Cameron Bruce, head of oil and gas at RSM, distils the key themes from Subsea Expo 2019.
After years of cutbacks, cautious optimism has returned to the sector despite the recent volatility in the crude oil price; and this is expected to continue throughout 2019. Winners in the sector will emerge; however, this will depend largely on where they are in the project cycle and many companies will look to recruit throughout 2019.
A year to collaborate
Historically collaboration, especially between oil and gas entities, has been sporadic. Businesses have struggled with the practicalities and realities of collaboration; but there have been pockets of success with some pulling together during a challenging time. This is a positive step forward and 2019 will see more organisations working together to change culture, reduce costs, enhance productivity and develop new technologies. These innovations will allow many businesses to access tax reliefs (R&D tax credits, Patent box) and this will continue to assist further investment in research and development.
Different ways of working
The protracted downturn has enhanced labour shortages in the sector as large numbers have left through redundancies, retirement or staff looking for a more stable work environment. Arguably this is the greatest challenge facing the industry in the short term. Attracting employees and newcomers to the sector without just paying enlarged salaries must lead to further innovation, different ways of working and contractual changes. Consideration is also required on the impact for the sector of changes to IR35 off-payroll tax rules on Limited Company contractors being introduced in 2020. This will put the onus on the end users of the services to assess employment status and arrangements should be made now to ensure that they are ready to take on new responsibilities in April 2020.the arrangements – putting more pressure on the operators; and will likely lead to increased scrutiny.
Changes to operators
Focusing locally the future of oil and gas industry is likely to be very different to what has gone before. With a mature basin we can see that the mix of operators is changing with an increase in new players entering the market. It will be interesting to see the results of the 31st licensing round for the North Sea in early 2019, to assess the level of industry interest and the entities looking to unlock new opportunities in this area.
Geopolitics has a massive impact on oil and gas prices and continues to be a significant risk for the industry. Recent events have shown political uncertainty leads to volatility, instability and a lack of investment in the sector. This trend looks set to continue in 2019, making energy prices very difficult to estimate. Undoubtedly Brexit will also have some implications for the UK oil and gas sector. Having said that there will inevitably be upsides which will benefit those in a position to take advantage.