With Offshore Europe, the largest oil and gas showcase in our region, underway, it will be interesting to find out more from those attending on what they believe the future holds.
The view from across the Atlantic
With that in mind, it’s worth reflecting on the views expressed at May’s Offshore Technology Conference in Houston, which I attended.
There, over-production was seen as a major barrier to achieving a better price for oil with commentators suggesting OPEC would likely agree to extend its agreement to cut production by 1.8m barrels per day.
This was confirmed at the end of May with the extension running until March 2018.
Whilst this is viewed as helpful, the same commentators cautioned that this would not, in itself, solve the problem for those businesses engaged in the traditional offshore oil and gas sector.
A major concern was the threat of production from US shale, which has the potential to produce vast quantities of oil at a much lower cost, offsetting any OPEC production reduction.
Skills shortage
Potential skills shortages also remained a topic of concern.
While we hope the level of redundancies being made from now on will be fewer than we’ve seen, a large number of businesses asked said cost cutting was still ongoing and, in fact, those cuts may not yet be deep enough.
Additionally, a common view expressed at OTC was the concern that the loss of experienced personnel and lack of recruitment may well be storing up a problem for the future.
The result could well be a skills gap and that, in turn, might result in the return of a familiar cycle of having to pay inflated prices to attract the right talent.
The rise of entrepreneurship
What has been interesting is the resilience and entrepreneurship shown against the backdrop of these extraordinary circumstances, particularly by individuals who find themselves facing redundancy.
In fact back here in Aberdeen in June, Elevator, a social enterprise dedicated to supporting the entrepreneurs, business leaders and employees of today and tomorrow, announced it had helped more than 1,300 people start up their own business in 2016/17.
This was an increase of almost 10% on the previous year.
Interestingly, the organisation said it had seen a raft of innovators from the oil and gas industry, with at least 70 new businesses set up by those who faced redundancy from the sector during the last year.
Our perspective
So what trends are we seeing?
Given that we are now in an environment where maximising return on investment is more challenging than before, many of our clients see the merits in being more proactive in seeking legal advice.
High up the priority list is sense-checking contracts and, where appropriate and reasonable, resisting terms weighted to heavily in favour of the other party.
And not surprisingly, many businesses are looking for investment.
Whatever funding route they may take, from private equity and bank lending or other avenues, there will be important considerations for business owners, including the related constraints, and risks of any given option.
I would expect too there will be opportunities for owners of successful enterprises to exit through the sale of their business: new start ups with innovative technology are bound to be on the radar of larger, more established companies looking to secure a competitive edge.
So while there remains little doubt we’re operating in extraordinary times, the opportunities are there - with the right advice, of course - for businesses and entrepreneurs looking to seize them.
To find out more, drop by and see us at stand 2C20 for a chat.
