Optimism of North Sea Contractors

A recent survey has shown Contractors are becoming more optimistic about the future of the North Sea oil and gas industry as petroleum prices rise irrespective of no improvement in trading conditions.

These were the main findings of the newly published survey included companies with more than 600,000 employees and more than 50,000 in the UK (conducted by Aberdeen and Grampian Chamber of Commerce together with the University of Strathclyde's Fraser of Allander Institute).

It comments that growing optimism among contractors was reflected in the rise in activity in the UK Continental Shelf during the next year by half of the operators who responded to the survey. The survey was undertaken when the oil price stood at $46, having since risen to in excess of $50 a barrel. Whilst overall activity is higher than in the past two years, it is still lower than in the previous decade.

The emphasis among operators is on increasing production rather than exploration and development, though several contractors anticipate some increase in exploration activity over the next year. The survey also reported that more than 40% of contractors reported operating below optimum levels, and the overall level of UKCS based activity was one of the most frequently mentioned business concerns being cited by 10 of the largest 21 contractor respondents. They also commented there was seen to be 'a continued lack of spend by the majors in the UKCS' and a 'lack of clarity on development activity' leading to 'increasing pressure from group divisions for access and utilisation of UK based assets'.

Some concerns highlighted were that if the "oil price drops, operators will dramatically cut activity." Nine of the largest contractors thought some form of policy, fiscal or licence changes were necessary to encourage, sustain and increase exploration and production activity.

Geoff Runcie, the chief executive of Aberdeen and Grampian Chamber of Commerce, expressed disappointment the energy minister had changed again in a ministerial reshuffle. He also expressed concern that an impending election and high oil prices might encourage the government to take no action rather than stimulate activity. "The chamber is very disappointed that the government has reshuffled the energy brief again, which will almost inevitably mean a delay to any action by the minister to encourage greater exploration activity. We note too that the high oil price also benefits the UK exchequer so perhaps these two factors suggest that government action is unlikely in the short term."

Added to site on 29/10/04

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