More than 50% of oil and gas operators in the UK North Sea believe the March tax hike has harmed planned long-term investment in the basin, according to a report published today.
Aberdeen and Grampian Chamber of Commerce’s 15th oil and gas survey found that 21% of those asked, including contractors, also thought operational activity had dropped.
The latest indictment of the Government’s tax increase on North Sea oil and gas producers also found that business confidence among North Sea operators was lagging behind international counterparts in the wake of the March tax grab.
Further, the industry is also facing internal pressure – difficulties retaining staff is causing double-digit percentage wage inflation.
However, recently-announced substantial investment over the next three years had reaffirmed the potential for the UK continental shelf (UKCS), said the report.
Bob Ruddiman, head of energy at McGrigors, which sponsored the survey, said: “There is no great comfort in being able to say to Westminster politicians that ‘we told you so’, and it is time to move on.
“But we have to hope they have taken on board the strong message from operators that, without a stable and transparent tax regime, investment capital will be diverted to other oil and gas producing regions and the UKCS will pay the price of Government meddling.”
The report also said ongoing economic uncertainty – in the UK, Europe and globally – alongside Government spending cuts was also raising caution about future demand and investment decisions.
Rising costs, geopolitics such as the unrest in North Africa and aggressive Chinese energy policy, would all also impact on investment, it said.
According to the report, more than 50% of contractors said they were under-capacity in UKCS activity.
But firms were also facing difficulties in recruiting staff.
All operators and 87% of contractors said they had sought to recruit staff, thought partially due to firms having cut staff numbers in previous years.
But Ron Cookson, vice president of the chamber and senior vice-president of Technip Offshore Wind, said: “Retention of staff is as big an issue as getting people.”
According to the report, retention problems were leading to pay inflation, sometimes in double-digit percentage figures, especially when it came to specific skills needs and retaining experienced staff.
Most staff were recruited from other industry firms and those who left were going to other companies in the sector or, especially at contractors, going overseas.
To add to the staffing pressures, most firms said they expected to increase staffing over the next three years.
The study was released at safety training firm Survivex’s Dyce base.