Oil Sector Confidence Increasing

Confidence in the oil sector is increasing, according a new industry survey by Aberdeen & Grampian Chamber of Commerce (AGCC).


The AGCC’s Oil & Gas Survey, released on the 30th November, revealed that 60 percent of the 95 firms questioned believed the sector had already reached the bottom of its current cycle. Fifty-two percent believed the same sentiment in spring this year and 29 percent in autumn 2016.


Of those who thought the worst was still to come, 24 percent forecasted that this would happen within the next 12 months and 11 percent anticipated that it would happen within one to two years. Only six percent felt that it would take longer.


The report also showed that contractors are becoming more optimistic about their prospects in the UK Continental Shelf (UKCS); 49 percent of those surveyed suggested they were more confident about their activities in the region in the current year, compared with 38 percent in the spring.


Employment and labour market issues in the UK oil and gas sector were also explored in the latest AGCC survey, which found that less than a quarter (23 percent, 2016: 68 percent) of contractors reduced their employment in 2017, while almost half (47 percent, 2016: 24 percent) held employment stable. A total of 30 percent (2016: 8 percent) increased employment.


Looking ahead, the survey suggests a continued positive outlook with a net balance of contractors (36 percent) expecting a rise in UK-based employment across both permanent and contract staff.


“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,” said James Bream, research and policy director at AGCC, in an organisation statement.


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


Moray Barber, partner at KPMG, which partnered with AGCC on the survey, said the report provides some reassurance that the industry, in general, is in a more stable condition.


“Companies have been fully focused on driving efficiency across all business areas, which has included a period of intense cost cutting and, in some cases, a complete reassessment

of the effectiveness of current business models to survive the lower for longer oil price,” Mr Barber said in a company statement.


“Having come through a more productive phase of value creation and new ways of working, it is encouraging to see that 60 percent of companies in this survey believe that the industry has already reached the bottom of its current cycle,” he added.


Commenting on the survey, Deirdre Michie, chief executive of industry body Oil & gas UK, said it was heartening to see another report indicating that confidence is returning to the UKCS.


“Oil & Gas UK believes there is more optimism surrounding the future of the basin and this is partly reflected in the significant merger and acquisition activity we’ve been seeing over the past year,” Ms Michie said in a statement.


“That said, we can’t be complacent, as there are parts of the supply chain still finding it very tough. So that’s why we must maintain our focus on sustaining our efficiency improvements and making the North Sea as competitive as it can be,” she added.