The representative body for the UK’s offshore industry has warned the sector is at a crossroads as it publishes its Economic Report 2018.
Oil & Gas UK highlighted findings which show an improved landscape for the sector, with reduced costs, competitive fiscal terms, improved operational performance and more stable oil and gas prices.
However, Oil & Gas UK Chief Executive Deirdre Michie warned about the impact of record low drilling activity and a potentially damaging supply chain squeeze.
Speaking to an audience of industry leaders recently, Deirdre Michie said the Economic Report 2018 shows investment conditions remain key to the long-term future of the North Sea.
It comes as the report shows operating costs have halved and are now being sustained at around $15/boe, production is on track to be 20 % higher than 2014 and more major new projects have been sanctioned by Exploration and Production (E&P) companies so far this year than the last 2 years combined.
However, this recovery is yet to be felt across the whole of the sector, with the report noting that four exploration wells were spudded in the first eight months of the year – and even with more wells to come, total exploration activity this year expected to be the lowest since 1965. The capacity of the supply chain has been reduced in recent years, as revenues and margins continue to be squeezed.
Speaking ahead of a report launch to industry leaders in Aberdeen and London today, Oil & Gas UK Chief Executive Deirdre Michie said:
“Industry is emerging from one of the most testing downturns in its history. However, the steps that have been taken by industry, government and the regulator have delivered tangible results.
“Despite the improvements seen in recent years, we find ourselves at a crossroads. Record low drilling activity, coupled with the supply chain squeeze, threaten industry’s ability to effectively service an increase in activity and maximise economic recovery.
“The UK Continental Shelf is a more attractive investment proposition – our challenge now is to take advantage of this.
“We have to drive an increase in activity while continuing to find and implement even more efficient ways of working which support the health of supply chain companies whilst also keeping costs under control.
“It shows that investment conditions remain key to the long-term future of the North Sea industry.
“Choosing the correct direction of travel is critical to securing our ambition for the future, outlined in Vision 2035. The sector deal is a further important step in delivering this vision.
“Essential for security of energy supply, supporting hundreds of thousands of skilled jobs and contributing billions to the economy, this is a vital industry. As our Economic Report shows, with the right stewardship across the industry, it will continue to play a leading role for many decades to come.”