FOR Wood to highlight recent crude price volatility in a trading update yesterday was not surprising. However, the Aberdeen engineering giant’s move likely stoked concern about the outlook for Scotland’s key oil and gas sector.
The industry is emerging slowly from the deep downturn triggered by the plunge in the oil price from $115 per barrel in 2014 to less than $30/bbl early in 2016.
The partial recovery in the price to $85/bbl in October following production cuts by exporters encouraged firms that operate fields to invest in developments again after years of cut backs. On Monday Shell approved its seventh North Sea project of the year.
But the hard-pressed supply chain may not feel much benefit from projects approved this year for some time. None have been on the scale of developments approved during the boom that ended in 2014, such as the Clair Ridge project which came onstream recently.
After crude’s retreat to around $62 per barrel the concern must be the modest increase in North Sea activity noted by Wood earlier this year may prove to be short-lived.
Spending on new field developments, exploration work and facilities upgrades could come under renewed pressure.
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