North Sea oil firms are still laying off staff and slashing pay amid low oil prices but the industry is beginning to see light at the end of the tunnel, according to an annual survey.
The note of cautious optimism came as oil prices rose slightly on Monday on raised hopes that this week’s meeting of Opec oil producing countries will yield an agreement to cut output.
Some two-thirds of all UK oil firms cut staff during 2016, according to the 25th Oil and Gas survey from the Aberdeen & Grampian Chambers of Commerce, a record since the survey began in 2004.
Companies, including BP and Shell, cut their headcount by an average of 15% in the year to October, while contractors, including supply chain firms such as Wood Group, reduced theirs by 7%.
The survey also found that 40% of the 130 firms surveyed have adjusted working conditions, mostly by reducing pay.
The figures support an estimate by Oil & Gas UK that the prolonged oil price slump will result in 40,000 jobs being lost this year, on top of 84,000 in 2015.
But while a third of the companies surveyed said they feared a negative impact from Brexit, the majority said the industry is on the brink of a recovery.
Some 36% of firms said they believe the bottom of the oil market will be reached within the next 12 months, while 29% feel it has already passed.
Most firms expect the rate of job cuts to slow next year, the survey found, while 16% expect their business to be growing by the start of 2017, compared with 3% expecting a decline.
An overall gauge of business optimism in the oil industry improved from a record low of -78% in autumn 2015 to -35%.
One anonymous survey respondent wrote: “The phoenix is rising. Those who have been sensible and survived will reap the benefits and there will be many.”
Uisdean Vass, oil and gas partner at law firm Bond & Dickinson, which sponsored the report, said the industry was showing “signs of the green shoots of recovery […] even though the improvement is from a very low point”.
About 58% of firms said they see Brexit as having no impact on their business, a result that Vass said proved the oil industry was “unfazed” by the UK’s vote to leave the European Union.
But 31% of the survey respondents said they believed the decision would ultimately have a negative impact.
The tentative optimism of the survey chimed with a slight rise in the price of oil ahead of Wednesday’s crunch meeting of Opec countries in Vienna.
The price of a barrel of Brent crude oil has slumped from more than $100 in 2014 to an 11-year low below $35 earlier this year and is still hovering below $50 amid global oversupply.
Prices rose by $1, or 2.2% to $48.30 during the day’s trading, after Iraq’s oil minister said it would co-operate with any deal to cut oil production that was “acceptable to all”.
Opec members have already agreed in principle to curb output but political tensions between major producers such as Iran and Saudi Arabia have cast doubt on a concrete agreement being reached.
The largest oil producers have expressed public support for limiting output in a bid to boost prices but have been reluctant to be the first to make cuts.