“Hard decisions” are going to have to be made by firms that are too reliant on North Sea oil, according to a director at Oil and Gas UK (OGUK).
Matt Abraham, supply chain director for representative body OGUK, said yesterday that 2020 would be “an interesting year” for oilfield services companies as many are forced to choose where best to invest their cash.
He was speaking during accountancy firm EY’s oilfield services industry report launch.
The new industry review, published yesterday morning, highlighted a lackluster recovery of the sector over last year, with a mere 2.3% increase in turnover.
The previous year’s report had forecast a “cautiously optimistic” global capex increase of 8% across the market in 2019 and 2020.
But the new 2019 report warned that “transformational change” will be necessary if service firms are to experience growth over the next few years.
Mr Abraham said: “A lot of the oil field services providers now have a cash decision to make – where are they going to invest?
“Are they going to continue to back the North Sea or are they going to divest into the other energy sectors? Are they going to go abroad?
“We’ll see how it plays out in 2020.
“It’s going to be a very interesting year for a lot of the oilfield services companies.”
With just under half of the total number of all UK services firms represented in the north-east of Scotland, Mr Abraham also warned that a lot of firms are going to have to look seriously at diversification.
He claimed many service companies had already taken steps to invest into other energy sectors and were now “making money”.
But he added that those firms who are still very dependent on North Sea oil would have “some hard decisions to make” in 2020.
“The UK will be one of the first to meet its diversification goals, but it will be those that work collectively who will make that happen”, he said.
Mr Abraham was joined on a panel at Aberdeen’s Chester Hotel by EY oilfield services lead Celine Delacroix, Chrysaor decommissioning manager Richard Tocher and Wood’s president of operations services for Europe and Africa, Craig Shanaghey.
Mr Shanaghey agreed that a diversified future “brings both opportunity and challenge” for many firms.
The transition to cleaner sources of power would require the oil and gas sector to “do something different” and “collaborate” more widely, he said.
He added: “There’s going to be an increased demand in energy but a demand for a lower carbon future.”
“We need to make sure we are diversifying both in our sectors and in our geographies to stay relevant.”