Risk of 60,000 North Sea job losses by end of the decade

Moving oil and gas workers into new green energy roles is vital for the UK economy, writes Jonathan Leake

THE UK’S offshore oil and gas industry will lose up to 60,000 jobs by 2030 unless there is significant investment in new infrastructure, experts warn.

The potential job losses are based on predictions that 180 of the UK’S 284 active oil and gas fields will close within the next seven years.

Those closures mean that many of the 120,000 oil and gas workers employed offshore and in the industry’s supply chain will no longer be needed.

At least 33,000 jobs will be lost but the total could be as high as 60,000, Robert Gordon University’s Energy Transition Institute found.

A report authored by Prof Paul de Leeuw and Sumin Kim said: “A managed transition from oil and gas will see the oil and gas workforce decline from 120,000 today to around 87,000 by 2030. But limiting new investment and reducing operational activities could reduce the workforce to around 60,000 by 2030.”

Policies that generate uncertainty for investors, such as the UK Government’s windfall tax or Labour’s pledge to halt new drilling, risk pushing the industry towards maximum job losses, said Prof

De Leeuw. The report, called “Powering up the Workforce”, led to private briefings with senior politicians in Westminster and the Scottish government. Prof De Leeuw said: “We are apolitical but we are talking to senior figures in every political party about these findings.”

Some fear that the speed of the North Sea’s projected decline could echo that seen in the coal industry in the 1980s – when 200,000 miners lost their jobs in a decade. It would also be particularly damaging for Scotland, where around 94,000 jobs rely on the oil and gas industry, according to Offshore Energies UK, the industry trade body.

Prof De Leeuw said: “Close to one in 30 of the working population in Scotland is currently employed in, or supports, the offshore energy industry.”

The scale of potential job losses is amplified by the fact that more workers are required to keep the older and less efficient oil and gas fields in operation.

The report added: “About 80pc of UK production comes from just 20pc of the fields so there’s far more people working on mature assets that will soon be decommissioned. This will have a disproportionate impact on the number of people leaving the industry.”

‘Close to one in 30 of the working population in Scotland is employed in the offshore industry’

For five decades, the UK’S seas have provided it with the oil to power the country’s transport system and the gas to heat its homes.

In the process, Britain’s oil and gas industry has boosted the economy and poured £400bn of taxes into Treasury coffers, while also generating 120,000 high-paid jobs. However, the sector now stands on a cliff edge.

By 2030, experts predict between 33,000 and 60,000 jobs in the North Sea will be gone.

The natural decline of North Sea stocks is playing a crucial role, as around 180 of the UK’S 284 oil and gas fields are due to close down by 2030. Yet, politics is also key.

The Government’s windfall tax, Labour’s pledge to halt new drilling, and protests by climate activists mean that oil and gas investors are turning away from the UK.

For environmental groups, it marks a major victory as they strive to replace jobs in oil and gas with new roles in renewables – especially offshore wind.

Sadly, things are not that simple, says Prof Paul de Leeuw, director of Robert Gordon University’s Energy Transition Institute.

He has spent much of the autumn researching the risks building up in the energy sector, and briefing leading politicians from the main UK parties and the Scottish government.

His conclusion is that the oil and gas industry or, more particularly, the thousands of skilled workers it has created, will be essential to creating the renewable energy systems of the future – and the UK is at risk of losing far too many of them.

“Over 90pc of the UK’S oil and gas workforce possess skills that can be transferred to the offshore renewables sector,” he says. “Retaining the offshore oil and gas supply chain, its workforce and associated skills over the next five years will be crucial.

“But there is a limited capacity for the UK offshore renewables sector to accommodate the quantity of skilled oil and gas workers impacted by the predicted decline in the hydrocarbon sector until later this decade.”

What Prof de Leeuw is saying is that allowing bad politics to accelerate the offshore oil and gas sector’s natural decline will also undermine net zero, wiping out swathes of a workforce best placed to build the energy systems of the future.

The casualties are already mounting. Earlier this year, Harbour Energy, the UK’S largest oil and gas producer, said it was abandoning new oil and gas projects in Britain and announced 350 job cuts. Last month, Apache – another major UK offshore operator with more than 630 staff – announced plans to cut 90 more jobs. Contractors are also affected. Offshore Helicopters, which flies workers offshore from Aberdeen, Shetland and Denmark, has announced job cuts linked to fewer workers.

Such losses are already hitting the UK’S energy communities hard. Aberdeen, which in the 1990s was at the heart of the UK’S booming offshore industry, has lost hundreds of jobs.

Martin Jones, partner at UHY Hacker Young, the accountancy group, said Aberdeen was experiencing the lowest increase in disposable household income in the UK with just a 15.8pc rise over the last decade. By comparison, the national average was 40pc.

He says: “Aberdeen’s slow household income growth is entwined with the area’s ties to the troubled UK oil and gas industry, which has been hit hard by declining North Sea oil and gas production.”

House prices are also falling. The University of Aberdeen Business School’s latest quarterly housing market report shows Aberdeen house prices tumbled by 4.4pc over the past 12 months. The report said: “Downsizing by some major oil companies in the North Sea, together with rising concern regarding emissions, have all affected confidence.”

Some fear these declines are just the trickle before the flood. Prof De Leeuw says that in a worst-case scenario, job losses in the North Sea could hit 60,000 by 2030, while a managed transition will see the oil and gas workforce decline from 120,000 to 87,000.

Why, though, is the UK’S oil and gas production in decline at all? Part of the answer is that its biggest and best oil and gas fields have all been exploited.

Even the biggest reserves, such as the mighty Brent oil field, north-east of Shetland, have been drained. Brent, like many others, is currently being decommissioned.

Over the next decade, decommissioning could become a far bigger industry than oil and gas. A spokesman for the North Sea Transition Authority (NSTA) said UK oil production was expected to show a compound decline of 6pc a year over the coming decade.

“UK oil production peaked in 1999 and declined rapidly through to 2014, with only a handful of large undeveloped discoveries under active consideration for development, decline is expected to continue, albeit at a slower rate, through to 2050,” says a spokesman.

For gas, the predicted decline is nearly twice as fast. “There are few new developments under consideration and limited exploration prospects so rapid decline is now expected through to 2050,” the NSTA spokesman adds.

For politicians, the biggest battles have been fought over licensing. Claire Coutinho, the Energy Secretary, plans to approve dozens of new exploration and production licences in the coming months. By contrast, Ed Miliband, her Labour shadow, has pledged to block all new licensing if his party wins power.

But such squabbles are certain to drive investors away – and may hardly be worth having. The NSTA’S own projections show that UK annual gas production will decline from 34bn cubic metres (bcm) in 2022 to just 13bcm by 2030 and less than 5bcm by 2040. New licences might add around 4bcm to those annual totals, which is useful but will be nowhere near enough to offset the decline.

What such new work might do, however, is generate enough new investment to protect jobs in the oil and gas sector while renewables reach full strength. Katy Heidenreich, a director at Offshore Energies, the trade body for the offshore sector, says preserving British jobs in the energy sector is the main challenge. “The retention of the offshore oil and gas supply chain, its workforce and associated skills will be essential,” she said in a recent report. “People working in oil, gas and offshore wind are at the heart of the energy system and will be vital to the success of the transition as it gathers momentum.”

Currently, the UK has about 150,000 workers in the offshore energy industry, as offshore wind employs around 30,000 people in addition to the 120,000 in oil and gas. That balance is about to flip with up to 100,000 new jobs likely to be created in the low-carbon sector by 2030 – making it an ideal home for workers that face redundancy.

Managed properly, says Prof De Leeuw, a new workforce model will emerge, with jobs concentrated around energy clusters that could see hydrogen production, carbon capture and wind turbine construction in close proximity.

A successful transition will lead to the UK offshore energy workforce actually increasing by 50pc to 225,000 people by 2030, he says. Failure to realise its full potential will lead to the workforce declining by around 15pc to 130,000 over the same period. “There is a huge prize up for grabs,” said Prof De Leeuw. “We want to equip decisionmakers with new insight to convert those opportunities into reality.”

But will it happen? The UK’S energy history is littered with failed promises, ranging from Tony Blair’s pledge to create a new generation of nuclear power stations to David Cameron’s Green Deal.

Stephen Kerr, Tory MSP for the Central Scotland region, whose constituency includes Grangemouth, the refinery that will soon close, says the UK’S oil and gas sector should be protected until green promises come true. “Those green jobs aren’t there yet in the numbers needed,” he says. “And the jobs that are there are certainly not in the same income bracket as those that are disappearing. So, we need to cut the fantasy and deal with the reality.

“Political leaders who talk about tens of thousands of new green jobs in the future are leading astray a public who have little idea how far in the future they mean,” he added.

‘The retention of the offshore oil and gas supply chain, its workforce and associated skills will be essential’ ‘Over 90pc of the UK’S oil and gas workforce possess skills that can be transferred to offshore renewables sector’