The head of Oil and Gas UK (OGUK) has urged the Cromarty Firth’s supply chain companies to “keep the faith” amid signs of a “fragile confidence” returning to parts of the North Sea industry.
But, during a visit to the area, where 14 rigs are currently stacked, Deirdre Michie acknowledged firms face another tough year in 2017.
Ms Michie, the OGUK chief executive, met representatives of around 10 companies during a fact-finding mission to Invergordon set up by the Cromarty Firth Port Authority (CFPA).
Referring to findings of the industry body’s recent annual economic report, she said during the downturn operators had become more competitive, reduced costs and improved efficiencies and sustainability. She added that the UK’s fiscal regime was also “pretty competitive”.
But she said, with only one project sanctioned this year, compared with five in the previous year, fresh investment remained the key to the industry’s recovery.
OGUK’s economic report showed supply chain revenue down by 30% in the most recent year, amid continuing low oil prices.
Ms Michie said: “There is a fragile confidence building up in some parts of the industry, but it’s not translating through yet to other parts.”
She added: “All things being considered, it could be that you see companies start to make money in 2017. But it’s very tentative at the moment.”
The OGUK chief executive described the sight of the stacked rigs in the firth as, “awesome, but for the wrong reasons.”
She said: “That is a manifestation of the impact on the supply chain, without a doubt.
“So our focus is on how to stimulate activity and investment in the short term. Our ask to government was to start working with us to really promote the industry in the way they do the automotive or aerospace industries.”
Mrs Michie said her message to supply chain companies in the area was to: “keep the faith, keep the confidence and to look for opportunities for efficiencies and to diversify.”
She said: “There is a recognition that it is really tough. There is also a recognition that things are improving and that it is worth it.
“We still think the opportunity is there. There are hundreds of thousands jobs we still support and we can support.
“The stars need to start aligning and actually we think that when the upturn does come we will be really well positioned as an industry to take advantage of it.”
CFPA chief executive Bob Buskie welcomed Ms Michie’s visit to the area.
He said: “As a trust port we have got a pretty unique position to make sure that all the stakeholders, including people like Deirdre, understand and see what the port is doing. It was great to welcome her here to give her an oversight of port operations and the nature of the industry just now. The firth at the moment is symptomatic of the low oil price and despite the fact that the price has risen to $52-a-barrel, it’s just not enough for these assets to go back to work yet.
“The price has to be significantly higher than that for a significantly longer period of time before we see any of these assets going back out to either do exploration, appraisal or even work-over drilling.”
Frank Hall, of Semco Maritime, which operates a rig upgrade facility at Invergordon Service Base, said diversifying the business had been vital during the downturn.
He said: “Our involvement is primarily within the mobile and drilling industry. Obviously there is a direct correlation between the collapse in the drilling market and the collapse in the market generally for people like ourselves.
“So what we have had to do is look at diversifying away from what would be a traditional yard stay project management type company. We have diversified into carrying out upgrades and modifications offshore. But also we’ve got guys working on vessels, so we are in the marine market now. You’ve got two choices. You either sit still, or you go where the market goes and that’s exactly what we have done.”
He added: “It’s not doom and gloom everywhere. There is work to do offshore, essential repair work there and potentially decommissioning.”
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