Subsea Expo

Access. Connect. Grow.

Subsea Chief Urges Government to Take Assertive and Decisive Approach to UK's Oil and Gas Industry

01 April 2009

Alistair Birnie, chief executive of Subsea UK, is among a number of oil and gas trade associations meeting with Energy Minister, Mike O'Brien, at the House of Commons today.

The meeting is for Government to hear how the current economic climate is impacting across the industry and for the bodies to articulate their members' views and suggestions on what Government can do to help.

“The upstream oil and gas sector is just as strategic as any bank. If oil and gas stop flowing, utilities and power stations will be unable to meet demand, with a massive impact on the UK economy.

“We need Government to understand the strategic importance and scale of the subsea sector whose track record and potential risks being eroded if we do not see some decisive and assertive actions from Westminster soon,” says Birnie.

The UK subsea industry which employs 40,000 people with revenues of £4.5 billion has recorded growth rates of about 25% year on year for the last four years. Currently leading the way in subsea around the world, the UK has the potential to capture a significant share a global market set to grow to £40 billion by 2012. Subsea production now accounts for almost 50% of all UKCS hydrocarbon output.

However, Birnie will tell Mr O'Brien today that this sector is under significant threat.

“Despite having punched above our weight in the last four years, we are starting to feel the pressure and suffering as a result which should be ringing alarm bells.

“The subsea supply chain is heavily dependent upon UKCS activity, and this has slowed significantly in the last six months, putting serious pressure on the liquidity of companies carrying a higher working capital burden through deferred and written down revenues.

“The behavior of the banks in terms of charging excessive interest rates, curtailing, and canceling debt facilities without prior discussion and creating ways of adding bank charges in an unreasonable manner is causing serious problems for our members.

“If the impact of the downturn is not addressed as a matter of priority, significant redundancies will have to be made in our industry. This is hard to bear for a sector that has spent the last four years investing heavily in attracting people and developing them. “

“We need to see an overhaul of the tax regime for oil and gas production to support cash-flow and investment within the UKCS that stimulates crucial investment to arrest an increasing decline in production and its impact on the economy.

“The banking system must support its customers in the upstream sector and in particular support export sales through proper borrowing terms. As a majority and preferential shareholder of the two banks that have invested most in upstream projects, the Government has a responsibility to ensure that the national strategic interest is fully taken into account when helping protect these businesses.

“Finally, Government must do all in its powers to further support an export market that remains in a stronger position than the UK sector, through improved export credit support and focused investment in international trade initiatives to markets we can exploit.”