DEEP cuts in spending by oil and gas firms in the UK North Sea since the crude price tumbled in 2014 have fuelled fears the area could be stuck in a vicious cycle of decline.
The cuts have meant only a small number of new field developments have won approval. Exploration levels have fallen to record lows leaving the hopper of potential development projects worryingly empty.
The consequences for firms across the supply chain have been grim. Thousands of people have lost their jobs.
Against that backdrop, many will welcome the International Energy Agency’s observation that the downward trend in investment may be about to turn.
Noting that Shell recently approved plans to redevelop the giant Penguins field off Scotland, the Paris-based body listed four other projects that may get approval in 2018 and 2019.
If all these get the nod, billions of pounds worth of work will be on offer for services firms.
That’s’ a big if, however. The outlook for crude prices may be much brighter than it was in the depths of the downturn but it is still uncertain.
The North Sea has to compete against other oil and gas regions where majors see huge potential and where costs may be lower.
It is worth remembering oil and gas firms sanctioned 22 North Sea projects in 2012.
There can be a long delay between projects winning approval and work on them starting.
Meanwhile, more of the projects approved amid the boom will be completed this year, leaving fresh gaps in the workloads of firms employed on them.
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