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Investor Confidence Returns To The North Sea Despite 60,000 Jobs Cut

As reports begin to come in with tantalising signs of investor confidence returning to the North Sea, we’re concerned about what’s happening with the people who should be driving this recovery, with new figures showing thousands of jobs are still being cut.

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Data from Oil & Gas UK, the industry trade body, reveals that while it had predicted 40,000 jobs were going to go in 2016, it was actually 50% worse than that.

60,000 jobs were lost. And, in the first six months of 2017, 13,000 jobs went.  Now let’s set that against what had occurred in recent years – in 2014 when the oil price was over $100 a barrel, the workforce was almost 500,000 strong; in 2016 it was 315,000.

The jobs go right across the sector, and are broken up by Oil & Gas UK into three types:

  1. Direct employment, which denotes people working for companies that are working to remove the oil and gas, and those people who help them in that process
  2. Indirect employment, such as people who support exports and overseas services
  3. Induced employment which is made up of people in areas like hospitality – hotels, catering and taxis.

The chief executive Deidre Michie called for action: “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. Despite our difficulties, we’ve got more reasons to be positive and some great stories to tell that demonstrate the real progress that we are now making. Although we are getting to a much better place, we still need further investment to generate new activity and sustain hundreds of thousands of UK jobs.”

And therein lies the problem. Drilling activity remained at “record low levels” last year with 14 exploration wells and only eight appraisal wells drilled. Just three new oilfields have been approved since 2016.

However, at a recent gathering in Aberdeen, industry executives found reasons for confidence in this occurring.  Wood Mackenzie said last week that a ten-year high will be reached in the North Sea this year, as a raft of new project starts-ups get underway. 14 with a combined peak production rate of 230,000 bpd will come from these. Industry executives at this month’s Offshore Europe event in Aberdeen talked about the strong exploration discoveries and the shot in the arm for the region which came from Total SA’s recent acquisition of AP Moller-Maersk A/S’s oil unit. In total in the first half of 2017, £4.6bn of deals were done in that time, which sent out a “vote of confidence” in the North Sea.

According to a recent report, Wood Mackenzie believes that as much as half of the untapped resources under the North Sea – 3 billion barrels – could be economic even at low oil process. However, it made clear that getting to this requires more skin in the game: £14bn to be exact.

Companies are being urged to recognise that continued job cuts is not sustainable for the industry. “Morale among the workforce is rock bottom,” Steve Todd from the RMT union told The Guardian. “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%.”

We know other industries are becoming more and more attractive at the moment; in most cases freelancers are choosing renewables as a more stable choice for work. The oil and gas industry lost good people before and turning that around cost it not-insignificant amounts of time and money. Right now, it’s starting to feel like few people learned that lesson.