WOOD has won a $130 million (£95m) contract to help extend the life of one of the UK’s oldest gas field clusters, which will fuel hopes of recovery in the sector.

The Aberdeen-based engineering giant has been hired to provide ‘late life solutions’ on the Morecambe Bay fields, which have been an important source of the gas used in the UK for more than 30 years.

The award of the contract provides a boost for Wood as businesses grapple with the downturn in the North Sea triggered by the coronavirus crisis. Oil and gas firms slashed investment in response.

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The contract may signal that firms are rediscovering some of their enthusiasm for investing in UK assets following the recent improvement in the outlook for the market. This has been supported by hopes that coronavirus vaccines will be made widely available this year. Investment bank Credit Suisse this week increased its forecasts for oil and gas prices significantly amid expectations that the big gap between available supplies and demand will narrow this year.

The International Energy Agency yesterday said: “Despite rising Covid cases, crude prices are well supported by financial, economic and market fundamentals.”

The Paris-based watchdog highlighted the fact that the Brent crude price had hit $57 per barrel last week. It noted this was a level not seen since February last year.

However, the organisation cut its forecast for demand this year by 300,000 barrels per day to reflect the impact of renewed lockdowns on fuel sales.

It reckons demand will increase by 5.5million barrels per day (m/bd) this year after falling by 8.8m/bd last year.

“This recovery mainly reflects the impact of fiscal and monetary support packages as well as the effectiveness of steps to resolve the pandemic,” said the IEA.

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Saudi Arabia’s recent decision to cut output by 1m/bd has also provided support for crude prices.

Wood has been awarded a five-year contract to provide services on the Morecambe Bay fields and an onshore terminal in Barrow for Spirit Energy, which is owned by Centrica.

It hopes to help Spirit to cut the cost of production and to reduce the carbon intensity of operations.

Centrica decided to quit the North Sea production business after concluding it should focus on supplying gas and electricity to consumers and businesses.

The Scottish Gas owner put its 69% stake in Spirit up for sale in 2019 but paused the process in April last year. It was reported to have resumed sale talks in December.

Wood said the Morecambe Bay contract will employ around 130 people offshore and in the Barrow terminal, supported by a small team in Aberdeen.

HeraldScotland: Wood chief executive Robin Watson Picture: Gordon TerrisWood chief executive Robin Watson Picture: Gordon Terris 

Brent crude sold for $55.80/bbl yesterday afternoon, up $1.05/bbl on the day.

The price fell from around $70/bbl in January to an 18-year-low of less than $20/bbl in April.

Credit Suisse increased its forecast for the Brent crude price for this year to $59/bbl from $50/bbl and for next year to $63/bbl from $60/bbl.

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On Monday Rystad Energy predicted that spending on offshore developments would increase dramatically next year. The consultancy said the tax breaks provided in the UK mean firms can achieve better returns on investment in large scale field developments in its sector of the North Sea than in any other comparable basin.