WHILE the results of the latest Bank of Scotland oil and gas survey indicate that life is getting less grim than it was in the North Sea they make clear that big challenges remain.

Sector watchers will take heart from the fact the survey is the second in the space of a fortnight to suggest confidence levels have increased markedly off Scotland since last year.

With more than half the respondents expecting to achieve growth this year, the findings will lend credibility to talk of a mood of cautious optimism in the North Sea.

Other notable positives include evidence that interest in the area has increased markedly among big firms recently.

But it must be remembered how bleak things looked for the North Sea in the first half of last year, after the crude price hit a 12 year low in January.

The improvements in sentiment recorded recently may simply reflect the belief things have stopped getting worse, rather than expectations much of a recovery is on the way.

While there is hope production cuts agreed by Opec members in November will put a floor under the crude price at around $50 per barrel, the days of $100/bbl oil remain a distant memory.

It is notable the bank found exploration and subsea development budgets remain under most pressure.

With respondents saying production costs remain too high, pressure on the supply chain is likely to continue. Around 20 per cent expect to cut jobs this year.

The fall in the pound and political uncertainty following the Brexit vote have created additional complications.