As anticipated 2015 proved to be a difficult year for both oil and gas companies and the supply chain companies that make up the oilfield services sector. The average price of a barrel of Brent crude in 2015 was $52.35 dollars, less than half of the average price for the years 2011 to 2013, and a little over half the average price for 2014. The average to date for 2016 has fallen further to $30.70 per barrel, less than the average Brent price for each of the years 1979 to 1982 even in nominal terms!
A leading oil and gas tax expert has called on Chancellor George Osborne to make changes to the North Sea oil and gas tax regime which could put off potential buyers of late life assets.
At the start of the year there was a growing sense of trepidation as to what the next 12 months may hold for the sector due to an acceleration of the downward trajectory of the oil price in the second half of 2014.
With the Autumn Statement announced this week, Derek Leith, UK head of oil and gas taxation at EY, continues in the role of Energy Voice’s guest editor. Follow along each day as he spells out the challenges and triumphs the industry faces.
Chancellor George Osborne gave the North Sea oil and gas industry a clear signal that it will have to become its own saviour - by saying nothing about it in his Autumn Statement.
As the Autumn Statement is announced this week, Derek Leith, UK head of oil and gas taxation at EY, has taken up the role of Energy Voice’s guest editor. Follow along each day as he spells out the challenges and triumphs the industry faces.
A managing partner at EY in Aberdeen said in order to “radically" improve the cost base in the UKCS there would need to be a behaviour change within the oil and gas industry.
Speaking after the event, Derek Leith said he had been surprised by findings from Energy Voice’s research which showed a ‘negative’ view of the industry.
Leith was joined by a panel including Sir Ian Wood, Andrew Reid, chief executive of Douglas-Westwood, Rebecca Wain, a 24-year-old graduate geologist and Michael Engell-Jensen, co-chairman of
Offshore Europe at the Energy Voice – Securing Our Future event at the Tivoli in Aberdeen.
Despite the oil price being slightly more stable over the past three months, it is still significantly lower than the highs seen over the past few years. There is still a great deal of uncertainty as to the future price and the UK oil and gas sector is facing the challenge of re-basing costs and improving efficiencies to make the UKCS viable at a $60 oil price.
Following the slide in oil price, which commenced in earnest in July 2014 and by 31 December had fallen by more than 40% in 6 months, alarm signals have been sounding loud and clear throughout the sector.
Collectively industry drew a deep breath on the 1 January 2015 as it pondered what the year would bring. Could the price go lower than the $57 recorded on the 31 December and how soon would the price rebound?
Well the answer to the first question has been yes, to just over $45 on January 13, and the answer to the second is anyone's guess but looks increasingly like a slow recovery with many predicting an average Brent price of $75 for 2016.
