Oil and gas contractors continue to enjoy sustained demand and increased rates, with skills shortages cited as a major constraint on the activities of clients based around Europe’s oil and gas capital Aberdeen.
The 20th Aberdeen and Grampian Chamber of Commerce (AGCC) Oil & Gas Survey also highlights that activity in the North Sea may decline unless measures such as those proposed in the Wood Review are implemented.
There are other concerns, such as reduced exploration and production, and the uncertainty over the Wood Review and Scottish Referendum. But the investment intentions and confidence of operators, service providers and supply chain companies remains high.
AGCC chief executive Robert Collier explains: “More stable trading expectations are returning after rapid growth in recent years. 30% of all firms were more confident about their UKCS [UK Continental Shelf] activity than they were a year ago. It is positive to see that firms are continuing to invest in the UKCS and are looking to increase spend over the next two years.”
Skills shortages still high in the ‘business constraints’ league table
The report says skills shortages and competition for staff are significant in “constraining” activity in the North Sea. But they were also cited by clients as the “second most common constraint on their international activities”, after generating demand for the client’s services.
Contractors will continue to fulfil many of the talent and skills shortfalls over the short term. Longer term, clients are clearly looking to nurture their existing employees, as staff training is now the second highest investment category for clients, after developing new markets.
Can contractors ride the wave of investment into research and development?
The survey features an analysis of clients’ plans for investment into research and development. Over 80% engage in R&D, and the total investment has increased already during 2014, after remaining stable over the last two years.
Based on the focus of operators on research that results in “improving extraction yields, followed by improving the extraction and developing processes”, contractors seeking contracts within R&D should focus on developing these areas of expertise.
Other ongoing areas of R&D that contractors may be interested in cover many sectors and disciplines, ranging from subsea systems to developing advanced manufacturing capabilities.
The Wood Review may benefit contractors
Despite the Wood Review’s drive for efficiency in North Sea activities potentially reducing contracting rates, it may ultimately benefit contractors. The alternative is a potentially declining North Sea sector that will benefit no-one.
Nearly half (48%) of those clients surveyed in the report were unsure whether the Wood Review would “lead to significant change in the way the [UKCS] operates”.
Larger firms were more positive about the review than smaller ones, leading Collier to conclude that lack of awareness and understanding may underpin the uncertainty of smaller contractor clients.
“Part of this uncertainty comes from a lack of knowledge of the recommendations and we would encourage all firms in the supply chain to take time to understand the review and recommendations it makes,” notes Collier.
Contractors may also be able to help their clients, particularly small to medium sized enterprises (SMEs), maximise any benefits likely to arise from the Wood Review.
The Scottish Referendum – more contracts, or fewer?
This 20th edition of the survey asked the question, Is the referendum in September
The fieldwork for Survey 21 will take place immediately after the referendum vote; the findings will make for interesting reading
Robert Collier, AGCC
2014 having a consequence on plans and investment proposals?. Clearly, a ‘no’ answer would not benefit contractors as less investment means fewer contracts.
Encouragingly, just over half of contractor clients (55%) responded that the referendum has not impacted on their plans. Less welcome news is that this percentage has fallen from 57% to 55%, and 45% of contractors’ clients have indicated that the referendum has impacted on their investment plans.
Fortunately for oil and gas contractors, the sector is global and workers with North Sea experience are highly prized in oil and gas provinces worldwide. However, the negative sentiment bodes less well for UK plc.
Collier says: “The fieldwork for Survey 21 will take place immediately after the referendum vote; the findings will make for interesting reading.”