OIL AND gas operators may delay investing in North Sea operations until after the chancellor’s Autumn Statement, according to a new report from Deloitte.
The report found that four deals were announced offshore UK in the third quarter of 2014, down slightly on the five transactions signed off in the second quarter, and significantly reduced from the 14 reported in the third quarter of last year.
Companies are shying away from deals until they have clarity about the future of the UK Continental Shelf (UKCS).
Firms are also waiting for details on the implementation of the Wood Review, including formation of the Oil & Gas Authority, and changes to the North Sea’s fiscal regime, which are due to be addressed in George Osborne’s Autumn Statement on 3 December.
Derek Henderson, senior partner in Deloitte’s Aberdeen office, said all eyes would be on the chancellor’s plans, and stated: “There remains much change on the horizon and, as a result, many companies will be biding their time.” He added: “Having spoken to a range of investors in the North Sea, we know that a fiscal regime which is more predictable, with a lower tax burden is key for improving investor confidence.
“Incentives which will encourage exploration and appraisal activity, as well as new entrants to the region, are also a vital part of the equation.
“Ultimately, the UKCS needs to be internationally competitive if it is to attract the investment it requires to boost its future prospects.”
Graham Sadler, managing director of Deloitte’s Petroleum Services Group, added that price pressure and access to finance continue to pose problems in the North Sea.
He said: “During this period of transition, costs have remained high for North Sea firms, access to finance has remained difficult and the price of oil has dropped to as low as $95 this quarter.”
He added: “This combination of factors continues to make the economics of extraction more difficult for operators.”
Brent crude oil fell below $91 a barrel for the first time in more than two years yesterday.