Offshore companies are planning to spend billions of pounds more in the North Sea this year to boost output.
The soaring oil price is encouraging significant additional investment in existing and new fields, a move expected to lead to the creation of hundreds of extra jobs at firms that provide services to the industry.
Energy consultancy Wood Mackenzie said yesterday that returning confidence would see spending on additional equipment and facilities nearly double from £4.4billion in 2010 to £7.7billion this year.
It also forecast that this would lead to a temporary halt in the decline of oil and gas production in the UK.
The consultancy expects a rise in exploration and test drilling in British waters this year.
Its newly published 2010 annual review reported that the UK’s oil industry had continued a slow recovery that began in late 2009.
The good news was delivered on the same day that official figures showed unemployment in Scotland had fallen and the economy north of the border had grown for the second consecutive quarter.
Wood Mackenzie’s lead analyst Lindsay Exulting said: “Looking at the last year, industry confidence was reflected by the success of the 26th oil and gas licensing round, an increase in deal activity and a rise in the number of projects put forward for approval.
“The returning confidence was also evident in exploration, where drilling was up by 28%, with 37 wells started, but it was still a long way short of the 56 wells started in 2008.
“For 2011, we expect exploration and appraisal drilling to increase as companies’ more positive economic outlooks become reflected in their drilling schedules. The UK remains an attractive province and material discoveries are still being made.”
Wood Mackenzie said key finds in 2010 included the Catcher and Edradour fields.
The UK oil and gas industry supports more than 400,000 jobs.
Major producers in the North Sea include BP, which is planning to invest about £1.5billion in the area during 2011 – the largest annual amount in more than a decade.
One of the smaller players in UK waters is Xcite Energy, which has a base at Banchory and is working on the Bentley heavy oilfield off Shetland.
Bentley is believed to have more than 200million barrels of recoverable reserves and Xcite plans to start production later this year.
Aberdeen and Grampian Chamber of Commerce chief executive Bob Collier said of the Wood Mackenzie report: “This growth in confidence is entirely consistent with the findings of the chamber’s own oil and gas survey published in November, the views of industry associations and the anecdotal feedback from our members.
“This optimism is good news for the wider economy of the north-east because it reinforces the long-term future of the sector in the region and its potential to bring more jobs to the area.
“The challenge now will be to ensure that we have the skills and training to fulfil the recruitment needs in both the short and long term because this very clearly is an industry which is here to stay for many years.”
Aberdeen City and Shire Economic Future chairman Tom Smith said: “This announcement reinforces the renaissance in the North Sea we have been experiencing recently and demonstrates that, with the right attitude and stable fiscal regime, there is an exciting and sustainable future for oil and gas in the UK Continental Shelf.
“These investment figures, when added to what will be a considerable subsequent operational expenditure spend, underline Aberdeen City and Shire’s position as a major global oil and gas province.
“This region is the supply-chain hub for this exploration and appraisal activity and we must capitalise on this while we can.”
Mr Smith added: “We have a very strong position from which to build a sustainable, international oil and gas base and diversify into other energy business to become a true global energy hub.”
