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survey highlights

The 10th Aberdeen & Grampian Chamber of Commerce's Oil and Gas Survey, sponsored by McGrigors, has just been launched. Widely publicised and acknowledged throughout the UK and beyond, it gives an insight to how the industry sees business developing over the course of the next year.

The results of the 10th Aberdeen & Grampian Chamber of Commerce Oil and Gas Survey have prompted a call for the Government to The The results of the 10th Aberdeen & Grampian Chamber of Commerce Oil and Gas Survey have prompted a call for the Government to support the industry by implementing a long term tax and energy policy in April's Budget.

The suggestion, by Chamber chief executive Geoff Runcie, was widely supported by the industry amid increasing evidence that the UK oil and gas industry is facing job losses and forced mergers and acquisitions as a result of the global recession.

The survey, sponsored by McGrigors and conducted by the Fraser of Allander Institute, has revealed that the current financial climate has already had an impact and is expected to severely challenge business confidence in the future despite UK operators and contractors still expressing a degree of optimism in both domestic and international markets.

After a period of rising investment, activity and employment the United Kingdom Continental Shelf is facing an increasingly uncertain future as a result of the current global economic recession, reduced energy demand and the credit crisis.

The majority of operators expect to reduce total employment levels this year and contractors, for whom the impact is slightly slower, expect a marginal increase in total and permanent employment but a cut in temporary and contract staff.

Amongst both operators and contractors the commodity price, rising costs, tax relief/capital allowances, the current economic recession and lift costs were the five factors most frequently ranked as very important and the only difference to previous surveys is the declining importance attached to skill shortages.

For the first time access to capital and loans was included and 50% of operators and 54% of contractors rated this as very important.
"Given the findings of this survey it is clear there are real threats on the horizon. It is crucial that the UK Government implements in the forthcoming Budget a long term fiscal and energy policy that recognises the high levels of dependence on hydrocarbons and ensures the continued competitiveness of the UKCS and encourages future investment in the sector and the region," said Geoff.

"The survey suggests that the present global financial crisis will result in cutbacks and a change to the structure and pace of the industry's investment, leading to a period of consolidation and reassessment of present operations and future plans.

"Respondents felt that the recent collapse in the oil price together with the continued uncertainty and limited access to working capital and long term loans will have a major impact on the level of activity in the sector and on the wider business community in both Aberdeen City and Shire. "

McGrigors partner and head of energy Bob Ruddiman said: "The survey highlights that yet again our industry is at a crossroads. Global financial markets are in turmoil, oil prices have collapsed and in the UK there has been a lack of fiscal consistency in respect of energy.

"The current market forces threaten not only UKCS investment and development but also the international oil service business which emanates from the UK and plays such a vital role in our economy.

"Only a year ago the clarion cry was of a skills shortage and it is vital that government and industry work together to ensure the sustainability of this sector in difficult times."

The full report can be viewed on the Chamber website at
www.agcc.co.uk

See page 38 for feedback on the UK Oil & Gas 2008 Activity Survey.