Over 34,000 jobs to be created in the Oil and Gas sector in the next two years

The oil and gas sector could create as many as 34,000* new jobs in the UK over the next two years with 77% of companies in the sector planning for growth in 2013-14, according to new research from Lloyds Banking Group.

The Lloyds Bank Commercial Banking report, Oil & Gas: Rising Fortunes 2, which launched today, surveyed a broad cross section of 100 UK oil and gas businesses.

However, the sector remains fully engaged in a war for talent, with a third (33%) naming a shortage of skills as the biggest challenge they’ll face within the same timeframe.

The lack of skills is worrying equipment and service suppliers (37%) more than exploration and production firms (25%). Training existing workers is the overwhelmingly preferred way of dealing with the skills shortage (named by 50% of all companies), followed by working with universities (24%) and launching apprenticeship schemes (23%).

Moving into new growth markets is clearly the greatest opportunity seen by oil and gas companies (named by 43%). Whilst just under a fifth (17%) of all companies (9% of exploration and production firms; 21% of equipment and service suppliers) stating an interest in diversifying into unconventional oil and gas, including fracking, the controversial process of extracting gas and oil from shale deposits.

More growth is planned by oil and gas equipment suppliers (80% expect growth) than by exploration and production firms (72%). Geographically, companies based in Scotland are more growth orientated (83% expect growth) than companies in the North and Midlands of England (75%) and south of England (74%).

The majority (86%) of growth-orientated firms expect expansion to come from organic growth rather than merger and acquisitions (14%) but there is a stronger preference for M&A growth amongst explorers and producers (16% of all firms in the sector) than amongst supply chain firms (9% in this sector).

Other findings from the research included:

• Two-thirds (66%) of all companies say they expect to expand overseas in the next year.
• Explorers and producers are looking more active in foreign markets – the proportion of this sector not expecting any overseas expansion is down to 41% from the 56% who said they did no expansion last year.
• New and expanding oil provinces of the Far East, East Africa, and West Africa, are exciting more interest amongst explorers and producers than last year.
• Supply chain companies are also more expansionist – 72% expect overseas growth, up from the 63% which undertook overseas expansion last year – and more orientated than explorers and producers to traditional markets such as the Middle East and Africa.

Stuart White, Area Director of Lloyds Bank Commercial Banking North of Scotland said: “This is good news for the UK economy and north-east Scotland, in particular, where there is a concentration of oil and gas companies. However, the spread of these firms throughout the UK means that all parts of the country should reap the benefits of these 34,000 new jobs, a major boost in these challenging economic times.

“This is our second oil and gas report and the results show that the optimism expressed in that report has translated into reality in the intervening period.

“The 100 companies we surveyed have committed to creating 5,000 jobs, which if replicated across the industry would see tens of thousands of jobs created over the next two years. This is on the back of two-third of companies expecting further internationalisation and significant investment.

“The development of new oil and gas fields normally grabs the headlines for sheer size of investment and job creation, but this survey has found that some equipment and service suppliers may create an even bigger numbers of jobs, albeit in a series of growth steps rather than the one big project.

“The report also highlights the challenge posed by the lack of a skilled workforce. The survey acknowledges that positive action to address this shortfall is underway with established partnerships between higher education and the creation of apprenticeship schemes, but this is a long-term solution and will take time to alleviate the current pressure.”

Commenting on the report, David Rennie, director of oil & gas at Scottish Enterprise said:

“The remaining oil & gas reserves in the North Sea have been estimated up to £1.5 trillion and this report highlights the industry’s continuing strength and long-term economic potential for Scotland, particularly in terms of job creation.

“Scotland’s industry-led oil & gas strategy, which was launched last year, targets higher long-term recovery rates, greater exports and £30billion of annual sales by 2020. The findings of this survey demonstrate that we are already well on the way to reaching these goals, particularly in exploiting new market opportunities both here and internationally.

“We know there are still challenges in addressing the current skills shortage, and this was identified as a key area for action within the strategy. We’re currently working closely with our private and public sector partners look at ways to address this issue, ensuring that the industry can attract the right talent and ensure its long term success.”

Trade body Oil and Gas UK announced last week that investment is expected to rise to £13 billion in 2013, from £8.5 billion in 2011. The industry currently employs around 440,000 people in the UK.