Business Outlook 2020 - Autumn Snapshot

BUSINESS OUTLOOK 2020: Autumn Snapshot

Foreword The full impact of the COVID-19 pandemic on the global economy is unparalleled, with record decline in growth rates and levels of national debt, increasing unemployment and low investor and consumer confidence. The challenges faced by the UK offshore oil and gas sector is one important marker of the extent of this economic shock. OGUK will examine this relationship in more detail in our upcoming Economic Report . While the longer-term economic outlook remains uncertain, it is increasingly clear that any marked recovery in activity and investment on the UKCS will take some time. The effects of the downturn were felt rapidly, with companies having to respond to protect the safety of their workforce and the sustainability of their businesses. This resulted in a fall in expected total expenditure of around 30 per cent this year as companies reduced activity levels. It could take two to three years to restart much of the capital investments that have been lost. This is reflected in the low business sentiment expressed by OGUK members as companies look to 2021. The outlook for next year is determined by a number of factors including ongoing uncertainty over how themarket will develop, the ability to safely increase offshore personnel levels, the extent of cash constraints within E&P companies and how competitive the UKCS remains for investment in an international context. Activity and investment are crucial to providing secure energy, and vital in sustaining supply chain capabilities and ensuring the UK is viewed as a good place

for these companies to anchor their resources. This is not only core to supporting the industry now, but also in ensuring it can provide many of the net-zero solutions required for the future. The current fragile position of many areas of the supply chain means that this future contribution cannot be taken for granted. The coming months mark a critical time for the UK oil and gas industry. It is crucial the government recognises the ongoing importance of oil and gas in a diverse energymix in its anticipated EnergyWhite Paper and through the ongoing Licensing and Maximising Economic Recovery strategy reviews. The Brexit transition period will also come to an end and OGUK continues to advocate that a deal outcome is in the best interests of the industry. Alongside this, work to agree a North Sea Transition Deal with the UK Government to accelerate the transformation of the industry is ongoing. Support for this sector is essential for the continued provision of affordable and sustainable energy supply and in realising the country’s ambitions as a leader in low-carbon solutions.

Ross Dornan, Market Intelligence Manager, OGUK

3