Half of N. Sea contractors ‘confident’ for the first time in four years as spate of job lay-offs slows

For the first time since 2013, half of contractors say they are more confident about N. Sea oil and gas sector activity, while 60% of firms believe the sector has reached the bottom of its current cycle.

The findings of the latest Oil and Gas survey by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute and KPMG reveal that 49% of contractors surveyed are more optimistic about their activities in the current year, up from 38% since the spring survey.

The survey looked at work in the six months to October 2017, 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 production, decommissioning, renewable and unconventional oil and gas extraction activities both in the UK and international markets.

It found that a net balance of 39% continue to expect a rise in optimism in the year ahead, with almost half (48%) more confident and only 9% less confident; while a net balance of 28% of firms are forecasting an increase in the value of production-related work in the coming year.

The share of contractors working at, or above, optimum levels peaked at 79% in 2013 and has cliff-edged over the last three years to a low of 12% last year.

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

The survey also indicates contractors’ expectations of greater involvement in decommissioning activity over the medium term with 83% reporting potential involvement in the next three to five years.

There also appears to be a firming up of opinions on unconventional oil and gas compared to previous years, with 71% of operators/licensees now not predicting any involvement in the UK compared to 40% last year.

The number of firms expecting to become more involved in renewables has remained unchanged (54%).

The autumn survey also looked at employment and labour market issues in the oil and gas sector. Less than a quarter (23%, compared to 68% in 2016) of contractors reduced their employment in 2017, while almost half (47%, compared to 24% in 2016) held employment stable.

A total of 30% (compared to only 8% in 2016) increased employment. Looking forward, the survey suggests a continued positive outlook with a net balance of contractors (36%) expecting a rise in employment across both permanent and contract staff.

The proportion of firms reporting salary cuts also fell during 2017, from 43% in the previous survey to 25%. While many have remained steady, the number of contractors increasing pay during the period rose 10% overall to 29%.

However, the number of vacancies also remains historically low, suggesting limited prospects for major hiring in the sector.

Meanwhile, the trend in skilled workers leaving the industry continues although figures suggest it has eased marginally, down to 38% from 43% at the same time last year.

Mark Andrews, KPMG partner and UK head of oil & gas, said: “With the industry enduring a persistently lower oil price and much uncertainty in recent years, new investment has slowed and both productivity levels and production volumes have taken a hit.

“However, this latest report on the current situation in the UK oil and gas sector provides some reassuring signs that confidence is growing in the industry.”

1 Dec 2017

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