Oil And Gas Firms "Plan More Cuts"

More than four in 10 of the UK's oil and gas firms plan to cut costs further in response to the downturn in the industry, according to survey evidence.

The Bank of Scotland/Lloyds Banking Group report took industry opinion between last December and February.

It shows a third of businesses planned to cut jobs further during this year.

Of the 141 companies surveyed, 51% made redundancies in the past year. For Scottish firms, that was true of 63%.

In Scotland, 57% of companies surveyed within the industry and its supply chain said they had been severely or quite badly affected by the slump in oil prices, and 41% of firms across the UK.

For every one job created last year, they said that six had been lost.

A quarter of companies said they had grown by diversifying into other sectors. Larger firms are looking to decommissioning of North Sea equipment.

Small firms aim to gain more business from renewable energy investments. But there has been a drop in the expectations that business will come from the shale gas industry.

There has also been a sharp pulling back in plans for exporting, down from 91% last year to 67%.

That drop has been most notable in those eyeing North American markets and firms considering a move into the Middle East.

However, interest remains strong in seeking deals in African energy developments.

Firms expect exploration activity to remain subdued until the oil price rises further. It has gone up from a low below $28 in January to around $50 in recent trading.

Expectations of when it could reach $75 to $80 were mixed, with 33% of respondents saying that should be by 2018, and 38% believing it will not be before 2020. Larger oil firms were more likely to see the recovery in prices taking longer.

Stuart White, an industry specialist with Bank of Scotland, said: "The decline in the price of oil has made headlines around the world, and its knock-on impact on investment and employment has created economic headwinds that are being felt, not just by the industry but across the wider economy.

"With oil prices currently hovering around the $50 mark there is hope that prices have bottomed out and have begun to slowly and modestly recover.

"Many businesses however, undoubtedly face more difficult decisions on cost savings, jobs and investment.

"While the blow from depressed oil prices has been severe for many businesses and individuals impacted by job losses, the sector is proving itself to be among one of the most resilient industries in the UK. There are still choppy waters to navigate, but we remain committed to supporting our clients within the sector."




June 2016