CONFIDENCE has surged in the UK North Sea putting recruitment back on the agenda after four years of job cuts according to research findings that will boost hopes the recovery in the area will accelerate this year.
Read more: North Sea oil and gas industry to generate £10bn surplus
In a survey of senior professionals working in the UK oil and gas industry almost three quarters, 71 per cent, of respondents were confident about the outlook for the sector in the country.
The results of the study by risk and assurance specialist DNV GL point to a dramatic improvement in sentiment following the rally in the oil price since late 2016. This has given firms the confidence to invest in the North Sea again after slashing spending during the deep downturn triggered by the plunge in the crude price between 2014 and 2016.
The implications of the survey findings for the supply chain and jobs are encouraging. However, some observers may worry about the risk that cost increases could undermine efforts to increase the competitiveness of the UK North Sea.
Read more: Exploration back on agenda in North Sea with all eyes on West of Shetland
The confidence reading has risen from just 18% in the 2017 survey by DNV GL. This reflected the fragile state of sentiment in the area as the industry started to emerge from the downturn.
The findings of the latest survey add to a growing body of evidence that oil and gas firms operating in the North Sea have moved back into expansion mode.
Industry players ranging from giants such as Shell and BP to independents approved a series of big North Sea development projects last year.
Read more: Shell appoves fresh North Sea project as interest in area grows
The DNV survey suggests the trend will continue, with 68% of respondents expecting their firms to increase or maintain capital spending, on new assets or upgrades, compared with 33% in 2017.
The percentage expecting to at least maintain spending on running costs also jumped, to 72% from 37% in 2017.
“The significant boost in expectations for spending are welcome signs of an industry that is, for the most part, prepared to close the chapter on a string of challenging years,” said Hari Vamadevan, regional manager, UK and West Africa, for DNV GL’s oil and gas arm.
Noting early signs of cost inflation returning to the industry, Mr Vamadevan said the industry could face challenges sustaining the hard-earned efficiencies achieved as a result of cutbacks made during the downturn.
These resulted in thousands of jobs being shed by firms that operate North Sea fields and services businesses that support them in areas such as drilling.
Read more: One in three North Sea oil jobs 'lost' since 2015
DNV GL said: “Recruitment is firmly back on the agenda after four years of consistent reductions.””
Nearly half, 48%, of the UK senior professionals surveyed by the Norwegian firm expected to grow their workforces in 2019, against 10% four years ago.
The improvement in sentiment appears to have been greater in the UK than in other areas.The global confidence reading increased to 76% from 32% in 2017. Some 34% of respondents globally expected to increase their workforces this year, against 10% four years ago.
Since the survey was completed in late October and early November, renewed crude price volatility has sparked concern about the outlook for the sector.
Brent crude sold for around $62.50 per barrel yesterday after hitting a four year high of $85 per barrel in October. A boom in production in the US has undermined the efforts of exporters led by Saudi Arabia to support the market by curbing output. These helped the oil price recover ground after plunging from $115/bbl in June 2014 to less than $30/bbl early in 2016.
Oil and gas consultancy Wood Mackenzie last month predicted the recovery in the North Sea would be consolidated this year. It said exploration activity could increase markedly in UK waters while oil and gas firms would approve a range of developments.
The latest survey by DNV GL covered 791 senior professionals, including 79 based in the UK.
Six in ten, 61%, of respondents to the 2018 survey were confident about the outlook for the UK industry. One in four expected to increase capital spending in 2018 with 23% predicting a rise in operating spending.
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