Tumbling oil prices lead inexorably to companies cutting not just capex but also operating costs. And cutting operating costs inevitably involves casting a slide rule over staff numbers.
Tumbling oil prices lead inexorably to companies cutting not just capex but also operating costs. And cutting operating costs inevitably involves casting a slide rule over staff numbers.
To date, the UK North Sea workforce has not been slashed, although with the results season just under way there may be more to come. Shell and Chevron cut almost 500 jobs late last year but gave assurances over safety provision. BP is cutting 300 North Sea jobs but they are all onshore.
Jake Molloy of the RMT union is worried about the impact of North Sea restructuring by US independents Apache and Marathon. Apache is to lay off 5pc of its global workforce, and Marathon will cut 2015 spending by about $1bn, or 20pc, to $4.3bn-$4.5bn in the face of lower oil prices, likely selling up in the North Sea.
Offshore trade unions are concerned that key skills will be lost only a few years after a major industry and government drive to attract and train a younger engineering workforce. They are also concerned about operational safety issues.
The impact of job losses on safety does not become apparent immediately. Molloy argues that it was cost cutting after prices fell to $9/bl in the late 1990s that was responsible for a gas blast in 2003 on the Brent Bravo platform that killed two but might have killed many more. The Health and Safety Executive commented on “failure to maintain known defective equipment properly and a failure to assess potential consequences”.
Some North Sea operators are pushing to change the shift system offshore from two weeks on and three weeks off to three weeks on and three weeks off. The RMT says that the staffing impact of this equates to a cut of 20pc at a time when there are extensive maintenance backlogs.
UK North Sea drilling in 2014 was at its lowest level since 1999. Some 12-16 mobile drilling units are likely to be stacked this year. As they lie idle, experienced workers will look for jobs elsewhere, and skills will be lost. When the units are re-mobilised, it will be with inexperienced staff, something that led to deaths and injuries during the last recovery, Molloy says.
The trade union approach for now is to seek a common front with industry and appeal for UK government support to keep the industry active. In common with Oil and Gas UK (OGUK), the RMT is calling for tax relief for the industry. “We’re on the same page, just not the same part of the page,” says Molloy. His members want to see targeted tax incentives for maintenance work and for exploration, suspecting that OGUK’s priority is its member companies’ bottom line.
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