Job losses in the industry have slowed to about 13,000 in 2017, compared to almost 60,000 in 2016, according to a new report by Oil & Gas UK.
The Economic Report 2017, which was released at an SPE Offshore Europe business breakfast on Wednesday, also says an estimated US$6 billion worth of mergers and acquisitions were made in the UK oil and gas sector in 1H 2016, pointing to a turn in fortunes for the basin.
Total’s acquisition of Maersk Oil will further add to the trend through the rest of the year, but it could also signal further job losses as the major has indicated US$400 million “synergies” could be made due to the deal.
Oil & Gas UK says assets changing hands and the increasing diversity in their ownership suggests that the UK Continental Shelf may start to benefit from a badly needed investment boost.
According to the body, there’s £40 billion worth of potential investment opportunities currently sitting in company business plans. While the industry has halved lifting costs since 2014, and increased production 16% since 2016, “the industry will have to stay the course in terms of safely and relentlessly improving its efficiency and reducing its cost to ensure these opportunities become business realities in the near term.”
Further, investors still want more certainty over Brexit and clarity over the role of oil and gas through a more comprehensive energy policy, notes Oil & Gas UK. Low levels of exploration and appraisal activity also remain a “serious concern,” and the basin still needs further fresh capital investment, with just three new field approvals sanctioned since the start of 2016, says the report.
“If activity does not pick up this could have further negative implications for jobs that could threaten core capabilities,” the report says, adding that the industry would benefit from the UK Government’s ongoing commitment to the Driving Investment Plan and for government to implement transferable tax history (TTH) to facilitate asset transfer.
Oil & Gas UK CEO Deirdre Michie said: “There are still serious issues facing our industry which has suffered heavy job losses since the oil price slump. But we are hopeful that the tide is turning and expect employment levels to stabilise if activity picks up.
“Our sector is successfully re-positioning through efficiency and cost improvements. We are transforming in a way that is getting UK oil and gas back in the game. Although we are getting to a much better place, we still need further investment to generate new activity and sustain hundreds of thousands of UK jobs.”
Graham Hollis, Senior Partner for Deloitte in Aberdeen, said: “The latest economic report from Oil and Gas UK demonstrates just how much progress the UKCS has made on reducing operational costs, and the encouraging level to which confidence is returning to the basin – most notably through a significant uptick in M&A activity across the sector. Assets are finding their way into the right hands and a new cohort of private equity-backed businesses is breathing new life into the basin. Nevertheless, challenges still remain.”
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