AMID growing confidence that oil and gas markets have bottomed out following the turmoil caused by the coronavirus crisis, it may still be too soon to read much into faint signs of recovery in the North Sea.

Those that are hoping brighter times may be ahead following the mauling suffered by the North Sea supply chain last year will take plenty of heart from judgements made by international players.

With Brent crude selling for above $50 per barrel for weeks, traders seem confident that the chances of a return to the grim conditions seen in April, when the price fell below $20/bbl, are remote.

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The prospect of effective coronavirus vaccines being made widely available this year appears to have convinced leading authorities to share that view.

The International Energy Agency on Tuesday noted that lockdowns could slow the pace of demand recovery. However, the Paris-based watchdog declared: “Despite rising Covid cases, crude prices are well supported by financial, economic and market fundamentals.”

Investment bank Credit Suisse raised its forecast for Brent crude to $59 per barrel for this year, from $50/bbl, and to $63/bbl for next year, from $60/bbl.

Services giants that have had to grapple with big drops in spending by oil and gas firms also provided signs that the conditions they face may be easing after a grim nine months or so.

Wood announced on Tuesday that it had won a $130 million (£95m) contract to help boost the performance of the Morecambe Bay gas hub, output from which has been helping to keep UK households warm for more than 30 years.

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The contract awarded to the Aberdeen giant by Spirit Energy covers the kind of discretionary work that many North Sea firms put on the back burner in response to the oil price slump last year.

It signalled that Spirit thinks there is still plenty of potential in the Morecambe Bay fields.

US oil services heavyweight Halliburton said business in the shale fields of its home country picked up in the fourth quarter in a development that will bring heart to Scottish firms that have a big presence in that market. These include Wood.

Halliburton also said that its pipeline of international opportunities was improving.

On Monday, the Rystad Energy consultancy underlined its confidence in the prospects of an oil and gas sector recovery by forecasting that there will be a big increase in spending on offshore development work next year.

Offshore developments cost much more and take longer than onshore projects. However, Rystad reckons total global spending on offshore developments will rise to $56 billion next year, from $44bn last year. It thinks spending could top $130bn in 2023.

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Rystad predicted that there would be fierce competition between the world’s oil and gas basins for a share of the spending involved.

The UK North Sea appears to have struggled to retain the attention of big players in recent years amid complaints that it is an expensive place to operate in.

A range of majors, including Royal Dutch Shell, BP and America’s Chevron, have sold significant North Sea assets in recent years.

However, an analysis by Rystad found that the UK could actually be well placed to compete for investment with other countries.

Rystad noted that the fiscal regime in the UK allowed oil and gas firms to generate bigger returns on their investments in projects off the country, after tax, than those made in any other state.

It ranked the UK ahead of countries such as the USA and Norway, which appear to have attracted lots of investment in recent years from firms that are active in the North Sea.

However, any optimism about the possibility of recovery in the North Sea must be tempered with caution.

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While the outlook for demand for oil is much brighter than some feared it might be, Brent crude is still selling for well below the $70/bbl it fetched in January last year.

Credit Suisse noted on Tuesday that its long-term assumption for the Brent crude price remained unchanged at $60/bbl. If the bank is right on that count, oil and gas firms are unlikely to be prepared to sanction big enough increases in spending to go anywhere near taking up the slack left by cuts made in response to the coronavirus crisis.

Rystad reckons global spending on offshore developments fell by $55bn, or more than 50%, in 2020, from $99bn in the preceding year.

The North Sea oil and gas industry was still only enjoying a tentative recovery in 2019 from the downturn that followed the sharp fall in oil and gas prices from 2014 to 2016. Firms that operate oil and gas fields made big cuts in spending in response to the commodity price falls. The supply chain felt the squeeze as operators also looked to cut the costs of running their remaining North Sea operations.

The fallout from last year’s turbulence continues to ripple through the sector. US oil services giant Weatherford is reported to be preparing to close its Aberdeen manufacturing facility.

Some may wonder if there are many opportunities left in the North Sea that would encourage firms to make investments on a similar scale to those made by the likes of BP, Shell and Total in the West of Shetland area in recent years.

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West of Shetland generated excitement after firms concluded there were much bigger finds to be made in its waters than in parts of the North Sea closer to mainland Scotland, which have received lots more attention over the years.

The frontier area may have lost some of its lustre following the challenges faced by the pioneering Hurricane Energy. It made what looked like huge finds off Shetland but concluded last year that they were probably smaller than hoped.

However, Hurricane said last week that it had increased cash balances by around $20m in a month helped by the recent oil price increase. Chief executive Tony Maris said a continued recovery in oil prices would further enhance the significant value the firm saw in its portfolio

Spirit Energy bought into Hurricane’s acreage in 2018 and supported costly drilling work.

Centrica has been trying to sell its majority stake in Spirit for more than a year.

Its former rival in the household energy supply business, SSE, quit the North Sea gas business to focus on renewable energy. Last month SSE sold its North Sea business to Viaro Energy, which will only have to pay an initial £25m.

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Viaro previously bought North Sea-focused Rockrose, which found bargains in the North Sea amid the last downturn. Significantly, investors in Abu Dhabi provided backing for Viaro. The Abu Dhabi National Oil Company has made clear it wants to grow its oil and gas business.

Other investors may decide now is a good time to buy North Sea assets. It could be years before we discover if any will be prepared to sanction the kind of investment in big new developments the supply chain is crying out for.