SCOTTISH QUESTION
Oil firms are scaling back operations in Aberdeen as offshore exploration and drilling becomes more unprofitable.
ABERDEEN: In the bars, boardrooms, hotels and high streets of the Scottish city of Aberdeen, there is one question on most people’s lips: how do you survive a global oil price slump?
Oil firms are scaling back their operations in Britain’s oil capital as the tumbling value of the estimated 16.5 billion barrels of oil left in expensive-to-reach undersea fields off the British coast, makes exploration and drilling unprofitable.
The price crash has cost thousands of workers in Aberdeen their jobs, threatening the future prosperity of the city and, for some, undermining the economic case for Scotland breaking away from the rest of Britain.
The keenest edge of the crisis is being felt by the workers who were drawn to the remote Scottish city in boom times by the lure of plentiful work and high wages, but now find themselves accepting pay cuts and chasing increasingly scarce employment.
From Monday t o Friday, Marcin Kozlowski works for US oilfield equipment provider National Oilwell Varco. On Saturdays he now washes cars in a multi-storey car park.
“The oil price has affected everyone in Aberdeen,” he said, explaining that his monthly income has dropped from £4,500 (US$6,900) to £2,500.
Oil companies have shed around 6,000 jobs, according to Scottish Enterprise.
This amounts to roughly 2% of the working-age population of Aberdeen and its surrounding area, a figure that experts say is likely to be much higher if the impact on flexible labour is included.
“There’s just no jobs. Customers aren’t placing contracts,” said Norman Ross, an unemployed contractor in the skilled field of measuring the value of oil as it is pumped out.
The knock-on effect is hurting the restaurants, hotels and shops that depend on oil workers spending their money.
“We used to have one quiet night a week; now we have three,” says Lisa Kelbie, owner of the Bistro Verde fish restaurant.
Oil market veteran Ian Wood, author of a government-commissioned report on North Sea oil, said production could last at least another 30 years if companies become more efficient.
Over the last five decades, oil has supplanted almost all of Aberdeen’s other industries. The granite quarry that produced the stone from which much of the city is built closed over 40 years ago, and only one paper mill remains of the 300year old industry the city was once known for before oil.
Aberdeen is hoping to ride out the crisis by learning from previous oil crashes in the 1980s and 90s.
“The city has to regenerate itself if it is to survive,” said local politician Willie Young, highlighting the need for improved road and rail links to keep oil firms in the city.
“We used to be so reliant on Shell and BP and all the rest that when they said ‘we are stopping exploration’, the phones just stopped ringing,” said Mr Young. “We’ve got the [oil] service industries here now, so the phone is still ringing.”
A spokesman for BP, whose North Sea headquarters are located in Aberdeen, said the firm had probably become smaller in the region but expected to keep operating there “out to 2030 and beyond”.
Aberdeen’s relationship with oil has changed from when fisherman first laid down nets to provide the brawn for drilling rigs in the 1970s.
“This is important in giving a cushioning effect because in some parts of the world like the Middle East, they are not cutting back, they are expanding,” said Alexander Kemp, an oil economist.