Cost-cutting and mergers still hitting industry despite recovery in the oil price

This article is more than 3 years old

This article is more than 3 years old

Britain’s North Sea energy sector is still shedding thousands of jobs despite the recovery in the oil price, according to new figures.

The industry had already been hollowed out by the 2014-16 oil price slump, falling from a peak of nearly 500,000 employed in 2014 to 315,000 at the end of last year. But data from the Oil & Gas UK, the trade body, shows a further 13,000 jobs linked to the sector were lost in the first half of 2017.

The bulk of the employment is indirect jobs, in the supply chain and services such as hotels and restaurants.

Oil & Gas UK said this year’s contraction, which has continued despite the price of a barrel of oil costing a third more than a year before, was the result not just of cost-cutting, but nearly $6bn worth of mergers and acquisitions.

Several major oil firms have sold stakes to smaller, independent players in the region this year in search of more profitable reserves elsewhere, raising fears over further job losses.

One industry expert cited Total’s recent acquisition of Maersk’s North Sea operations, saying head office functions would be duplicated and therefore liable to restructuring and job cuts.

Steve Todd, national secretary of the RMT union, said: “I’ve been involved in this industry for 45 years and it’s the worst I’ve ever seen it. I don’t see any light at the end of the tunnel.

“If anything it’s getting worse, in my view. I’m yet to be convinced there are any green shoots.”

Todd said the reasons for the losses included downsizing and mergers, and warned that workers still in employment were also suffering.

“Morale among the workforce is rock bottom,” he said. “Those in jobs have had to make sacrifices, they’ve had to do longer tours of duty [out on vessels and on rigs]. People have taken pay cuts, sometimes of 20% to 30%.”

Oil & Gas UK said it believed the largest job cuts “may now be behind us” but warned it still had serious concerns over record low levels of drilling.

Deirdre Michie, the chief executive of Oil & Gas UK, said: “There are still serious issues facing our industry which has suffered heavy job losses since the oil price slump. But we are hopeful that the tide is turning and expect employment levels to stabilise if activity picks up.”

Just 14 exploration wells and 8 appraisal wells – the step after exploration but before production – were drilled in 2016, the trade body’s economic report found.

A lack of capital investment also remains a serious concern, with only three new oilfields approved since 2016.

The only area where expenditure is increasing involves the decommissioning of old oil rigs, such as Shell’s removal of a platform in the Brent field earlier this year. The government has proposed changing tax relief rules around decommissioning to support the sector, with a final decision expected at the autumn budget.

Andrew Jones, a Treasury minister, told an industry conference on Tuesday: “The government remains fully committed in its support of the UK’s oil and gas industry.”

The price of oil continues to hover around $50 a barrel despite a deal agreed in May by major oil-producing countries to extend production curbs and prop up prices.

Oil & Gas UK said the market’s reaction to the agreement suggested “it may be more difficult to overcome the global oversupply [of oil] than previously anticipated” and that the market was likely to remain volatile until 2019.