Oil Firms Frustrated by Lack of Info on Potential Impact of Scottish Independence

A record number of contractors in the oil and gas sector (98 per cent) are looking to recruit in the next 12 months and confidence in the industry is high for 2014, according to a new report published last Thursday.

Oil Firms Frustrated by Lack of Info on Potential Scottish Independence Impact

However, the findings reveal that the industry’s growth is being constrained by skills shortages in key areas, and companies are being frustrated by a lack of information on the potential impact of a vote for Scottish independence.

The 19th Oil and Gas Survey, conducted by Aberdeen and Grampian Chamber of Commerce and sponsored by law firm Bond Dickinson, reveals a positive outlook for the sector. The report shows that 58 per cent of operators and 65 per cent of contractors increased their headcount in the past year, and average pay increased by 6.5 per cent for operators and 4.8 per cent for contractors, well above the national average.

This positive trend looks set to continue, with three in four contractors (73 per cent) and half of operators (50 per cent) anticipating an increase in their total number of employees next year, with a particularly strong demand for permanent staff.

However, most companies report recruitment and retention difficulties, with contractors facing their most significant difficulties since 2007. Three in four operators (75 per cent) and two thirds of contractors (68 per cent) say they are suffering from recruitment difficulties.

The Scottish referendum on independence is a key issue governing the future of the industry. The report reveals that executives in the high-growth oil and gas sector feel they have a lack of clarity on issues such as tax (both personal and corporate), regulatory issues and the position of Scotland in the EU should the referendum result in independence. They say this lack of information is hampering their ability to establish business plans beyond 2014.

Kenny Paton, oil and gas partner at Bond Dickinson, said: “More and more of our clients in oil and gas and other sectors are raising questions about the implications of the result of the referendum, and this report provides more evidence that oil and gas businesses are concerned about the lack of information. The main concerns that we are being approached about involve personal and corporate tax issues and fiscal policies, but a yes vote could impact companies in a number of ways that they need to factor in to their business planning.”

Robert Collier, chief executive at the Aberdeen and Grampian Chamber of Commerce, said: “The survey is now in its 19th edition and remains a critical independent benchmark for the oil and gas sector. We’d like to thank those who continue to support this important work as the study relies on businesses providing their views on sector performance and the issues they face.”

“Of course the good news is that the sector and the North-east continue to see record levels of activity. This time, we are reporting our highest ever reported level of companies recruiting in the contracting sector.

“This brings challenges around how vacancies will be filled but we fully expect the sector to meet these challenges and continue to deliver for the North-east, Scottish and UK economies.”

North-east Scotland is home to a large part of the UK oil and gas industries and is pivotal to the Scottish and UK economy. The region generates the second highest economic output per head in the UK (behind inner London) and has shown growth more than double the Scottish average since 2009. Capital investment in the sector in the UK Continental Shelf (‘UKCS’) is predicted to total £13.5 billion in 2013.

Further key findings from the report include:

Employment challenges

Operators continue to face particular difficulties in recruiting managerial or professional employees, and those in technical and skilled trades.

Half of all respondents reported losing core staff in 2013, and half of all respondents (50 per cent) claimed that losing employees to companies in other oil regions around the globe was a contributory factor to staff loss. This has led to an increasing focus on attracting talent from outside the sector. The percentage of contractors sourcing staff from non oil and gas firms increased from 18 per cent last year to 31 per cent, with the armed forces being a particularly common source of new employees.

Activity levels

The report says half of all operators report an increase in production-led work in 2013 and that there is an expectation of an increase in production-related work in 2014. Some 42 per cent of operators expect decommissioning activity to increase on the UKCS in 2014 and two in three contractors (65 per cent) said they would definitely be or were likely to be involved in decommissioning work in the next three to five years.

All but one operator surveyed reported working at optimum levels in their international activity, and they expect this trend to continue. Three in four (73 per cent) contractors reported working at or above optimum levels in international work.

One in four firms in the sector (26 per cent) reported being currently involved in renewables activity, with involvement from contractors particularly high (30 per cent). Though there is an expectation that involvement in renewables will increase in the medium term, firms still cite a lack of sector knowledge and a better return in oil and gas as reasons for limiting their involvement in it.

Press Release, December 02, 2013


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