A TRIPLE whammy of the global impact of coronavirus, the steepest fall in oil prices in almost 30 years and a halving of gas prices have left the UK’s oil and gas sector in a paper-thin position.
The stark warning comes from industry body Oil and Gas UK (OGUK), which says the combination is driving an “increasingly fragile” outlook for the sector, with severe pressures across its supply chain significantly undermining businesses, jobs and its contribution to the economy.
In its first in a series of new reports – The Business Outlook: Markets and Investment – OGUK says it expects drilling levels to fall back to the lows of 2016, down more than a third on previous forecasts.
It also warns of a possible 20%-30% drop in capital investment for this year as well as operators potentially experiencing negative cash flow through 2020.
OGUK said that while the industry was only beginning to emerge from one of the longest and most severe downturns in its history, the supply chain had remained under significant pressure. It is now calling for Government support to ensure the sector can continue to provide security of supply in the face of what it calls “extraordinary” difficulties.
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“Businesses and industries across the UK are facing extraordinary pressures but coming so soon after one of the worst downturns in our history, this report shows that this sector is now in a paper-thin position,” said OGUK chief executive Deirdre Michie.
“The offshore oil and gas sector is part of the UK’s critical infrastructure, providing the secure and affordable energy the country needs and is a key contributor to the economy in terms of supporting hundreds of thousands of skilled jobs, businesses and our wider economic contribution.
“Action is needed now to ensure the sector doesn’t lose the skills, experience and infrastructure it needs to meet the UK’s energy needs of today as well as help deliver its net-zero ambitions in future.”
OGUK’s market intelligence manager, Ross Dornan, added: “The UKCS has seen significant improvement in its competitiveness, efficiency and productivity in recent years.
“At this time innovative thinking, partnerships and meaningful collaboration will be required to help as many as possible to weather the storm.”
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