Warning up to 30,000 oil and gas jobs could be lost

DOWNTURN: Trade body OGUK fears drilling activity could fall by 50% this year

The leading representative body for the UK’S offshore oil and gas industry has warned that up to 30,000 jobs could be lost in the sector.

The warning from Oil and Gas UK (OGUK) comes as firms in the sector report an increasingly grim outlook as they deal with the fallout from the coronavirus pandemic and a 20-year low in oil prices and a 14-year low for gas.

The industry has expected a dramatic reduction in revenue, sparking concerns about the ability of some companies to survive a downturn that is likely to be even more severe than the slump in 2015 that the sector was just emerging from.

OGUK’S business outlook report, published today, calls for urgent action to protect energy security, jobs, and energy regions.

Based on company feedback, OGUK anticipates the level of direct and indirect jobs supported by the industry could contract by up to 30,000 during the next 12-18 months.

OGUK has asked governments and regulators to support a three-stage framework to support the sector in dealing with the immediate crisis while positioning it to play a key role in the UK’S transition to a net-zero future.

Chief executive Deirdre Michie said 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 UK’S oil and gas industry.

“If the UK is to maintain its supply of domestic energy, protect jobs and build the critical infrastructure it needs to transition to a net-zero future, ours is an industry worth fighting for,” she said.

“It’s why OGUK is today outlining a three-stage framework with a range of measures for governments and regulators to support industry now, stimulate a recovery and accelerate the transition to a net-zero future.”

The three-stage framework proposed by OGUK covers immediate needs, industry recovery, and accelerating to a net-zero future.

It includes recommendations to improve Covid-19 financial packages, retaining a sector-leading and progressive regulatory, fiscal and policy framework, as well as the development of a sector deal which will support the supply chain and accelerate the UK towards a net-zero future.

The report highlights a stark contrast in sentiment compared to the beginning of the year, with all exploration and production companies and 93% of supply chain firms reporting a worse outlook for 2020.

OGUK anticipates that capital expenditure could fall to £3.5-4 billion, the lowest investment since 2000 and among the lowest levels of investment since the early 1970s.

OGUK also warns that drilling activity this year could be down by 50% on 2019 levels, pushing activity to record lows.

Meanwhile revenues and margins across the supply chain are expected to fall 20-30%, on top of reductions seen during the last downturn.

Picture: Abermedia. OGUK chief executive Deirdre Michie has asked governments and regulators to support a three-stage framework to support the sector.