Financial Times

UK oil industry brace for 10,000 more job losses

by Kiran Stacey, FT Energy Correspondent

October 19, 2015 | 10:38 am
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Two of the biggest independent oil explorers in UK’s North Sea have predicted a further 10,000 jobs will be lost from the sector, indicating a growing acceptance that oil prices are stuck in a prolonged slump.

Since late last year, 5,500 people directly employed in the industry have lost their jobs — 15 percent of the total workforce — due to the fall in the price of oil, according to Oil and Gas UK, a trade body for the offshore sector.

But executives and experts warn the worst is yet to come as the industry adapts to expectations that the oil price could stay low for many more months.

Amjad Bseisu, chief executive of EnQuest, one of the biggest independent explorers in the North Sea, told the Financial Times: “I reckon there will be three times that (figure of 5,500) by the end.”

Tony Durrant, chief executive of Premier Oil, another North Sea producer, agreed with Bseisu’s estimate, adding: “The industry is only just beginning to get under way with this — it has not so far been very good at making itself efficient.”

The UK’s North Sea is the most expensive place in the world to extract oil, thanks to high staff costs and declining reserves, which mean companies have to spend more to reach what is left.

Those extra costs have left it more exposed than most regions to the tumbling oil price, which has fallen from $115 last June to around $50 currently.

Some industry executives have admitted they were slow to reduce jobs and costs in the first few months of the oil price collapse.

Bseisu said: “We went through last year’s cycle in a little bit of a timid manner . . . There was the feeling that maybe things can come back like they did in 2008/2009 [when the oil price rebounded quickly from a slump]. But that hasn’t happened.”

Analysts now predict a protracted period of low prices and companies are rushing to catch up, cutting staff numbers, renegotiating contracts and buying more equipment off the shelf.

The oil majors have made the steepest job cuts. Shell has axed 500 posts, BP has cut 200 full-time jobs and 100 contractors, and Conoco has cut 230 staff jobs. But smaller operators, which are often more focused on the North Sea, are also feeling the effects. Companies such as EnQuest and Premier have reduced both the amount they spend on contracted staff in particular, by cutting both numbers and pay.

Rising unemployment is starting to be felt in Aberdeen, the Scottish city that is the hub of the UK’s offshore drilling industry. House price rises have stalled, while hotel room rates and taxi bookings are both falling.

One international oil company executive predicted the city could suffer lasting damage, saying: “Aberdeen has never put itself in a position to survive after oil. They are bidding for extra funding from the government, but it is too late now.”

Andy Greenwood, a manager at Air Energi, a recruitment company, said: “With billions of pounds worth of projects cancelled, put on hold or drastically scaled down, more job cuts could certainly be on the horizon.

“As the downturn continues and more talent is released from the sector and region, there is a real danger that this will open up an even bigger skills gap.”

by Kiran Stacey, FT Energy Correspondent

October 19, 2015 | 10:38 am
  |     |     |   Start Conversation

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