by Ian Forsyth

09-11-05 The Well Services Contractors' Association said that the "resource flight" of personnel and equipment from British waters has stopped.
The body has just published its latest annual business, investment and confidence report. It reports that well-service contractors in the UK North Sea are now seeing increased demand for their services as a result of the higher oil price and expect this to be reflected in a rebound in profitability in 2005.

Mike Bowyer, UK managing director of Halliburton and chairman of the WSCA, said: "After five years of shrinkage in the well-service sector, we are now seeing a welcome return to growth due to the increased demand for oil and gas."
He said that, despite the pick-up in activity in 2004, the profitability of the sector continued its decline because of increasing sector costs, mainly labour related, and contract pricing which continued to reflect the low demand of the previous five years. But he added that, as in the drilling sector, new contracts now reflected the increasing demand for services.

The WSCA chairman added: "The historic resource flight of personnel and equipment from the UK North Sea to other more profitable areas has now been halted. The major problem is now maintaining or increasing the number of engineers and technicians in a market which contains a limited pool of technically-competent people.”
"There is both international and domestic competition for manpower with competition not only between contractors, but also from within the ranks of both new entrants and established operators who are manning up their own technical departments."

Mr Bowyer said efforts needed to be continued to remove non-value adding costs to the benefit of both operators and contractors.
"There are efficiencies which can be achieved in management of the supply chain through the use of standardised tender and contract documentation and by reducing bureaucracy generally."

He said WSCA members were at their most optimistic in the last five years.
"Whereas last year, we saw the increase in activity coming primarily from new-entrant operators, we now see the increase in activity spread across the full operator spectrum.”
“The problems we are now facing are those related to expansion of the sector and are more welcome than those of managing decline as we have been doing over the previous five years.”

"We believe that the worldwide demand for oil and gas is likely to maintain an oil price high enough to sustain current activity levels in the UK continental shelf (UKCS) for some considerable time."
But the WSCA chairman added: "This is, of course, subject to the UK fiscal regime remaining relatively stable so that the UKCS continues to be viewed as an attractive area for investment when compared to other global oil and gas basins."