A new report has revealed confidence in Scotland's oil and gas sector is on the rise.

The study, commissioned by Aberdeen & Grampian Chamber of Commerce (AGCC) in partnership with the Fraser of Allander Institute, states 38% of contractors are feeling more confident about business on the UK Continental Shelf (UKCS) compared with 10% who are less confident.

While this is a marked increase compared to six months ago (12% of contractors were confident, 47% less confident), 52% of respondents reported no change in their future outlook, suggesting challenges still remain in the sector.

In addition, more than half (52%) of contractors and operators / licensees believe that the sector has already reached the bottom of the current cycle, while 26% consider it will do in the next year.

42% of contractors said they expect their business to grow when asked what position they expect to be in by 01 January 2018, up from 16% who expected to be growing by 01 January 2017. Only 2% of respondents are predicting a further decline.

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Contractors' investment spend is moving in a positive direction with more contractors anticipating to increase investment over the next two years (26%) rather than reduce (19%). However, increases are limited to certain areas and cannot be seen consistently across all parts of the industry.

Elsewhere, excess capacity remains with 24% of contractors reporting working at, or above, optimum levels in the UKCS and 43% are working at or above their optimum levels overseas, up from lows of 12% and 24% respectively six months ago.

However, the survey found there are still signs of more labour market challenges, with operators and licensees reporting a 2.5% decline in their FTE workforce, and a 6% decline for contractors. Although operators and licensees continue to anticipate a decline over the next 12 months at a rate of 2%, contractors expect to increase their workforce by 0.8%.

Overall, 81% of respondents expect to be involved in decommissioning in the next three to five years with 54% reporting similar interests in renewables. 69% expect to be involved in nal oil and gas activity in the UK in the medium term, with 65% expecting to be involved outside the UK.

James Bream, research and policy director at AGCC, said: "We're seeing some signs of recovery for the industry and the global outlook is certainly more positive than it was six months ago but it is clear that most companies are still suffering.

"We are hopefully stepping into a more prosperous period in due course but that is not upon us for now. It seems clear that many believe that we won't return to previous levels of activity and that perhaps we shouldn't call this a downturn. This isn't a 'new norm', it is just normal."

(LM)