OIL & Gas UK recently warned that the sector is “at the edge of a chasm” and it’s true that the North-east is currently feeling the effects of the $30-a-barrel environment in very human terms.
While the continuing low oil price has its roots in a perfect storm of global market factors, it is creating significant challenges within this region as thousands of people find either without a job or with the fear of redundancy on the North Sea horizon.
On an everyday level, businesses and consumers are enjoying cheaper prices at the pump and lower utility costs, but almost unseen, reduced profits on every barrel of oil translates into less tax flowing in to government coffers which in turn puts further pressure on already creaking public spending.
For the past nine years, Treasury receipts from the sector have averaged around £7billion and research conducted in 2012 indicated that over 16% of corporation tax receipts was generated from oil and gas companies.
However, in 2014-15 this figure had fallen by 54% on the previous year with further declines to come.
More must be done if we are to avoid premature decommissioning, which is why the Chamber, and others, have asked the UK Government for further changes in the tax regime.
The supplementary (tax) charge for oil and gas has to be removed; we have a mature basin and the tax rate needs to fall to continue to make the UKCS an attractive proposition.
This has been promised before but meaningful action is now required.
Various initiatives are also underway to provide real help now and in the longer term.
The Energy Jobs Taskforce, of which I am part, is bringing the public and private sectors together to tackle the immediate challenges facing the energy sector and support those who have or may lose their jobs in this volatile environment.
Scottish Government funding of £12million is supporting a Transition Training Fund to help redeploy and retain the highly skilled workforce in the region, while a further £12.5million is earmarked to help oil and gas firms research and develop new technologies.
The recently announced City Region Deal has released over £500million of funding which includes a crucial expansion of the capacity of Aberdeen Harbour and the establishment of an Oil and Gas Technology Centre.
But what else must we do in the short term, as the media spotlight continues to shine on “Aberdeen in crisis”?
Many city regions cast envious glances at the economy here and we know this is a fantastic place to live, work, study, visit, invest and do business.
Among the gloom there are very many success stories waiting to be told.
The foundations remain in place for a highly successful future - if we collectively make good and bold decisions and take the necessary actions now.
We need to continue our record of operational excellence by finding new and more efficient techniques to maximise the recovery of the significant remaining oil and gas resources in the UK continental shelf.
We have to ensure our world renowned expertise is exportable, assisting partners in less mature basins around the globe.
If we do this well, sharing our unrivalled knowledge, innovation and technology we will anchor Aberdeen as a significant international oil and gas location for many years to come.
Russell Borthwick is chief executive of Aberdeen & Grampian Chamber of Commerce
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