Energy Voice | Acid test for North Sea cost cutting crusade, DNV GL poll says

The resilience of North Sea industry’s recent cost cutting crusade faces an acid test in 2019, a new survey shows.

After years of prices being squeezed by the exploration and production companies, some energy service firms are starting to push up rates, according to a poll from DNV GL – technical advisor to the oil industry.

Two fifths of UK respondents said they experienced price inflation from suppliers last year, and 44% have braced themselves for notable increases in 2019.

The findings are mostly positive from DNV GL’s ninth annual survey, answered by 791 senior industry professionals, about 10% of whom were UK-based.

With optimism flowing back into the sector, North Sea oil companies appear ready to close the book on a string of tough years and loosen their purse strings.

Seventy-one percent said they were confident about the UK oil industry’s prospects, compared to 61% in last year’s report, and 18% two years ago.

More than two thirds (68%) intend to increase or maintain capital expenditure in 2019 – roughly in line with last year, but more than double 2017’s figure of 33%.

Sixty-seven percent anticipate an increase in the number of large, capital-intensive projects being sanctioned.

The proportion of those expecting operating expenditure to go up or remain flat in 2019 increased to 72%, from 65% in the 2018 outlook.

Recruitment is back on the agenda after four years of redundancies.

Nearly half (48%) think their organisations will take on more staff in 2019, compared to 28% a year ago.

But 39% warned skills shortages and an ageing workforce would be a barrier to growth.

Meanwhile, the drive to reduce energy sector carbon emissions is gaining momentum.

Nearly two fifths said they would focus on adapting to a less carbon-intensive energy mix in 2019.

One-third said they were looking to increase investment in renewable energy this year.

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