According to the latest report from the Bank of Scotland, as much as 43 percent of UK oil and gas companies are planning further cost-cutting measures because of the downturn, with 32 percent of businesses planning to cut jobs. Scottish businesses have been hit particularly hard with 63 percent of firms having suffered redundancies, compared to an average of 42 percent across firms surveyed in England and Wales.
Despite the downturn, companies are still looking for expansion opportunities but the report found that expansion was being “entirely driven by smaller and mid-sized companies who find it much easier to diversify and embrace new technology”.
Fewer companies than before are looking at international opportunities (67 percent down from 91 percent last year), with even fewer considering branching out into onshore shale gas – 31 percent, down from 47 percent last year. This can be explained by the low crude and gas prices making the expensive exploration – involving horizontal drilling and hydraulic fracturing – less attractive to cash-strapped companies.
Renewables haven’t lost its lustre, though, with increased interest from mid-sized firms rising from 46 percent in 2015 to 57 percent in 2016. Meanwhile the majority of large firms said that they see decommissioning as a major diversification opportunity. North Sea expansion opportunities remain attractive to more than a fifth of businesses questioned.
Asked when they expect oil prices to recover, 33 percent of firms stated it would be 2018 before the price of Brent crude oil reaches 75 to 80 US dollars (£52 to £55) a barrel while 38 percent believed the rise would happen no sooner than 2020.
A Scottish Government spokesman commented on the report’s findings saying: “The Scottish Government is focused on creating a competitive and supportive business environment and promoting innovation throughout the supply chain; however, the UK Government retains control of the key taxation levers affecting the sector, and must take the action needed to protect jobs and, hence, we will seek to engage constructively with them, to that end.”
Last week Scottish Parliament reached a decision to indefinitely ban hydraulic fracturing in the country.
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