Falling oil prices, rising costs, and looming political questions darken the business mood about the UK offshore.
For the first time since 2009, the quarterly Oil & Gas UK Business Sentiment Index has turned negative.
Based on a survey of 1,500 operators and contractors active on the UK Continental Shelf, the index assesses changes in expectations for the next 3 months relative to the current quarter. Questions relate to indicators such as business confidence, activity levels, business revenue, investment, and employment.
Results yield a score of as high as 50 and as low as -50.
The third-quarter 2014 score: -7.
According to Oil & Gas UK, the survey's 15-20% response rate represents a consistent group of companies.
When the trade group launched the index in January 2009, the numbers were negative: -4 in the first quarter, -5 in the second, and -1 in the third.
The index then fluctuated above 0, peaking at 33 in the second quarter of 2012. It has fallen every quarter but one since then.
Oonagh Werngren, Oil & Gas UK operations director, said respondents now voice concerns about costs, declining drilling rates, and oil prices.
Pessimism is natural for a mature oil and gas province from which oil and gas production, which peaked in 2000, fell last year by 7.7% after drops of 14.5% in 2012 and 19.2% in 2011.
Potential, however, remains high. Recoverable oil and gas off the UK is estimated to total 15-24 billion boe. But discovery sizes aren't nearly what they once were. Newly found reservoirs are complex and expensive to develop.
The industry also worries about the UK regulatory and fiscal regime.
"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," Werngren said.
The business mood, in other words, awaits clarification of the government mood.
(From the subscription area of www.ogj.com, posted Oct. 31, 2014; author's e-mail: [email protected])
