Oil and gas contractors are typically highly mobile and have traditionally moved to where the work is. And the sector is truly globalised, with oil and gas provinces the world over at every stage of the development lifecycle.
As a result contractors, and to a lesser extent the supply chain, look set to benefit regardless of what happens in the North Sea, although prospects may not be quite so rosy for UK plc.
The current focus on the North Sea, and the oil and gas contractors who work there, is a result of four key publications:
- Two visions by the UK and Scottish governments on how the North Sea’s resources and tax revenues should be managed – both documents are part of the political debate over September 2014’s Scottish independence referendum
- The Wood Review, which is the final report by Sir Ian Wood on how to maximise the recovery of the North Sea’s remaining oil and gas reserves
- Oil & Gas UK’s Activity Survey 2014, which provides an evidence base for record capital investment alongside increasing operational costs, falling production and sharply declining exploration.
The impact of an independent Scotland, if Scots vote ‘yes’, may affect contractors both directly and indirectly. Direct impacts could include a new currency and a new tax regime. Indirect impacts could be the taxation by a future Scottish government of oil and gas revenues, which may impact positively or negatively on investment in the region, and therefore affect the number of contracts and contract rates.
Should the Wood Review’s recommendations be fast-tracked and effectively implemented, then the volume of North Sea work for contractors may both increase and be sustained over the longer term. However, like many industry reviews before it, there is a danger of the Wood Review fading into obscurity with the end of the media focus and politicians’ short-term interests moving elsewhere.
Oil & Gas UK’s findings may be positive for contractors in the short term, as their skills are so obviously needed to fill skills shortages and to ramp up exploration and production efficiency. But until exploration does increase, the medium- to long-term looks less positive.
Taking a worst-case scenario, that a future government – whether in Westminster or Holyrood – imposes unrealistic taxes that deter investment, the Wood Review is ignored and exploration never recovers, where does that leave contractors?
Actually, with a huge choice of alternative locations to seek work, including ‘nearby’ in Norway’s North Sea sector, where the skills of North Sea contractors are highly prized. For contractors used to travel and working offshore, their lifestyles may see little change.
And of course a best-case scenario is that the Wood Review is successfully implemented, oil and gas companies take heed of Oil & Gas UK’s warnings, and investment in exploration accelerates.
Either way, oil and gas contractors will benefit.