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Energy ... Oil and Gas
Impact of low prices

North Sea oil and gas firms must find news ways of working and collaborate more say experts at PwC


Peter Burgess

North Sea oil and gas firms must find news ways of working and collaborate more say experts at PwC North Sea firms told: take a long view amid crude price plunge North Sea firms told: take a long view amid crude price plunge MARK WILLIAMSON / Sunday 14 February 2016 / Business Share 0 comments

OIL and gas firms need to broaden their view beyond issues such as tumbling oil prices and over-supply if they are to prosper in an increasingly complex and volatile global market, PwC has warned.

In a report on the oil and gas industry, PwC said firms that focus too much attention on the short term problems facing them in areas such as the North Sea may fail to prepare for the even bigger challenges the future is likely to hold.

'While, for understandable reasons, the current depressed oil price dominates the headlines, it’s also important to look beyond that to consider what forces are shaping the future of the industry,' said Viren Doshi, strategy and oil and gas leader at the accountancy giant.

He added: “Global demand for affordable, reliable energy will continue to grow for the foreseeable future, but there is a new longer-term backdrop, as the world transitions to a low carbon system. Momentum to replace fossil fuels with cleaner energy sources is building, and oil and gas companies need to consider their futures in this context.”

PwC said oil and gas firms had to consider the potential impact of a range of factors.

They may need to find new ways of working in response to increased demand for renewable energy and the associated development of disruptive technologies.

Governments may act to curb oil and gas firms’ activity in areas such as the Arctic or in shale regions to help curb emissions.

While the future may be uncertain, PwC believes it is possible to identify key characteristics that successful companies will have to demonstrate.

These include having a clear strategy and an ability to be agile and resilient in uncertain times and to offer innovative responses to disruptive change.

PwC’s UK oil and gas leader Alison Barker, said:

“As the North Sea becomes increasingly mature and increasingly uncompetitive in the face of rising costs it is essential that the industry finds new ways of working. There are opportunities to learn from other sectors in developing a collaborative, sustainable future in the basin.”

Oil & Gas UK survey highlights scale of challenge facing North Sea industry amid widespread job cuts North Sea firms slash more jobs as confidence slumps to record low North Sea firms slash more jobs as confidence slumps to record low MARK WILLIAMSON / Tuesday 9 February 2016 / Business Share 0 comments

CONFIDENCE levels in the North Sea have slumped to a record low amid widespread job cutting in the area in response to the renewed fall in the crude price, a survey has found.

Trade body Oil & Gas UK said more than half (54 per cent) of the firms that responded to its latest survey had shed jobs in the final quarter of 2015 when the challenges facing the North Sea industry mounted relentlessly.

The rate of job cutting matched the previous record set in the second quarter of 2015.

Two thirds of respondents told the industry body they had suffered a drop in sales in the latest period as the firms that operate oil and gas firms slashed spending in response to the price fall.

The findings paint a grim picture of the state of the North Sea where confidence nosedived toward the end of last year. A brief rally in oil prices during the summer fizzled out as supplies ran well ahead of demand.

Oonagh Werngren, Oil & Gas UK’s operations director, warned that 18 months after the downturn started firms are braced for conditions to get even worse.

“The deteriorating market conditions and the scarcity of new business opportunities continue to be major concerns for the industry,” she said. “Many companies remain deeply apprehensive about the future.”

The findings provide the latest evidence of the severity of the downturn in the industry, which is facing up to the prospect of a long period of low oil prices.

Oil and Gas UK noted that its sentiment index reading has been in negative territory for six quarters. However the reading fell sharply in the last three months of 2015, to a record low of -32 from -25 in the preceding quarter. A reading below zero indicates confidence fell compared with the preceding three months.

The fall in oil prices accelerated in the quarter as hopes that members of the Opec producers organisation would reduce output were dashed. Levels of excess stocks have risen around the world as economic growth in China has slowed and new fields that were commissioned during the boom that ended in 2014 have come onstream.

Conditions got even worse in January, when Brent crude hit a 12 year low of $27.15 per barrel, compared with $115/bbl in June 2014.

While Brent had rallied to $32.80 on Monday the price fell to $31.36 yesterday when the International Energy Agency highlighted downside risks. It said global oil demand growth is forecast to ease back considerably in 2016, noting: “OPEC crude oil output rose by 280 000 barrels per day in January as Saudi Arabia, Iraq and a sanctions-free Iran all turned up the taps.”

The Oil & Gas UK survey will spark renewed concern about the outlook for jobs in the North Sea as the impact of the price fall ripples through the supply chain.

Oil and gas firms shed 5,500 jobs in the North Sea in the first six months of last year alone, since when a series of firms have announced cuts.

Last month BP said it planned to cut 600 North Sea jobs

On Monday accountancy giant EY warned that many of the small and medium sized enterprises that help oil and gas companies run their North Sea operations will face a struggle for survival this year.

It reckons bigger fish will be better able to withstand the downturn but are still likely to suffer a sharp drop in sales.

Oil & Gas UK said firms were making progress with efforts to cut costs and increase efficiency and noted increased cooperation between companies.

However, Ms Werngren said: “Both fiscal and regulatory reform also have a key role to play in transforming the United Kingdom Continental Shelf into a competitive, low tax, high activity basin.”

Separately, Wood Group has won an extension to support Chevron’s North Sea operations which it said would retain 30 jobs.

The Aberdeen-based oil services firm has been appointed to provide operations and maintenance services on four offshore facilities for the US giant including the Captain floating production, storage and offloading vessel, for an additional year.

The value of the contract extension was not disclosed.

In December Wood revealed it had reduced its UK workforce numbers by around 20 per cent last year, to 10,000 from 12,000.

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