Optimism in the UK’s offshore oil and gas industry continues to wane, according the second-quarter Oil & Gas UK (OGUK) Business Sentiment Index (BSI), released Aug. 6.
However, the index revealed that while industry’s optimism continues to decline, it does remain positive, at 2 points above zero on the –50 to +50 scale.
The BSI captures a snapshot of the industry’s mood and gauges a number of economic indicators, including business confidence, activity levels, business revenue, investment, and employment. A higher rating (above zero) indicates a more positive outlook and a lower rating (below zero), a more negative opinion.
“This latest snapshot shows optimism in our industry has dropped by 4 points—from 6 points above zero last quarter to 2 points today,” said Ken Cruickshank, OGUK’s operations manager. “Unfortunately we have seen the index fall over the last five quarters and, while businesses remain in optimistic territory overall, this is not a trend our industry can afford to ignore,” he said.
Cruickshank noted that incentives will be required to encourage further investment in the basin to “turn around low levels of drilling.”
He said, “While capital expenditure last year was at all-time high, our costs continue to rise and production rates continue to fall, especially in some of the oldest fields, which are taxed at rates of up to 81%, and exploration is at an all-time low.”
He added, “We are clear that fundamental change is needed to change the way the industry is taxed and regulated, if the UK is to maximize economic recovery from the UK Continental Shelf.”
Cruickshank noted that OGUK, as the leading representative trade association representing about 460 companies throughout the UK, hopes that the implementation of the Wood Review—and in particular, the creation of the Oil & Gas Authority and the establishment of a simpler, more-competitive fiscal regime with a lighter tax burden—will be the catalysts that will turn the situation around.