Contractor confidence in the UK Continental Shelf (UKCS) has risen with almost half being more confident about their prospects for the first time since 2013, according to an industry report released today.

Contractors regain confidence in growth

The findings of the 27th Oil and Gas survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute and KPMG, reveal that 49 per cent of contractors surveyed are more optimistic about their activities in the current year, up from 38 per cent since the spring survey.The survey looked at work in the six months to October 2017, asking firms about their prospects in the year ahead as well as the next three to five years in order to assess trends in exploration and production, decommissioning, renewable and unconventional oil and gas extraction activities both in the UK and international markets.It found that a net balance of 39 per cent continue to expect a rise in optimism in the year ahead, with almost half (48 per cent) more confident and only 9 per cent less confident; while a net balance of 28 per cent of firms are forecasting an increase in the value of production-related work in the coming year.The share of contractors working at, or above, optimum levels in their UKCS operations peaked at 79 per cent in 2013 and has been declining steadily over the last three years to a low of 12 per cent last year. However the latest results show this has improved, with 27 per cent of contractors now identifying that they are working at, or above, their optimum levels in the UK.

---

Related stories:

• Trends in the global oil and gas industry
• New UK oil forecast as BP profits rise
• Global oil industry ‘set for return to growth’

---

Decommissioning growth continues

The survey also indicates contractors’ expectations of greater involvement in decommissioning activity over the medium term with 83 per cent reporting potential involvement in the next three to five years.There also appears to be a firming up of opinions on unconventional oil and gas compared to previous years, with 71 per cent of operators/licensees now not predicting any involvement in the UK compared to 40 per cent last year.The number of firms expecting to become more involved in renewables has remained unchanged (54 per cent).

Employment and labour market positivity in the oil and gas sector

The autumn survey also looked at employment and labour market issues in the oil and gas sector. Less than a quarter (23 per cent, compared to 68 per cent in 2016) of contractors reduced their employment in 2017, while almost half (47 per cent, compared to 24 per cent in 2016) held employment stable.A total of 30 per cent (compared to only 8 per cent in 2016) increased employment. Looking forward, the survey suggests a continued positive outlook with a net balance of contractors (36 per cent) expecting a rise in employment across both permanent and contract staff.The proportion of firms reporting salary cuts also fell during 2017, from 43 per cent in the previous survey to 25 per cent.While many have remained steady, the number of contractors increasing pay during the period rose 10 per cent overall to 29 per cent. The number of vacancies also remains historically low, suggesting limited prospects for major hiring in the sector, however both operators and contractors are forecasting an increase in the total number of employees going forward.Meanwhile, the trend in skilled workers leaving the industry continues although figures suggest it has eased marginally, down to 38 per cent from 43 per cent at the same time last year.

Oil and gas sector increases diversity

Looking further ahead the sector is planning to diversify further with 82 per cent of business currently being undertaken focused on oil and gas, but with an expectation of this figure being 72 per cent by 2025.“The underlying data suggests that rather than an industry with ‘cautious optimism’ we actually see a picture of significant diversity with some companies buoyant and performing well while others remain fragile,” Said James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce.“It does look like the worst is likely to be over, at an aggregate level, with 60 per cent of firms believing that the industry has already reached the bottom of its current cycle and a further 24 per cent predicting this will happen within the next 12 months. However as activity levels and revenue remain lower for many compared to three years ago business models for some may be simply unsustainable.“When asked what position businesses expect to be in by January 1, 2019, 54 per cent expect their business to be growing while none expect to be declining. This is a vast improvement on the findings from a year ago and indicates that the businesses, which have been able to withstand the downturn, are seeing a change in their operating environment and are focused on the potential upside.“We were perhaps surprised that the expectation is that in 2025 respondents on average felt 72 per cent of revenue would still be from core oil and gas activity. We may need to be more ambitious around diversification to secure growth to retain the scale of the sector at these percentages, unless we see a large increase in UKCS capital investment or a step change in internationalisation. Both of these feel unlikely at the moment with the sector already performing well on the latter measure.”

Brexit and the industry

The survey also sought firms’ perspectives on a number of issues, including the impact of Brexit on talent attraction in the sector, whether businesses have undertaken certain transformational changes; and the industry’s view on when they think the current downturn will bottom-out.The majority of firms are not overly concerned. Since this time last year, the number of firms reporting an impact on talent attraction has risen 11 per cent to 33 per cent, although 47 per cent believe it will have no impact, down from 54 per cent in 2016. More than half (54 per cent) have changed the structure of their organisation in the last six months with slightly more than quarter starting process change or the application of new technologies (28 per cent and 27 per cent respectively).When asked to give their predictions as to when the sector will reach the bottom of its current cycle, the majority (60 per cent) felt it already had, compared to 52 per cent in the spring and only 29 per cent this time last year. A further 24 per cent forecast this will happen within the next 12 months and 11 per cent anticipate that it will happen within 1-2 years. Only 6 per cent felt that it would take longer.Moray Barber, partner at KPMG, said, “We are proud to partner with Aberdeen & Grampian Chamber of Commerce on this survey, which has long been a reliable barometer for the current health and future outlook of the oil and gas industry in the UK.“This survey provides some reassurance that the industry, in general, is in a more stable condition. Companies have been fully focused on driving efficiency across all business areas, which has included a period of intense cost cutting and, in some cases, a complete reassessment of the effectiveness of current business models to survive the lower for longer oil price. As a result, the industry has undoubtedly undergone some transformational change to ride out the downturn.“However, having come through a more productive phase of value creation and new ways of working, it is encouraging to see that 60 per cent of companies in this survey believe that the industry has already reached the bottom of its current cycle.“Whilst this indicates a more positive attitude is developing across the industry, there is still a long way to go to get back to 2013 productivity levels, with only 27 per cent of contractors stating that they are working at or above their optimum levels in the UK.“That said, as the industry shifts its focus to driving increased performance and productivity from the UK Continental Shelf (UKCS), continued investment in recruiting and maintaining the best talent and skills, and making use of available transformational technologies will help to drive the industry forward, and with this survey demonstrating increased confidence for the year ahead, there is every possibility that the industry will continue to show resilience and deliver strong results during 2018 and beyond.”

Investment in operating models and transformative technologies

The industry has endured a persistently lower oil price and much uncertainty in recent years, with new investment slowing and both productivity levels and production volumes taking a hit. However, this latest report on the current situation in the UK oil and gas sector provides some reassuring signs that confidence is growing in the industry, suggested Mark Andrews, KPMG partner and UK head of Oil & Gas.Mr Andrews added, “To ensure that we drive production efficiency and maximise the recovery from existing producing assets, it is critical that the industry continues to invest in new operating models and transformative technologies, such as digital and intelligent automation.“It is encouraging to see that this change is already happening in the industry, with the survey showing that more than half of firms reported changes to the overall structure of their organisation in the last six months, and more than a quarter of firms have implemented process change or applied new technologies. Looking ahead, the survey demonstrates a rising confidence within the industry, and it is welcome news that more than 50 per cent of respondents expect to see growth in UK Continental Shelf over the coming 12 months.” Deirdre Michie, chief executive of Oil & Gas UK, said, “It’s heartening to see another report indicating confidence is returning to the UK Continental Shelf – a sentiment reinforcing the findings in our own Economic Report. “Oil & Gas UK believes there is more optimism surrounding the future of the basin and this is partly reflected in the significant merger and acquisition activity we’ve been seeing over the past year.“That said, we can’t be complacent, as there are parts of the supply chain still finding it very tough. So that’s why we must maintain our focus on sustaining our efficiency improvements and making the North Sea as competitive as it can be.“We must attract more fresh investment into the basin to drive new activity and ensure we can recover the billions of barrels of oil and gas it still holds.”To read the report click here.For related news and features, visit our Enterprise section.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory  

©2025 Re:locate magazine, published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein.