North Sea Investment Rising as Optimism Picks Up
Investment is rising in the oil and gas sector, with North Sea operators putting money into research and development, people, new markets and the maintenance of infrastructure, according to a report published today.
The 30th Oil and Gas survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute and KPMG UK, revealed optimism in the industry, in contrast to the wider UK economy.
It found that around 45% of contractors have increased investment spend in the UK Continental Shelf (UKCS) in the past 12 months. Some 47% report they have either started to use artificial intelligence or will do so in the next five years.
The survey highlights a welcome trend in R&D investment with the highest proportion of firms reporting an increase in spend since 2006/07, and companies indicating they anticipate further rises over the next few years.
Only 6% of firms are currently citing taxation as a limiting factor when it comes to UKCS activity, down from 26% in 2017. With 35% reporting that the availability of tax or funding incentives had influenced their decision not to invest in further R&D, the report suggests the supportive environment created by government is having a positive effect.
Some 40% of firms have increased their total workforce in the last year; and a net balance of 52% expect to up their spend in staff training between now and 2021.
The survey looked at work in the six months to April 2019, asking firms about their prospects for the year ahead, as well as the next three to five years, to assess trends in exploration and production, decommissioning and other related oil and gas extraction activities in the UK and international markets.
In the international oil and gas sector, optimism is 21% above the 10-year average, suggesting that firms continue to be assured about opportunities in the export market.
Contractors in the UKCS are reporting healthy results. Almost half of firms are working at or above optimum levels, the highest figure recorded in the survey since 2014. Almost three quarters of firms are forecasting an increase in profits in 2019 – the results also recorded the highest figure in this survey’s history indicating a rise in the value of UKCS production-related activity.
For the first time since the downturn, confidence levels are consistently rising across licence holders, operators and the supply chain. Significantly, 90% of firms are also now optimistic about the long-term future of the Aberdeen city region.
Moray Barber, partner at KPMG, said: “The report tells us that there has been investment pick up but we need to be cognisant of the fact that this is starting from a relatively low base from the challenging times the industry was facing four or five years ago.”
Shane Taylor, research and policy manager at Aberdeen & Grampian Chamber of Commerce, said: “The levels of optimism reported in our survey are encouraging but for those of us passionate about the future of the region, it’s excellent to see an overwhelming majority of firms are optimistic about the long-term future of Aberdeen as not just Europe’s oil and gas capital, but as an all-energy hub which will be relevant long after the UKCS comes to the end of its operational phase.”
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