Written by: Keith Tully
Reviewed: Wednesday 9th September, 2015
The impact of the slowdown within the offshore oil and gas sector has been laid bare in a new report from the industry’s own trade body.
Oil and Gas UK has published a report this week highlighting the extent of the challenges being faced by British energy companies and warning of the potential for the industry’s fortunes to deteriorate further in months to come.
According to the organisation’s annual economic impact report, the number of people whose employment is supported directly or indirectly by the UK’s oil and gas sector has fallen from 440,000 to 375,000 since the beginning of 2014.
Driving current trends is a desire among oil and gas operators to cut their costs, with the industry as a whole reportedly having reduced its overall expenditure by as much as 8 per cent since the start of last year.
Worryingly, indications are that there will be a further £1.3 billion worth of cost cuts across the industry next year as oil and gas businesses aim to make further significant reductions in their spending.
“This great industry of ours is facing very challenging times. Last year, more was spent than was earned from production, a situation which has been exacerbated by the continued fall in commodity prices,” said Deirdrie Michie, chief executive of UK Oil and Gas.
“This is not sustainable and investors are hard pressed to commit investment here because of cash constraints,” she said.
“We anticipate that by the end of 2016, companies will have reduced the cost of operating their existing assets by 22 per cent (over £2bn),” added Oil and Gas UK’s economic director Mike Tholen.
Overall revenues across Britain’s oil and gas industry fell by around 20 per cent over the past year, with current estimates suggesting that a further contraction of around 30 per cent is likely over the next 12 months.
Underlying many of the problems being faced by oil and gas operators in the UK and around the world in recent months has been a sharp fall in the price paid internationally for energy resources.
Most notably, the price paid per barrel for Brent crude oil has halved over the past 12 months.