The UK oil and gas industry is more pessimistic about its prospects now than three months ago, despite the UK government changing the country's offshore tax regime this year, according to industry group OGUK.
The group's Business Sentiment Index dropped to minus 31 from minus 23 on a scale of minus 50 to plus 50. The index has been falling for eight quarters and has stayed in the negative territory for three quarters, indicating an increasingly gloomy outlook.
"These figures indicate the industry's focus remains firmly on reviewing and revising activities to achieve the significant efficiencies required when operating in the high cost, mature basin of the UK Continental Shelf (UKCS), where the oil price fall has added further pressure to an already challenging business environment," said OGUK operations director Oonagh Werngren.
The UK government has reduced taxes for the country's oil and gas industry and introduced an investment allowance to boost activity in the sector. The tax regime change boosted first-quarter earnings for companies operating offshore the UK. BP's entire effective tax rate swung into credit for the quarter, and Shell's one-off items included a $600mn credit.
But the industry said the tax regime change alone is not enough. "The companies are working with the service contractors. We have to come up with a solution that makes sure that the North Sea continues to be strong going forward," said BP chief financial officer Brian Gilvary. "And that is what we are trying to do around our big new investments".
"You have to accept the fact that we are in this late life development of the asset, and it is really about how we renew it going forward. And I think it is a matter for all parties involved in the North Sea," he said.
Operating in the UK North Sea late last year was at its least profitable for at least 19 years, official data show this month.
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