Survey sees rising activity in UK North Sea

July 5, 2005
UK North Sea oil and gas activity will continue to increase in the coming year, according to results of a major survey.

Eric Watkins
Senior Correspondent

LONDON, July 5 -- UK North Sea oil and gas activity will continue to increase in the coming year, according to results of a major survey.

The third Aberdeen & Grampian Chamber of Commerce oil and gas survey, sponsored by Deloitte and conducted by the Fraser of Allander Institute, reflects a more positive outlook for North Sea activity than existed 4 months ago.

"Overall, the survey underlines the increased activity and confidence in the sector which we in the [UK] Northeast are certainly feeling," Geoff Runcie, Aberdeen & Grampian Chamber of Commerce CEO, told OGJ.

But Runcie qualified his optimism with warnings of possible problems in the longer term.

"Most of the optimism comes from development and appraisal activity. We are still seeing very limited exploration activity, which is not good news for the long-term future of the sector," Runcie said.

"In a period of fairly stable, high oil prices, we would expect higher levels of exploration, and this must be encouraged so that when the oil price does descend we do not revert to a situation of postponed investment," he said.

The report nonetheless indicates that business confidence continues to rise, with both producers and contractors remaining optimistic about developments in the UK Continental Shelf (UKCS).

There are even stronger signs of increased activity among operators, and contractors reported increases in the volume of tenders and work.

"The most encouraging signs for the sector and the North-east are the forecasts for increased exploration, drilling, development, and appraisal activity in the UKCS for the next 12 months," said Derek Henderson, senior partner at Deloitte in Aberdeen, Scotland.

"Coupled with the new energy minister's hard-line stance on the North Sea, where he has pledged to revoke exploration licenses if companies fail to develop their assets quickly enough, we should see even more activity, which is good news for the industry but also for the many businesses which support it."

Forty-five percent of the surveyed contractors reported increased UKCS-based activity over the past 4 months, and 40% said they expect an increase on that in the next year. While 68% of contractors said they were working at or above optimum levels in the North Sea, 70% reported working at or above optimum levels in other parts of the world.

Runcie told OGJ that the survey was conducted among 69 organizations employing more than 130,000 people in the UK and elsewhere.

He said significant input into the survey also came from the Well Services Contractors Association, the Offshore Contractors Association, and the UK Offshore Operators Association.