North Sea Oil Firms Making Energy Transition

Almost 40 percent of North Sea operators and contractors are concerned about diversification and energy transition with around half (49 percent) working to reduce their carbon footprints or develop low carbon solutions, according to an industry report.

The findings of the 31st Oil and Gas survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute and KPMG UK, reveal that more than half (52 percent) of respondents report an increasing demand for their products and services in non-oil and gas projects, with a further 25 percent actively pursuing work outwith oil and gas, and only 11 percent planning no further diversification.

A growing number of businesses are seeing opportunities in less traditional activities such as decommissioning and renewables. 86 percent of firms expressed some likelihood of engaging in decommissioning activity in the medium term, the highest result since the question was introduced in 2010. The survey also shows the highest proportion of contractors since 2016 indicating expected involvement with renewables work in the near future.

Recruitment continues to rise with 54 percent of contractors having increased their total workforce the last year (compared to 40 percent in 2018). 

Of those firms who have considered potential diversification, 34 percent flagged concerns around profitability and return on investment as the main barrier, closely followed by 31 percent of firms citing experience and skills within the organization as a barrier.

When asked to consider the top concerns for the next 10 years, oil price and market stability remains the biggest concern for 88 percent of businesses. The political environment is also perceived to be a threat for a significant proportion of firms with 50 percent specifying Brexit and a further 22 percent identifying new regulations and/or tax legislation as an issue.

Martin Findlay, office senior partner and tax partner at KPMG in Aberdeen, said: “Despite continuing uncertainty in the wider Scottish and UK economies, and the impact of climate change on investment priorities for providers of capital, the latest survey paints a positive picture for the oil and gas sector with growing confidence levels driven by a deep sense of resilience and an increasing focus on innovation.

“Alongside rising confidence levels, production activity seems to be growing, with 43 percent of contractors reporting an increase – up from 28 percent 12 months ago. However, it’s clear that the downturn which hit the industry just a few years ago remains a risk factor, with 88 percent of respondents telling us the oil price and market stability is their biggest business concern.”