THE recovery in the North Sea will continue in 2020 with overseas investors ready to buy into the area, experts reckon.

However, the supply chain will remain under pressure as concern about climate change causes complications.

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As 2019 drew to a close, sector watchers appeared confident that the oil price outlook was bright enough to encourage firms to think seriously about stepping up activity in the North Sea.

With Brent crude expected to trade at $60 per barrel or more following moves by OPEC members and Russia to support the market, the prospect of a return to the dark days of sub $30 oil seen early in 2016 appears remote.

While US giants are shifting attention to the shale fields of their home country members of the Aberdeen advisory community reckon other players are keen to acquire exposure to the area.

“We are very busy talking to investors about potential deals,” said Mairi Massey, an oil and gas tax specialist at accountancy giant PwC. She reckons Middle East players are showing the most interest.

Martin Findlay, senior partner in the Aberdeen office of another big four accountant, KPMG, said it was “entirely possible” that new players could buy into the North Sea in 2020. He noted there is a lot of money in the Middle East looking for opportunities.

Israel’s Delek bought a $2bn North Sea portfolio from America’s Chevron in May.

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International private equity investors have invested billions backing independents such as Chrysaor which have pursued ambitious North Sea expansion drives that have involved buying huge portfolios from majors and appear ready to do more deals.

The hope is that firms that have bought assets will invest in them.

Mr Findlay noted that some new entrants have done deals in the expectation they could allow them to utilise late life asset skills that majors may not have.

They may invest in some fields majors consider to be immaterial.

In March Neptune Energy approved plans to develop the Seagull field on acreage it acquired from Apache. Eight months later it clinched a deal to buy the North Sea portfolio amassed by Italian energy firm Edison in a $280m deal. The portfolio includes stakes in a big find off Aberdeen and mature fields.

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Majors including Shell and BP have also started investing in North Sea projects again amid the partial recovery in the crude price since late 2016.

But the kind of projects winning approval are not on the bumper scale of those sanctioned by giants in areas such as West of Shetland in the period of $100/bbl oil that came crashing to an end in 2014.

“There has been a recovery, slower than people had anticipated it being,” noted Mr Findlay, adding: “The trend of recovery is continuing albeit at a slow rate.”

While production has increased following the startup of big fields approved during the boom, sections of the supply chain remain under pressure. Cost-cutting during the deep downturn that started in 2014 took a grim toll on the oil services sector.

“There are still strugglers in the supply chain,” said Ms Massey at PwC, adding: “I would not be surprised if there was a bit more consolidation seen.”

Firms that own big assets such as drilling rigs or ships could face challenges if they do not have the right funding in place.

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Growing interest in environmental issues could help breathe fresh life into the rationalisation process that started amid the crude price plunge.

Mr Findlay said the issue of how oil and gas firms can help the fight to reduce carbon emissions is assuming unprecedented importance in boardrooms across the industry.

“People are talking about it at all levels in a way that was not so 12 or 18 months ago,” noted Mr Findlay.

He said the need for funders to be seen to be addressing the climate change challenge could spur mergers and acquisitions activity.

Banks that may be looking to reduce their exposure to oil and gas could prove to be reluctant to fund stressed supply chain companies.

This might make it more likely such firms are bought by stronger players.