Optimism of UK Oil and Gas Sector Constrained by Rising Costs, Report Says

Optimism of UK Oil and Gas Sector Constrained by Rising Costs, Report Says

The business confidence index published by Oil & Gas UK today (21 December) reveals a slight decline in the third quarter of 2012 from the record high of 65 recorded in the second.

The drop in confidence, however, is more likely to be linked to the industry’s buoyant reaction to the incentives announced by the Chancellor in this year’s Budget, as recorded in the index for the second quarter of the year, than a significant decline of optimism since then. The industry continues to express concern regarding shortages of skilled personnel, wage inflation and a general escalation of operation costs.

Paul Dymond, Oil & Gas UK’s operations director, said: “Both operators and contractors see confidence sustained in the near future. Operators have undertaken new field developments, major modification projects and operations in the West of Shetland encouraged by the positive changes to the fiscal regime announced by the Chancellor in 2012. The consistently strong activity does, however, put pressure on the skilled labour resource and contributes to the escalation of operating costs.

“The survey shows contractors are slightly more confident than operators, although concerns about cost escalation have depressed their index. All contracting sectors follow the same trend except the drilling, well services and support services sectors, who, with an index of over 60, have the most positive outlook. Contractors cite the recent fiscal changes and busy order books as reasons for feeling confident that there are tangible plans in place for ongoing and future projects.”

The key findings of the survey for the third quarter of 2012 are:

Overall the Oil & Gas UK index measured 58, a decrease of seven points from 65 in Q2.

The operators’ outlook decreased 6 points from 63 to 57; the majors dropped two points from 60 to 58 while the independents reported an eight point fall from 64 to 56.

The confidence of the contractor sector decreased 8 points from 66 to 58 with two of the four sub-sectors remaining within the 60s range.

Drilling and well services fell by 3 points from 64 to 61

Facilities engineering, operations and maintenance dropped 7 points from 66 to 59

Marine and subsea fell by 13 points from 67 to 54

Press Release, December 21, 2012