The coronavirus outbreak has left the UK oil and gas sector in a “paper-thin position”, according to a new report.
Findings from Oil and Gas UK (OGUK) suggest 2020 could be the first year when demand for oil diminishes since 2009.
Paired with a long-standing downturn in the industry and the fastest fall in oil prices in 30 years, the sector is braced for value to fall further than its current position at less than $30 a barrel, according to its business outlook 2020 report.
OGUK has called for urgent meetings with Government officials to assess what can be done to bolster the sector against any potential effects of the Covid-19 outbreak.
Deirdre Michie, the chief executive of OGUK, said: “Businesses and industries across the UK are facing extraordinary pressures but coming so soon after one of the worst downturns in our history, this report shows that this sector is now in a paper-thin position.
“The offshore oil and gas sector is part of the UK’s critical infrastructure, providing the secure and affordable energy the country needs and is a key contributor to the economy in terms of supporting hundreds of thousands of skilled jobs, businesses and our wider economic contribution.
“Action is needed now to ensure the sector doesn’t lose the skills, experience and infrastructure it needs to meet the UK’s energy needs of today as well as help deliver its net-zero ambitions in future.”
She added: “We appreciate the Chancellor’s recent statement and OGUK is requesting urgent meetings with ministers to consider a Covid-19 sectoral resilience package which would help to give some reassurance to the regions, businesses and jobs this industry supports.
“We’re already working with our members to understand the challenges businesses are facing in these unique and extremely worrying times.”
The trade body’s market intelligence manager Ross Dornan said the outbreak could lead to companies taking steps to limit cash flow, which would have a knock-on effect on the supply chain.
Following the recent downturn in the industry, Mr Dornan said the sector “doesn’t have the capacity to absorb much more pain”.
He added: “The first week of March saw the most dramatic fall in oil price in almost 30 years and it remains uncertain as to how the market is going to evolve in the coming months as the coronavirus impact increases each day.
“Alongside this, the gas price has more than halved in the last 12 months, and we face a situation where E&P production revenues are set to be almost 50% lower than they were two years ago despite the same level of output.”