MORE than half of oil and gas contractors in the UK Continental Shelf (UKCS) and internationally think the sector has bottomed out, and more than a quarter (26 per cent) consider that it will do so within the next year, according to an industry report today.

The 26th Oil and Gas survey published by Aberdeen and Grampian Chamber of Commerce in partnership with the University of Strathclyde’s Fraser of Allander Institute, says improvements in oil and gas contractor confidence suggests some businesses are seeing signs of recovery and are focused on the future, Confidence has risen from historic lows says the report, with 42 per cent of firms expecting to be experiencing growth again by next January, although it says the improvement is not universal.

The survey shows that 38 per cent of contractors polled are more confident about business on the UKCS compared to just ten per cent who are less confident.

This is a notable rise from six months ago when only 12 per cent of contractors were more confident and 47 per cent not so buoyant.

However, just over half (52 per cent) report no change in their outlook, indicating that significant challenges remain in the marketplace, although it is too early to say a recovery is being universally felt.

A similar percentage believe the sector has already reached the bottom of the current cycle and 26 per cent consider it will do so within the next year.

When asked what position businesses expect to be in by January 1, 2018, 42 per cent expect their business to be growing — that is a rise from 16 per cent who expected to be growing by the beginning of this year — while only two per cent anticipated a further decline.

Investment spending by contractors is also moving in a positive direction with more of them anticipating an increase in investment over the next two years (26 per cent) rather than a reduction (19 per cent).

However, these increases are limited to certain areas and again cannot be seen consistently across all parts of the industry.

James Bream, research and policy director at Aberdeen and Grampian Chamber of Commerce, said: “We’re seeing some signs of recovery for the industry and the global outlook is certainly more positive than it was six months ago, but it is clear that most companies are still suffering.

“We are hopefully stepping into a more prosperous period in due course but that is not upon us for now.

“It seems clear that many believe that we won’t return to previous levels of activity and that perhaps we shouldn’t call this a downturn.

“This isn’t a ‘new norm’, it is just normal.”

The survey found that there is still excess capacity, with almost a quarter (24 per cent) of contractors working at, or above, optimum levels in the UKCS and 43 per cent working at or above their optimum levels overseas, up from record lows of 12 and 24 per cent respectively six months ago.

While more contractors have reported working at or above optimum levels, there are still signs of further labour market challenges.

Operators and licensees are reporting a 2.5 per cent decline in their full-time equivalent (FTE) workforce, and a six per cent decline for contractors in the 12 months to March 2017.

Although operators and licensees continue to anticipate a decline over the next 12 months at a rate of two per cent, contractors expect to increase their workforce by 0.8 per cent.

Most (81 per cent) contractors say they expect to be involved in decommissioning in the next three to five years.

Just over half of the survey respondents (54 per cent) reported similar interests in renewables — highlighting two areas with the potential for substantial work and investment.

Sixty-nine percent expected to be involved in unconventional oil and gas activity in the UK in the medium term, and a further 65 per cent expected to be involved in it outside the UK.