Confidence among oil and gas firms in the North Sea jumped to the highest level since 2009 after a boost from the Budget, it will be revealed today.
According to the results of the first survey carried out since the 2012 Budget, which offered a series of tax measures to encourage investment, confidence levels in the sector also grew at the strongest rate since the start of 2009.
However, the optimism was driven by contractors in the sector, the quarterly confidence index from industry body Oil and Gas UK (OGUK) showed.
Confidence among the operating companies rose marginally but has yet to return to levels seen before the 2011 Budget, in which Chancellor George Osborne make a surprise £10billion tax grab on the industry. The index also showed an increasing concern over manpower and rising costs in the basin, both of which were being stretched by current record levels of investment.
“It is a double-edged sword,” said David Ripley, OGUK’s supply chain director. He added: “If industry in the UK reacts to the (2012) Budget, as everyone expects it will, it has got potential for more activity. “The restriction comes with the availability of skills and equipment. Some has been exported but now there is a stronger level of confidence people will maybe be prepared to invest in skills, training and equipment.”
Alex Kemp, professor of petroleum economics at Aberdeen University, said that while current high levels of activity were boosting the confidence of contractors, oil firms would be aware of other medium-term factors.
High costs were putting pressure on potentially marginal projects not boosted by the tax measures announced by Mr Osborne in March.
The rise in confidence follows what Mike Tholen, OGUK’s economics director, called a “rollercoaster” year, with early optimism fuelled by high oil prices dashed by the 2011 Budget. Last year then saw an 18% fall in oil and gas production and a 50% collapse in exploration activity in the UK North Sea. Despite this supply chain firms have been reaping the rewards of high levels of investment in the North Sea as well as overseas business, according to the index.
Jim Milne, chairman and managing director of Aberdeen’s Balmoral Group, said his firm was bidding for more work than ever. But he added: “This brings its own challenges when it comes to staffing up.”
Marcus Richards, chief executive at Dana Petroleum, said operators still faced many challenges. “There’s no doubt they are finding it tough to recruit the best talent and access the infrastructure they need to deliver their plans.”
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