North Sea confidence plumbs the depths as sector is rocked by ‘ mid- life crisis’

The results of a new North Sea oil and gas industry survey have revealed a ‘recession of confidence’ in the sector.

The study conducted by Aberdeen and Grampian Chamber of Commerce showed confidence has plummeted to a record low with two thirds of operators being forced to cancel projects because of the drastic fall in the price of oil.

The bleak picture is outlined in the Chamber’s 22nd Oil and Gas survey, which describes the industry as being in a “mid- life crisis”, with confidence in the UK Continental Shelf ( UKCS) at its lowest ever point since the influential twice-yearly survey began in 2004.

Just one in five contractors (21 per cent) said they were working at or above optimum levels.

This was well down on the 47 per cent recorded in the previous survey.

Languishing oil prices are cited as the major contributory factor to the reduction in activity levels.

Yesterday the oil price remained at around $ 60 a barrel, compared to well over $ 100 a year ago.

The report said an increase in decommissioning work was “a bittersweet positive” as more than 80 per cent of contractors involved in that work seeing increases in their activity in the past 12 months.

This was contrasted with just 8 per cent of exploration firms saying they expected the value of their activity to increase in the coming year.

Meanwhile, tax issues were cited by 81 per cent of contractors as a constraint on their activity in the UKCS, up from 28 per cent in the last survey.

And there were also increases in the number of respondents reporting “complex regulations”, “cost of capital” and “access to capital” as constraints on their UKCS operations.

James Bream, research and policy director at the Chamber of Commerce, said: “Confidence levels are at an all- time low and we are now experiencing our first ‘recession of confidence’, and it looks gloomy in the year ahead, too.

“However, we have seen positive tax changes. There is lots to build on and just perhaps it is possible that we are seeing the start of the next phase in our role at the frontier of the oil and gas sector.”

He added: “Can we grasp the opportunity to lead the way in decommissioning practices and become a new high- efficiency basin as we mature faster than others? This is a mid-life crisis in the UKCS but as some people say life begins at 50.”

A Scottish Government spokeswoman said that changes brought by the Chancellor in his recent budget had not gone far enough to support the oil and gas industry.

She added: “In particular we note that survey respondents have highlighted the need to increase exploration drilling.

“We were disappointed that the changes announced by the Chancellor in his recent budget did not include the exploration credit which we proposed and which is clearly needed, however the forthcoming budget provides another opportunity for the UK government to take the necessary action to support exploration.”