Three-quarters of North Sea operators expect a reduction in activity this year, an oil and gas industry survey has revealed.
Global economic woes will have a growing impact on jobs in the sector throughout 2009 and even more so next year, according to the study.
Launching its 10th Oil and Gas Survey yesterday, Aberdeen and Grampian Chamber of Commerce warned that the financial climate would mean cutbacks and a change to the structure and pace of industry investment.
Jon Woodwards, the group’s international business director, said it was not all gloomy news as there were still good prospects of overseas growth for local firms.
He said: “International opportunities are still available despite the global crunch. Emerging oil and gas economies such as Angola will likely remain buoyant, as their thirst for oil revenue to satisfy the needs of infrastructure development and social imperatives outweigh other considerations.”
He said Aberdeen was unlikely to be as badly hit as other areas in the recession.
“The oil and gas industry is fundamentally strong for the long term and the nature of its projects and investment provide a temporary insulating effect,” he said. “Aberdeen’s infrastructure is well developed and robust, and economic development strategies such as those of Aberdeen City and Shire Economic Forum are in place.”
He said the downturn was hitting the North Sea more slowly. “After strong growth over the last few years, activity is set to level off during 2009, but this is a better situation than is seen in many other industries.”
The sector had seen downturns before but its resilience and ability to recover quickly were well known, he said. It just had to make sure its pool of expertise remained fairly intact so it was “nimble, competitive and well-positioned to respond to the inevitable upturn in activity levels”.
The survey, sponsored by law firm McGrigors and conducted by Strathclyde University’s Fraser of Allander Institute, revealed a rising trend in activity in the North Sea during 2008. But this was widely expected to go into reverse this year amid growing concerns about capital costs and access to credit.
Cliff Lockyer, of Fraser of Allander, said the process of shedding jobs was under way, with contractor and temporary staff the first to go as operators cut costs. Service giants Schlumberger, Halliburton and Baker Hughes all recently announced cuts.
Bob Ruddiman, Aberdeen-based head of energy at McGrigors, said global liquidity concerns and the low price of oil meant the industry faced a period of uncertainty.
He added: “Nobody can predict how long the global recession is going to last but there is still long-term demand for hydrocarbons.”
Mr Ruddiman said oil and gas firm Oilexco North Sea – in administration after failed efforts to gain extra capital funding – was an example of difficulties facing the sector.
There was an assumption in the past of debt being readily available, but no longer. “We are likely to see some weaker players run out of finance,” he said.
Industry body Oil and Gas UK said the findings, from responses of operators and contractors, were the first indication of the scale to which activity in the North Sea was affected by the recession.
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