Oil and gas contractors could have 'long term future'

Wednesday 25 February 2015

Oil and gas contractors could have a long term future working on rigs in the UK North Sea, according to a report.

The Activity Survey 2015 from Oil and Gas UK said that these long-term opportunities could surface if the right conditions are created, through cost restructuring and tax breaks, to allow for further exploration and investment.

It also said that if no action is taken then contractors ought to consider looking for opportunities for their services in other places than the UK. This is because the market for their services will begin to shrink.

The report claimed that exploration activity on the UK Continental Shelf has virtually collapsed as only 14 exploration wells were drilled in 2014, which is the lowest amount seen since the industry began during the 1960s. Moving forward, it says that the number of wells that will be drilled during 2015 is expected to fall even lower, potentially into single figures.

Chief executive of Oil and Gas UK Malcolm Webb said: "This year’s Activity Survey paints a bleak picture but also identifies this region’s potential, emphasising the importance of government and industry now putting the right measures in place to secure its long-term future."

"This is crucial, not only for the energy security that domestic oil and gas production provides, but also for the hundreds of thousands of highly skilled jobs, advanced technology and billions of pounds of exports which the industry underpins.

"Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground."

The report also noted that when oil prices fell to $110 (£71.28) per barrel, the challenge facing the industry was considered significant. Yet the issue has escalated considerably more since then.

This price drop was initially a challenge because, the report says, costs were escalating, tax burdens are unsustainably heavy and regulation is not fit for purpose. Mr Webb said that the current oil proves the ramifications of these issues.

It is expected that there will be a new tax break included in this year's Budget in March that should help producers in the North Sea. This should also make investment in exploration and production more attractive for oil and gas contractor clients.

The report pointed out that the Autumn Statement included a commitment to put an Investment Allowance in place and explained that the oil and gas industry is working closely alongside the government to make sure the allowance can be delivered as part of this year's Budget.

Reports that chancellor George Osborne would include the investment allowance in the Budget next month were welcomed by the Association of Independent Professionals and the Self Employed (IPSE). It noted that thousands of independent professionals work within the oil and gas industry and that this sector is often reliant on these workers. This is because the oil and gas industry tends to be project-based and need specialist experts to be available at very short notice.

By Victoria McDonnell

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