UK oil contractors report rising green demand

Article by Adam Duckett

UK oil and gas contractors have reported a significant increase in demand for their services from outside of the sector.

A survey of 90 firms by the Aberdeen & Grampian Chamber of Commerce (AGCC) found that 52% have seen demand for their services/products increase organically in non-oil and gas projects, compared to just 15% six months earlier. Asked about their interest in working in non-hydrocarbon projects, 61% said they will “definitely/possibly” become more involved in renewables work on the UK Continental Shelf in the next three to five years.

Shane Taylor, Research and Policy Manager at AGCC, said: “It’s clear that the energy mix in the future will be far more diverse and for our existing supply chain there’s huge opportunity to be seized from diversifying into new markets and sectors proactively.”

The survey paints a positive picture for companies servicing oil and gas activity on the UK Continental Shelf. Headline findings include a net balance of 43% of contractors reporting that production activity has increased compared to just 28% 12 months ago; and a net balance of 46% expect the value of production-related activity will increase next year. A net balance of 46% are more confident about their activities compared to 42% last year, against a 10-year average of +14%. Broken down by business activity, overall the value of work related to exploration, production and decommissioning is reported as net positive.

Business confidence in the UK Continental Shelf dropped sharply following the oil price collapse in 2015 but it has been making a steady recovery. The AGCC reports that fewer than one in ten contractors expect the outlook to worsen and close to half are confident that the situation will continue to improve over the coming year.

A review of employment trends found that 54% of contractors have increased their number of full-time employees over the last year, though 12% have decreased them. On top of this the average change in pay over the last year is a 2.9% rise compared to just a 1% rise in 2018 and a 2% drop in 2017. A standout figure for individual contractors is that 27% of firms plans to recruit fewer of them in response to IR35 tax changes being brought in next year by the UK government. These changes shift the onus onto companies to determine the employment status of contractors with tax liabilities for getting it wrong. Expert advice on how individuals and companies should prepare for this change will be published in The Chemical Engineer’s Consultants & Contractors Guide that will be available to download later this month.

Asked about their key concerns for the next ten years, 88% are wary about oil price and market stability; 50% about Brexit and the political environment; and 40% about employment costs and recruitment challenges.

“Fundamentally, few of the major challenges facing firms in the sector are likely to be solved overnight. What is clear is that some of the big issues, particularly talent attraction and the energy transition, will benefit from a collaborative approach to showcase where the industry is actively taking action,” Taylor said. “Around 50% of firms indicated that they have strategies in place which outline targets to reduce their emissions or explore low-carbon solutions. Proactively pursuing these strategies, and demonstrating real success, will be key in engaging the talent the industry needs to continue to contribute to the UK’s energy security for decades to come.”

90 companies employing more than 55,000 staff responded to the survey. A PDF of the full results can be downloaded here:

Article by Adam Duckett

Editor, The Chemical Engineer

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