Scotland business

North Sea firms confidence slumps

Rig in north sea Image copyright Reuters

North Sea oil and gas contractors are looking for alternative ways of generating revenue after a slump in confidence, according to a survey.

The chamber of commerce survey found 78% of respondents expected to be more involved in decommissioning work in the next three to five years.

The Office for Budget Responsibility has forecast that oil and gas revenues will drop by 94% this year to £130m.

The issue dominated first minister's questions at Holyrood.

The white paper for independence, published by the Scottish government two years ago, estimated Scotland would get £8bn from the North Sea if it left the UK.

With Holyrood to get powers over income tax from next April, Scottish Labour leader Kezia Dugdale insisted the country "can't ever again be in a position where our government's numbers are so wrong on such a grand scale".

'Financial watchdog'

She called on First Minister Nicola Sturgeon to back Labour plans to set up a Scottish Office for Budget Responsibility, stating: "What we need is a real financial watchdog with teeth, not the pup that (finance secretary) John Swinney is proposing."

Ms Dugdale added: "It would be bad enough if the government responsible for collecting an increasingly large share of our taxes had been out by 10% or 20%.

"But the first minister was out by 6,000%. On the money needed to fund our schools, our hospitals and our pensions."

Ms Sturgeon said the Scottish Fiscal Commission, which has been set up by the government, "will have a veto over the projections John Swinney brings to this parliament".

Image caption Source: Aberdeen and Grampian Chamber of Commerce Oil and Gas Survey

Ms Sturgeon added: "It says everything Scotland needs to know about the priority of the Scottish Labour Party that the day after George Osborne's budget, a budget that announced plans to reduce the revenue budget of this parliament by £1.5bn in real terms over the remainder of this decade, what does Kezia Dugdale come to this chamber and do, does she criticise the Conservatives, no she wants to play politics with the SNP instead.

"It's that approach, being arm and arm with the Conservatives while this party stands up for Scotland, that has left Labour in the doldrums."

They were speaking as the Aberdeen and Grampian Chamber of Commerce's 23rd Oil and Gas Survey suggested that two-thirds of contractors expected more involvement in unconventional oil and gas activities.

And nearly half forecast greater involvement in renewables work.

The survey also found confidence among contractors was at an all-time low.

Four in five firms said they were less confident about their prospects than a year ago, compared with just 1% who were more confident.

Just 16% of contractors reported working at or above optimum levels - the lowest level since the survey began in 2004.

And about 80% of respondents reported an "abnormal" increase in the number of projects being cancelled.

'Glimmers of hope'

The survey found confidence had not been helped by a high level of recent redundancies in the industry, with 64% of firms saing they had reduced their workforce in 2015, compared with just 14% who increased numbers.

More than eight in 10 contractors questioned said they thought job losses would continue over the next year.

The survey was undertaken in partnership with UK law firm Bond Dickinson and conducted by the Fraser of Allander Institute.

Uisdean Vass, from Bond Dickinson, said: "This is probably the most negative survey we have ever had and while there is little to be positive about in the short term, there are some glimmers of hope.

"Over the next three years 28% of contractors expect their numbers of core staff to increase. Neither contractors nor operators see the North Sea disappearing.

"They believe the industry can survive at $50 a barrel and that there will be a price upswing over the next three years with more room for oil company profitability because of enhanced efficiency."

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