Optimism in UK oil and gas sector 'hits new low'

Optimism in the UK oil and gas sector has sunk to a new low, according to an industry survey.

Oil and Gas UK's latest Business Sentiment Index drew the gloomiest response from companies since the survey began in 2009.

It said "deteriorating market conditions and the scarcity of new business opportunities" continued to be major concerns for the industry.

The latest index covered the fourth quarter of last year.

With a score of -32 on a -50/+50 scale, the index remained in negative territory for the sixth quarter in a row.

The index surveys representatives from both operator and contractor companies, including smaller enterprises.

Last month a report by accountancy firm Moore Stephens blamed plunging oil prices for a sharp rise in the number of UK oil and gas companies going bust.

Last year, 28 oil and gas service firms entered insolvency - up from 18 in 2014.

Moore Stephens said the increase was "an almost inevitable result" of the drop in the oil price and the consequent cancellation of projects worldwide.

Prime Minister David Cameron recently announced a £20m funding package to help the North Sea oil and gas sector.

The Scottish government also announced a new £12m fund to help people who face losing their jobs in oil and gas to gain new skills and find new work.

'Deeply apprehensive'

Oil and Gas UK operations director Oonagh Werngren said: "Many companies remain deeply apprehensive about the future, with two-thirds reporting activity down further in the fourth quarter of 2015 compared to the previous quarter.

"For the majority of respondents, job losses continue, with 54% of respondents reporting a reduction in headcount. Two-thirds of respondents also reported falling revenues."

Ms Werngren said firms had also reported progress in reducing costs, with two-thirds of respondents undertaking "intensive cost reduction and efficiency measures" to keep their businesses competitive.

These included reviews of internal practices and the application of new technology to "evolve smarter engineering solutions".

Ms Werngren added: "Taking a co-operative approach to implementing efficiency measures will help the UK oil and gas industry weather the current downturn and ensure it emerges in robust shape to tackle future economic challenges.

"However, both fiscal and regulatory reform also have a key role to play in transforming the UKCS (UK Continental Shelf) into a competitive, low tax, high activity basin that will be attractive to a variety of operators and support the continued development of the sector's world-class supply chain."