North Sea optimism hits five-year low
8 Aug 2014
Optimism in the UK’s offshore oil & gas sector is now at its lowest for five years, a new survey has revealed.
Low levels of exploration drilling and a slow-down in the industry’s commitment to future expenditure have combined to curb optimism in the sector, according to trade body Oil & Gas UK’s Business Sentiment Index for Q2 2014.
The index, which surveys Oil & Gas UK members, captures a snapshot of the industry mood and gauges a number of economic indicators, with a higher rating (above zero) indicating a more positive outlook and a lower rating (below zero) expressing a more negative opinion.
Fundamental change is needed to change the way the industry is taxed and regulated
Oil & Gas UK’s Ken Cruickshank
The results for Q2 20114 reveals that optimism has continued its steady decline from its peak of +33 in Q2 2012 to just two points above zero today, its lowest score since Q3 2009.
“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,” said Oil & Gas UK operations manager Ken Cruickshank.
“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.
“We are clear that fundamental change is needed to change the way the industry is taxed and regulated, if the UK is to maximise economic recovery from the UK Continental Shelf (UKCS). We hope that the implementation of the Wood Review – in particular the creation of the Oil and Gas Authority and the establishment of a simpler, more competitive fiscal regime with a lighter tax burden through the HM Treasury’s consultation, will be the catalysts which turn this situation around.”
Cruickshank’s calls for changes in taxes and regulation come just a month after the Treasury launched a review of the oil & gas tax regime aimed at making the North Sea more attractive to investors.
