Supply chain action plans wanted for onshore oil and gas SMEs

25 March 2015

The Onshore Energy Services Group (OESG) is calling on the UK government to require mandatory supply chain action plans for SMEs in the onshore oil and gas sector.

In its latest policy paper, the OESG said: “Unless more is done to create the conditions for SMEs to thrive, there’s a real risk the supply chain will come to be dominated by foreign interests and an imported workforce.”

It is calling for the introduction of supply chain action plans, such as those now used in offshore wind as part of the Contracts for Difference (CfD) subsidy regime. The contracts offer generators long-term deals with a guaranteed return on their investment, paid for by levies on electricity bills, similar to feed-in-tariffs.

The body is also developing guidelines to help small companies bid for contracts and it hopes the industry will adopt them as standard. It hopes the government will extend the Advanced Manufacturing Supply Chain Initiative (AMSCI) to cover shale gas activities. The AMSCI is a funding competition designed to improve the global competitiveness of UK advanced manufacturing supply chains.

The OESG is also calling for exploration tax breaks linked to the British SME supply chain spend as well as the introduction of a government-backed loan guarantee scheme to help capital-intensive supply chain participants fund new equipment.

With the right support, the organisation says, small companies in the onshore oil and gas supply chain could potentially generate tax receipts of over £1.35 billion and employ more than 35,000 people.

OESG chief executive Lee Petts, said: “Supply chain SMEs could one day be responsible for tens of thousands of jobs, with the workforce alone contributing a staggering £1.33 billion to the economy through their taxes at peak. Taxes on business profits could yield a further £20 million.”

Dan Lewis, energy policy adviser at the Institute of Directors, says: “In the years to come, it is clear that shale will only fulfil its promise on jobs, skills and regional growth if we do everything we can to develop a supply chain here in the UK.”

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