activity and revenues still low

evidence of a measured rebound in North Sea activity emerged today as contractor confidence hit a level not seen for four years.

For the first time since 2013 half of contractors are more confident about activity within the UK Continental Shelf (UKCS), the findings of the 27th oil and gas survey, conducted by Aberdeen & Grampianchamberofcommercein partnership with the Fraser of Allander Institute and KMPG, reveal.

The 49 per cent of contractors surveyed stating they were more optimistic about their activities in the current year was up from the 38 per cent recorded in the spring survey.

The latest study looked at work in the six months to October, asking firms about their prospects in the year ahead as well as the next three to five years in order to assess trends in exploration and proures duction, decommissioning, renewable and unconventional oil and gas extraction activities, both in the UK and international markets.

It comes after an industry expert said this week that spending on decommissioning in the UK sector of the North Sea could total £17 billion over the next eight years.

Mike Tholen, of Oil and Gas UK, said that was the figure which was expected to be spent on such work in the UKCS between now and 2025.

The share of contractors working at, or above, optimum levels in their UKCS operations peaked at 79 per cent in 2013 and has been declining steadily over the last three years to a low of 12 per cent last year, according to the Aberdeen & Grampian Chamber of Commerce.

However the latest results show this has improved, with 27 per cent of contractors now identifying that they are working at, or above, their optimum levels in the UK.

The trend in skilled workers leaving the industry continues, meanwhile, although figfresh suggest it has eased marginally, down to 38 per cent from 43 per cent at the same time last year.

Looking ahead, the sector is planning to diversify further with 82 per cent of business currently being undertaken focused on oil and gas, but with an expectation of this proportion being 72 per cent by 2025.

James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce, said: “The underlying data suggests that rather than an industry with ‘cautious optimism’ we actually see a picture of significant diversity with some companies buoyant and performing well while others remain fragile.

“It does look like the worst is likely to be over, at an aggregate level, with 60 per cent of firms believing that the industry has already reached the bottom of its current cycle and a further 24 per cent predicting this will happen within the next 12 months.

“However, as activity levels and revenue remain lower for many compared to three years ago business models for some may be simply unsustainable.”