The latest Oil & Gas UK Business Sentiment Index confirmed industry optimism remains on a downward slope.
Sector optimism dipped from +2 to -7 – the scale stretches from -50 to +50.
Rising costs, reduced drilling and deflated oil prices were all cited as major factors for the decline.
Oonagh Werngren, Oil & Gas UK’s operations director, said: “Over the last six quarters, there has been a marked trend towards declining optimism in the sector but this is the first time the overall index has moved into negative territory since 2009.
“In recent months, the North Sea oil and gas industry has been considering the implications of a falling oil price which makes it harder to attract new investment. Many of our survey respondents expressed concern over future activity levels, which have not been helped by rising costs.
“The industry urgently awaits an announcement on the 28th Licensing Round, the appointment of the new chief executive officer of the Oil and Gas Authority and the outcome of the Treasury’s fiscal review to ensure that the basin remains competitive on a global basis. Together, answers on these should help boost confidence in the UKCS.
“Ahead of the announcement of the CEO for the new Oil and Gas Authority, the industry has been working with the Department of Energy and Climate Change (DECC) to implement some of the key recommendations of the Wood Report aimed at maximising recovery from the UK Continental Shelf (UKCS). This will help deliver both opportunity and certainty in the UKCS which, despite the current pessimism, last year saw capital investment reach £14.4billion – its highest in three decades.”
The rising lifting costs and declining oil prices have created an industry-wide phenomenon, according to sector expert Professor Alex Kemp.
Currently Brent Crude currently sits at the $86 mark.
Oil & Gas UK economics and market intelligence manager, Adam Davey added:”As expected, UKCS production over the last quarter has been affected by a number of fields undergoing planned shutdowns to carry out essential maintenance over the summer months.
“Year to date figures show just a 1% decline in overall production compared to 2013. After declines of 19%, 14% and 8% in the last three years respectively, this represents a significant slowing of the rate of decline. If production performs as expected in Q4, this year could be the first since 2000 where the UKCS experiences no overall decline in production.”
The index surveys the industry mood and gauges a number of economic indicators, including business confidence, activity levels, business revenue, investment and employment.
By Rita Brown
