CONFIDENCE levels in the North Sea have slumped to a record low amid widespread job cutting in the area in response to the renewed fall in the crude price, a survey has found.
Trade body Oil & Gas UK said more than half (54 per cent) of the firms that responded to its latest survey had shed jobs in the final quarter of 2015 when the challenges facing the North Sea industry mounted relentlessly.
The rate of job cutting matched the previous record set in the second quarter of 2015.
Two thirds of respondents told the industry body they had suffered a drop in sales in the latest period as the firms that operate oil and gas firms slashed spending in response to the price fall.
The findings paint a grim picture of the state of the North Sea where confidence nosedived toward the end of last year. A brief rally in oil prices during the summer fizzled out as supplies ran well ahead of demand.
Oonagh Werngren, Oil & Gas UK’s operations director, warned that 18 months after the downturn started firms are braced for conditions to get even worse.
“The deteriorating market conditions and the scarcity of new business opportunities continue to be major concerns for the industry,” she said. “Many companies remain deeply apprehensive about the future.”
The findings provide the latest evidence of the severity of the downturn in the industry, which is facing up to the prospect of a long period of low oil prices.
Oil and Gas UK noted that its sentiment index reading has been in negative territory for six quarters. However the reading fell sharply in the last three months of 2015, to a record low of -32 from -25 in the preceding quarter. A reading below zero indicates confidence fell compared with the preceding three months.
The fall in oil prices accelerated in the quarter as hopes that members of the Opec producers organisation would reduce output were dashed. Levels of excess stocks have risen around the world as economic growth in China has slowed and new fields that were commissioned during the boom that ended in 2014 have come onstream.
Conditions got even worse in January, when Brent crude hit a 12 year low of $27.15 per barrel, compared with $115/bbl in June 2014.
While Brent had rallied to $32.80 on Monday the price fell to $31.36 yesterday when the International Energy Agency highlighted downside risks. It said global oil demand growth is forecast to ease back considerably in 2016, noting: “OPEC crude oil output rose by 280 000 barrels per day in January as Saudi Arabia, Iraq and a sanctions-free Iran all turned up the taps.”
The Oil & Gas UK survey will spark renewed concern about the outlook for jobs in the North Sea as the impact of the price fall ripples through the supply chain.
Oil and gas firms shed 5,500 jobs in the North Sea in the first six months of last year alone, since when a series of firms have announced cuts.
Last month BP said it planned to cut 600 North Sea jobs
On Monday accountancy giant EY warned that many of the small and medium sized enterprises that help oil and gas companies run their North Sea operations will face a struggle for survival this year.
It reckons bigger fish will be better able to withstand the downturn but are still likely to suffer a sharp drop in sales.
Oil & Gas UK said firms were making progress with efforts to cut costs and increase efficiency and noted increased cooperation between companies.
However, Ms Werngren said: “Both fiscal and regulatory reform also have a key role to play in transforming the United Kingdom Continental Shelf into a competitive, low tax, high activity basin.”
Separately, Wood Group has won an extension to support Chevron’s North Sea operations which it said would retain 30 jobs.
The Aberdeen-based oil services firm has been appointed to provide operations and maintenance services on four offshore facilities for the US giant including the Captain floating production, storage and offloading vessel, for an additional year.
The value of the contract extension was not disclosed.
In December Wood revealed it had reduced its UK workforce numbers by around 20 per cent last year, to 10,000 from 12,000.
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