In a macro-economic climate where uncertainty has been one of the few constants since the financial crisis began in 2007, one thing is clear: we are living in a changed global economy.
With global GDP increasingly shifting to the faster-growing emerging economies, Aberdeen is uniquely positioned in UK terms to benefit from the forecast international growth trends.
Following a year which saw sustained positive momentum in the international oil and gas services market, we firmly believe this positive trend is set to continue into 2012 as Aberdeen’s thriving service sector continues to capitalise on increasing global supply chain opportunities.
With the most recent HSBC predictions for 2012 forecasting GDP growth of 5.3% in emerging economies, compared with a more anaemic 0.6% growth in developed economies, the overall global picture remains positive for internationally-focused companies.
With Aberdeen-headquartered oil and gas service companies increasingly international in their outlook, we believe the local supply chain will continue to prosper from the prevailing economic trends.
Taking the changing economic picture into account, HSBC’s outlook for the oil and gas sector remains bullish, given the strong supportive fundamentals around supply and demand.
Clearly there is downside risk from a macro-economic perspective, but even in the event of a double-dip recession in the OECD countries, we believe that an oil price above $90 a barrel would be supported with emerging market economies likely to account for around 95% of the projected increase in oil demand in 2012.
We are also witnessing changing dynamics on the supply side, with major Opec producer Saudi Arabia now likely requiring an oil price at $90 a barrel to meet its budget needs following significant public spending in the wake of the Arab Spring.
Oil prices at these historically high levels will continue to drive investment across the sector, with key themes further emerging this year, including increased drilling in deeper waters, offshore gas, tight oil and liquids-rich shale plays in North America as well as opportunities in frontier markets such as Iraq.
We need only look to the survey of international activity in the Scottish oil and supply gas chain published by the Scottish Council for Development and Industry and Scottish Enterprise in 2011, to highlight the strength of the service sector.
With overall sales increasing by 3.7% to reach £15.9billion and international sales growing by 10.4% to £7.2billion in 2009-10, international activity accounted for a record 45.4% of the Scottish supply chain sales total.
For Aberdeen companies which are internationally focused, we are seeing many experiencing significant growth on the back of this positive global outlook.
Within HSBC Leveraged Finance, we assisted our clients with an increased number of international acquisitions in 2011 and we anticipate this trend continuing with a strong pipeline of opportunities in place in 2012.
With the innovative nature of the oil and gas service companies headquartered in Aberdeen, and the city’s strong track record in capitalising on international growth trends, we strongly believe this backdrop sets Aberdeen apart from the rest of the domestic UK economy.
Joe Windle is a director with HSBC Leveraged Finance Scotland.
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