THE oil and gas industry looks to have finally “turned a corner” with a growth rebound on the cards and job cuts slowing down, according to a new report.

In-depth research into the future of the industry by the Bank of Scotland shows there are no signs of reserves in the North Sea running out any time soon, with major investments continuing in the North Sea and UK Continental Shelf.

According to the bank’s oil and gas report, the industry is gearing up for growth as cautious optimism returns to the sector, with nearly 60 per cent of businesses expect to expand this year, while optimism has surged to 39 per cent from two per cent in 2016.

Companies in the energy sector have seen their financial performance suffer and have been forced to slash their workforces after the oil price failed to recover from a collapse three years ago.

However, the report said the rate of job losses was starting to ease, with the number of companies looking to trim staff over the next 12 months dropping to a fifth from a third in 2016.

More than half of companies are also looking to create more jobs in the year ahead.

Stuart White, Bank of Scotland regional director for mid markets North of Scotland, said the jump in optimism proved the industry was one of the most resilient in the UK and would ride out rough waters.

Speaking about the North Sea, he said: “The report highlights a cautious optimism that the industry has turned a corner and that there is evidence of more activity. What we have seen is that there is still a significant amount of interest in the North Sea specifically. That is obviously as a result of the significant activity ongoing there, however, the industry is hoping that will translate into more investment in the North Sea.

“A lot of the activity at the moment is looking after what we’ve got rather than investment into new fields, however, with the discovery of the new fields by Hurricane in the Halifax and Lancaster areas, these are quite significant and the hope is that these would come on-stream. This is very much a global report on the industry but what it does paint is that there is still a significant amount of interest in the North Sea and the UK Continental Shelf.

“There has been a huge amount of interest in buying assets in the North Sea, and clearly businesses like Ineos would only invest if they believed there were opportunities there, and it was going to be viable and profitable for them.

“These are very optimistic signs, not only for the operators that are buying in but for the supply chain as well, that these companies will rely on to execute the work for them. It all paints a much more positive picture going forward.”

He said that in global terms, the North Sea was a relatively small basin but it remained economically important and as the report has found there is still a significant amount of interest there.

“The challenges are, that whilst production costs have come down, it is still much more expensive to find and develop new fields in deep water offshore basins. The UK will continue to attract investment but it is very much going to have to change its way of working to make sure it remains attractive against other basins where those costs are lower, “ he said.

“There is still very much life left in the North Sea yet. As the North Sea matures, the importance of finding more oil to ensure production levels stay up is really important because these are depleting assets and clearly there are still significant finds being made globally as well.

“We are not going to run out any time soon but we need to continue the exploration and development push in the North Sea by being cost-effective and competitive in a global market to ensure the UK maintains its position in the industry.”

Despite the brighter outlook, firms flagged a number of factors that could threaten growth with nearly half saying rising production costs posed the greatest challenge to the industry, while 35 per cent warned over the fallout of Britain’s Brexit negotiations and 44 per cent expressed concern about sterling’s slump.

“There are still choppy waters to navigate, with political uncertainty at home and abroad, but we remain confident in the sector,” White added.

“Nobody is predicting that the oil price is going to go significantly upwards in the near future – the report doesn’t expect it to go above 75$ a barrel until the next decade. What has happened in that intervening period is that we’ve had stable oil prices and a significant cut in the cost of producing oil, so the costs of doing business in the oil industry have come down quite dramatically.”