Onshore shale oil production could lure investment away from offshore, according to the chief of a leading financial firm.
He said although this was not yet the case in the UK and Europe, there was potential for fracking to take off due to political will in Westminster.
He warned shale oil was more favourable, in terms of cost, compared to offshore oil extraction.
Colin Welsh, chief executive at investment bank Simmons & Co said: “There has been a real transformation in the States in the last five to six years; landowners have the mineral rights so there is something there for them to allow fracking.”
“I wouldn’t expect that the pace of fracking development will be as swift as it has been in the US, but there is clearly a lot of political will to make that happen,” said Mr Welsh at the opening day of the Subsea Expo in Aberdeen yesterday.
He said the industry is currently experiencing a period of range-bound pricing for crude oil, with a volatility range of around 40%, and low crude prices a thing of the past.
“The problem with range-banded oil prices is that they only stimulate activity whilst the cost base is static,” said Mr Welsh.
“Higher costs and range-bound oil prices are beginning to give the E&P (exploration and production) community pause for thought when it comes to pushing the button for new subsea contracts.”
He said E&Ps, in particular the majors, were finding it harder to grow production. “All the easy to find big fields were discovered decades ago. That’s why there is new drilling in the Arctic and other harsh places,” said Mr Welsh.
He said this had resulted in a boom in the subsea and services sectors, with oil field spending rising 10% year on year.
“The pendulum has swung away from the major oil companies in favour of the service companies. And we are relying on unconventionals to satisfy demand because conventional oil peaked in 2006,” said Mr Welsh.
He urged the subsea sector to make “hay while the sun shines” but not become too complacent.
“It’s impossible to set the right strategy or make coherent investment decisions without taking a look at the industry as a whole.”