Trade Body Warns 30,000 UK Offshore Oil Jobs May Vanish

Oil & Gas U.K., or OGUK, a trade association for the U.K.’s offshore oil and gas industry, warned that up to 30,000 jobs could be lost in the sector over the next 12 to 18 months due to the double whammy of the coronavirus pandemic and historic low oil prices.

The British offshore energy sector is expected to suffer a “dramatic reduction” in revenue, OGUK said, raising fears about the ability of some companies to survive such a downturn.

OGUK anticipates that capital expenditures by companies in the industry may fall to between £3.5 billion and £4 billion [$4.36 billion and $4.98 billion] -- the lowest such investment figure since 2000 and amongst the lowest levels since the early 1970s.

OGUK also warned that drilling activity this year may plunge by 50% from 2019 levels – nearing record lows.

“The position of many areas of the supply chain is increasingly fragile,” OGUK stated. “Revenues and margins across the supply chain are expected to fall by 20%-30 per cent, on top of reductions seen during the last downturn [in 2014-2015]. The impact on businesses will vary depending on their position in the industry, with some areas of the supply chain expected to see greater reductions.”

Many North Sea oil rigs already stand idle, especially off the coast of energy-dependent Scotland.

The Cromarty Firth near Invergordon in the extreme north of Scotland has at least 16 idle rigs and may store another five.

“I hate to say it but the whole of the North Sea has gone into meltdown again,” said Bob Buskie, chief executive of the Port of Cromarty Firth. “Once the price drops to where it is now -- basically the place just goes into shutdown.”

Jake Molloy, regional organizer for the RMT union in Aberdeen, warned: “We are heading into a crisis behind a crisis. Once the [coronavirus] crisis is over we are into a massive industrial crisis here as well.”

Some North Sea oil projects have been postponed or shelved indefinitely.

For example, Siccar Point Energy E&P Ltd. and joint venture partner Shell UK deferred work on the widely anticipated Cambo project (78 miles northwest of the Shetland Islands) to 2021. Cambo is believed to be one of the largest undeveloped fields in the U.K. Continental Shelf.

“Cambo remains an extremely attractive development with compelling economics,” said Jonathan Roger, CEO of Siccar Point “However, given the uncertainty of the global situation, including whether any people, goods and services can be mobilized in [Organization for Economic Co-operation and Development] countries, it makes sense to hold-off final approval until some normality returns to the market and a clear and robust path forward can again be established.”

Royal Dutch Shell (RDS-A) also said it will delay its $1 billion Jackdaw natural-gas field development in the North Sea.

Independent oil producer EnQuest said it expects to cut 530 positions in the U.K. Earlier, the company said it decided not to restart production at two mature North Sea oil fields.

“With historic low oil and gas prices coming so soon after one of the most severe downturns our sector has experienced, these findings confirm an especially bleak outlook for the U.K.’s oil and gas industry,” said OGUK Chief Executive Deirdre Michie. “If the U.K. is to maintain its supply of domestic energy, protect jobs and build the critical infrastructure it needs to transition to a net zero [carbon emissions] future, ours is an industry worth fighting for.”

However, the U.K. offshore energy industry has been bleeding jobs for years. Last year the sector employed 151,600 people either directly and indirectly, down from 247,400 jobs in 2014.

However, as the industry asks for state aid, environmental groups may oppose any government efforts to support the oil and gas industry.

"Any measures of support that seek to return the industry back to 'business as usual' from before coronavirus will be locking in another crisis further down the line without regard for the workers and communities that will face that the hardest,” said Ryan Morrison, from Friends of the Earth-Scotland. "We've already seen the industry accused of treating its workforce like a tap that can be turned on and off and a continuation of this approach where workers are hit first by any potential trouble to the industry cannot continue."