Contractors likely to cut jobs further

About one-fifth of surveyed oil and gas contractors have warned they expect to make further job cuts next year as they deal with ongoing turmoil in the sector.

Over the past year, nearly half of firms have reduced the size of their workforce in response to the Covid-19 pandemic and oil price crash, with 22% laying off more than 10% of their total headcount, according to the new study.

The 32nd Aberdeen and Grampian C hamber of Commerce (AGCC) oil and gas survey report – out today – reveals just 15% of contractors have increased staff numbers this year.

The research, carried out in partnership with the Fraser of Allander Institute and professional services firm KPMG, represents the views of 100 oil and gas firms, employing 22,665 people across the UK and more than 400,000 globally.

Findings cover the months to October.

AGCC’s report lays bare the scale of uncertainty stalking the industry, with business confidence falling to its lowest level since 2015.

A vast ma j o r i t y of operators (78%) said the outlook for the future was not much better, with just 1% feeling more confident.

Fewer than one in eight (13%) contractors said they were working at or above optimum levels in the UK North Sea, compared to 47% a year ago, with 82% predicting a decrease in their revenue in 2020.

AGCC said its survey was a “stark illustration” of the economic turmoil facing oil and gas firms.

There was widespread uptake for the UK Government’s furlough scheme, with 83% of contractors making use of the support, affecting 35% of the workforce on average.

AGCC research six and polic y manager Shane Taylor hailed the initiative for propping up jobs, but said increased activity levels were the “only sustainable way” to give firms long-term clarity.

Despite the grim outlook, Martin Findlay, senior partner at KPMG in Aberdeen, highlighted the “incredibly resilient” nature of a sector which is used to dealing with “instability”.

Mr Findlay also pointed out that while climate change once posed a threat to oil and gas, it now “offers new opportunities” and firms were starting to “embrace change”.

In 2018, when the survey started looking at diversification, around half of contractors said their business was wholly focused on oil and gas.

That figure has fallen to 38%, while only a quarter now feel hydrocarbons will be their sole area of attention by 2025.

Investment in green energy is also on the up, with 21% of contractors reporting interests in offshore wind and renewables.

And almost threequarters expect to have some involvement in the renewables sector within three to five years.

However, around half (49%) of firms warned a lack of experience and skills in their organisation was the biggest barrier to diversification, followed by profitability and potential returns to investment.

Contractors have also taken a less favourable view of Aberdeen’s longterm future as an energy hub, with 23% saying they are not optimistic.

A further 27% reported being only slightly optimistic about the Granite City’s prospects.

Mr Tay l o r said this underlined the need for “rapid progress” in key projects to underpin the region’s ability to navigate the energy transition.

IMPACT: The pandemic and oil price crash have taken a terrible toll on the oil and gas industry and confidence in it.