“Challenges remain, but the UK sector remains optimistic” – one of many headlines that appeared following the launch of our 2019 Business Outlook.
As the most comprehensive review of the UK industry performance, this summed up some of the improving news for the sector which includes an increase in production and building momentum around exploration.
It also highlighted the continued challenges many companies face as we emerge from one of our most difficult downturns.
While more than 60% of supply chain companies share a more positive outlook for 2019, concerns remain for some as reductions in revenue, margins and cash flow
have placed many in a position of financial distress.
Total supply chain revenue has fallen by almost one third between 2014-2017, from just under £40 billion to £27bn, as exploration and production companies made cost reductions and trimmed investment plans during the oil price slump.
The UK’s offshore oil and gas industry supply chain is world-renowned for skills and capabilities, with companies spanning the length and breadth of the UK offering the latest and safest technologies, new ways of working, and supporting thousands of skilled jobs in the process.
But the concerns I mentioned earlier are what keeps my team busy. This year Oil & Gas UK’s (OGUK’s) Supply Chain team launched an array of workgroups, forums and other initiatives aimed at addressing the challenge. These include improving industry systems for supplier qualification, developing a simplified supplier assessment questionnaire, and rolling out new supply chain contracting principles.
Since taking on the role as director, I’ve been meeting many supply chain industry leaders to help develop a detailed understanding of the challenges and opportunities facing our diverse supply chain.
It’s maybe something to do with a generational mindset, but occasionally I get the impression that some people forget OGUK is the leading representative body for the whole offshore oil and gas industry.
This is a perception I’m keen to dispel as OGUK’s remit is to support all organisations that operate in, or provide services to, the UK upstream oil and gas industry, from super majors and independent producers to large contractor businesses and SMEs. I believe it’s my job to raise the profile of our world-class supply chain companies and do everything we can to support their growth and resilience.
OGUK’s membership includes a hugely diverse community across more than 10 different segments including subsea services, rigs and drilling contractors, maintenance services and transport and logistics to name but a few. OGUK’s supply chain team is the go-to place for support, knowledge-sharing and guidance on collaborative working and good practice.
Those who have focused on innovation and collaboration have maintained healthier margins, but every segment must recognise we’re in a “new reality”, where it’s vital to embrace innovative business models and work co-operatively.
We need to be committed to this way of working if we are to thrive in the new reality of continued uncertainty in oil markets and a continued focus on cost. By ensuring these issues are addressed, we can work toward realising our ambition to add another generation of productive life to the UK North Sea, in support of industry’s Vision 2035.
Matt Abraham is Oil & Gas UK’s supply chain director