The UK oil and gas industry is calling for major financial assistance and governmental intervention to save it from crashing prices amid a "perfect storm" of factors which include knock-on effects from the Coronavirus illness 2019 (COVID-2019).
The most dramatic fall in #oilprice in 30 years, a halving of gas prices and the global economic impact of the continued spread of the #coronavirus is driving an increasingly fragile outlook for the UK’s offshore oil and gas sector. #BusinessOutlook https://t.co/pcakqe3c9j pic.twitter.com/3xTp4rFlfc— OGUK (@oilandgasuk) March 19, 2020
OGUK, which represents oil and gas businesses, published its annual report on 19 March 2020 which says that a collapse in commodity prices, increased oil production by Saudi Arabia and Russia and the COVID-19 pandemic are among key developments driving the price of oil and gas, and therefore their profits, to levels not seen since the crash of 2008.
Our latest report warns of increasingly fragile outlook for UK’s oil and gas sector. OGUK now expects drilling levels to fall back to the lows experienced in 2016, down more than a third on previous forecasts. Read the #BusinessOutlook online: https://t.co/PsrNITUCHJ #OilPrice pic.twitter.com/T10PBgrNmr— OGUK (@oilandgasuk) March 19, 2020
"We now face a situation where E&P production revenues could be almost half the level of just two years ago, despite the same level of output", writes Deirdre Michie, Chief Executive OGUK, in the introduction to her groups report BUSINESS OUTLOOK 2020: Markets & Investment.
"This trend is unsustainable for many and without intervention could lead to the loss of businesses, jobs and skills anchored in the UK", Michie argues.
This will be one of a myriad of examples of industry seeking governmental intervention, with public funds, to prop themselves up amid declining productivity and profits.
"We appreciate the Chancellors recent statement and OGUK is requesting urgent meetings with ministers to consider a COVID-19 Sectoral Resilience Package which would help to give reassurance to the regions, businesses and jobs this industry supports." Deirdre Michie, OGUK CEO. pic.twitter.com/0IWggJOhsA— OGUK (@oilandgasuk) March 19, 2020
The oil and gas sector have been one of the most subsidised industries on the planet with billions in public money poured in over the decades, along with tax breaks and other forms of protectionism. Critics argue that constantly subsidising these industries which are incredibly polluting and help drive global warming, undermines the shift away from fossil fuels and towards renewable energy which is needed to combat growing climate change. But the report says that a well-funded industry is needed in order to assist the UK to transition into a carbon neutral economy. The transition to "net zero" will "only be achieved through a joined-up approach across government, regulators and industry", the report says.