COLIN Welsh, CEO of energy investment bank Simmons & Company International, is optimistic about the oil-price environment and that this will help the North Sea.
He believes crude markets will progressively tightening over the year and could “easily reach above $100” in 2011.
“2010 is one of those years where I can see people being very cautious in the first half but growing in confidence during the second half. 2010 is potentially a transition year.”
This is expected to ease the deal-making environment, notwithstanding the fact that money has always been available for the “right” deal.
Welsh suggests two positive scenarios: that, in the range $80-120 per barrel, a long-term future is in prospect, and if prices shoot to $200 within five years, then there is scope for reinvention of the North Sea.
With current prices hovering around the $80 mark, the long-term scenario is already a reality, one within which the oil-service community could enjoy a period of growth.
Service companies are more sustainable than the exploration and production brigade as a long-term investment bet for Europe’s Energy Capital, says Welsh.
He cites five main reasons for this:
As production declines, more wells are required.
Oil services can be applied globally.
Deepwater/subsea expertise required internationally.
Technological track-record of innovation.
Merging with alternative energy.
“Aberdeen service companies will be the lifeblood of Aberdeen after hydrocarbon reserves are exhausted,” says Welsh.
But to create the right kind of business (and deal-making) environment, he says Aberdeen needs to shake off its “ostrich mentality”.
The city needs modernised industrial estates; improved infrastructure; direct flights to global energy centres; adequate funding for technology; incentives to attract top global talent; incentives for business, and world-class technical/business education.
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