North Sea is no longer the Dead Sea as confidence slowly returns

January’s spike in North Sea supply vessel rates was short-lived, but the offshore oil industry appears to be on the road to recovery

There was some surprise when an Aberdeen food bank opened six years ago. At that time, the "Oil Capital of Europe" as it likes to be known, was one of the most prosperous cities in Britain.

Yet, even when crude prices were averaging $100 per barrel and offshore support vessels were working flat out, food bank charity Instant Neighbour delivered 1,436 free food parcels to needy customers over 12 months.

By 2015, with an oil price collapse in full downswing, the food bank delivery figure had risen to 3,877. And now it is running at 85 deliveries a day — and this is from just one of a number of food banks operating in the granite city.

Clearly, this is only the roughest of measurements for the health of the Aberdeen economy, never mind the North Sea oil industry on which it predominantly depends.

There are a range of factors that would influence food bank use, not least recent government benefit policies.

But difficulties in offshore oil and its vessel support sectors have been profound: they have definitely impacted on poverty levels in the city, Instant Neighbour staff say.

"With Brent blend soaring to more than $70 per barrel last month, double the level of two years ago, the big oil companies are themselves in major recovery mode"

And the question they ask now is: will this industry ever recover the glory days of its past?

If you have been reading the odd TradeWinds' story over the past fortnight, you might argue that the answer is “of course” there will be a comeback — it is here.

Indeed, spot charter rates for anchor handlers over the median line in the Norwegian North Sea recently rocketed to double their previous value.

One significant operator, New York-listed Nordic American Offshore, said last week it was reactivating three laid-up platform supply vessels in the North Sea.

Another, SolstadFarstad, has just announced two new term deals for its vessels working in the UK sector.

With Brent blend soaring to more than $70 per barrel last month, double the level of two years ago, the big oil companies are themselves in major recovery mode.

a4f1fad68d55121ea7cdf19133f91b15 Shell's proposed floater for the redevelopment of the Penguins field in the UK northern North Sea Photo: Shell

Shell almost doubled its fourth quarter financial earnings at $4.3bn, while ExxonMobil, BP and others also leaped ahead.

Spending on exploration and production is increasing — including in the UK North Sea. For instance, Shell and Exxon Mobil recently announced the redevelopment of the Penguins field using a new floating production, storage and offloading vessel.

Up to 400 jobs will be created in what is Shell’s first manned new project in the UK northern North Sea for 30 years.

Meanwhile, BP spent January celebrating two new finds in the central North Sea and West of Shetlands. It says these will produce major new supplies of crude and have laid the foundations of a “refreshed and revitalised business”.

256b0f583d676a412f60d1680883f5a9 Oil & Gas UK chief executive Deirdre Michie Photo: Oil & Gas UK

Deirdre Michie, chief executive of lobby group Oil & Gas UK, said it was all very exciting and underlined the fact that with good fiscal terms the British offshore sector could compete with the best of them.

The oil industry is definitely doing things better, using technology more cleverly and keeping service costs cheaper.

So far, the real bounce-back in exploration and production activity is largely in the very low-cost, onshore shale lands of Texas and New Mexico.

More costly offshore activity is still quite slow in the Gulf of Mexico, offshore UK and other international offshore basins, and will be for some while yet.

The late January super spike in North Sea supply vessel rates was short-lived and there are still large numbers of vessels in lay up.

But there are definitely new signs of life around Aberdeen harbour, even as the food banks remain busier than ever. The North Sea is not the Dead Sea anymore and confidence is slowly building.