Oil and gas job fears "greatly overdone"

The findings of the latest Oil and Gas report by Bank of Scotland suggest fears that the slump in oil prices will send the UK industry into irreversible decline may be misplaced.

The survey found while some firms are cutting investment in the North Sea others are confident the fall in the crude price since June will create opportunities for them.

With firms plotting moves into areas like US shale and renewable energy, 92 per cent of respondents said they plan to grow over the next two years. More expect to increase investment than to cut it.

The implications for jobs in the industry will be welcomed by ministers.

"This survey has found that fears that the current oil price slump may cost as many as 35,000 jobs in the UK oil and gas industry, widely reported in the media, may well be greatly overdone," said the bank.

Survey respondents expect to create around 8,000 jobs globally over the next two years net of losses.

The bank said employment on the United Kingdom Continental Shelf may be more stable in the short-term than is generally expected.

Bank of Scotland said the findings suggest high profile reports of the cuts in the North Sea made by giant firms such as BP may have created a misleading impression of the outlook for the area.

"Much of the recent news on investment and jobs has come from a few large firms. According to our research, the overwhelming majority of North Sea companies and small and medium-sized enterprises (SMEs) see increased opportunity," it said.

The survey spanned the supply chain, from firms that produce oil and gas to those that supply them with equipment used in areas like drilling.

Stuart White, area director of Commercial Banking, Bank of Scotland, said: "While it is obvious the North Sea is facing some serious challenges, this research paints a clear picture of a global industry, which having dealt with similar commodity price challenges in the past, is determined to come through fitter and stronger."

The bank found SMEs expect the fall in crude prices will make firms that produce oil and gas more likely to adopt the kind of technologies they offer in the hope of reducing costs.

The crude price slump will result in company valuations falling and could encourage more firms to look to buy rivals.

However, the report highlights uncertainties about the outlook for the North Sea.

Noting that some of the 8,000 jobs firms expect to create may come from deal activity and international expansion, the bank said no reliable prediction about future North Sea employment can be made.

The findings may heighten fears that the fall in oil prices since June will lead to cuts in production in the UK.

The report highlighted the fact the oil price fall is likely to result in fields being taken out of production early. It found four times as many firms plan to increase decommissioning activity compared with last year than to reduce it.

"The trend is particularly striking among the major corporates where half are planning more decommissioning," said the report.

Cuts in spending by international giants may be offset by increases in investment by firms that are owned by governments of countries in areas such as the Middle East and Asia.

But the survey noted increased interest in decommissioning among services firms. This suggests firms are alive to the prospect of growing workloads in UK waters.

While industry leaders have been vocal in their demands that George Osborne should slash North Sea taxes to boost activity, the survey found tax was named as the biggest concern by only two per cent of respondents. This may reflect the fact tax is only payable on profits. Tax was among the biggest three challenges for 21 per cent of firms.

Mr White noted: "Firms continue to be concerned by an ageing workforce and a lack of skills, which explains why the industry is determined to get through ... without major workforce reductions."

Conducted in January, the survey covered 101 firms across the supply chain, ranging from big companies to SMEs.