Despite recent improvements, Britain’s oil and gas sector is at a dangerous crossroads.
That’s according to industry body Oil & Gas UK, which suggests although the sector has seen reduced costs, competitive fiscal terms, improved operational performance and more stable oil and gas prices, more investment is needed to guarantee its future.
It says this is indicated by the fact only four exploration wells were started in the first eight months of the year, with total exploration activity through 2018 expected to be the lowest since 1965.
The report suggests supply chain capacity has also been reduced in recent years, as revenues and margins continue to be squeezed.
It warns this will be worsened by further constraints emerging before 2021 as a result of the reductions in recent years and an expected increase in new development activity at home and abroad.
The organisation expects the tightening to be felt most across drilling and wells services and within engineering and subsea sectors.
Oil & Gas UK CEO Deirdre Michie said: “Despite the improvements seen in recent years, we find ourselves at a crossroads. Record low drilling activity, coupled with the supply chain squeeze, threaten industry’s ability to effectively service an increase in activity and maximise economic recovery.
“We have to drive an increase in activity while continuing to find and implement even more efficient ways of working which support the health of supply chain companies whilst also keeping costs under control.”