Most oil and gas companies working in the North Sea canceled projects and about half have cut staff because of the weak oil market, a survey found.
The Aberdeen & Grampian Chamber of Commerce, in partnership with law firm Bond Dickinson, said 67 percent of the companies working in the North Sea have been forced to shelve projects and half have been forced to cut staff in the depressed crude oil market.
"Confidence levels are at an all-time low and we are now experiencing our first 'recession of confidence', and it looks gloomy in the year ahead too," James Bream, policy director for the chamber of commerce, said in a statement.
The price for Brent crude oil, a North Sea blend, was down slightly early Thursday to $65.34, down around $40 per barrel from its June 2014 peak. Crude oil prices have been hammered in the oversupplied market characterized by weak demand.
A January report from analysis firm Wood Mackenzie said exploration activity in 2014 was off 18 percent from the previous year. Operating expenses in the North Sea are up 8 percent while revenues for oil companies working in the region are at their lowest levels since 1998. Combined, those elements translate to a negative cash flow for North Sea operators.
Industry group Oil & Gas U.K. in February said without sustained investments, much of the oil and gas remaining in North Sea basins may stay in the ground. Even when Brent was above $100 per barrel, costs and regulatory issues were handicapping regional operations.
The Aberdeen chamber said new tax proposals and commitments to the sector from the British government may be a silver lining for the sector, though the North Sea is in a fundamental transition.
"This is a mid-life crisis in the British continental shelf but as some people say life begins at 50," Bream said.
