Devastating blow to oil industry as BP axes 300 jobs
THE bleak future of the North Sea oil industry was laid bare yesterday when energy giant BP became the latest to slash hundreds of jobs due to plummeting prices.
The firm announced it will axe 300 jobs because of the falling price of oil, bringing the total posts lost in the past six months to more than 1,000.
Now there are fears that thousands more posts will be lost in the coming months with the forecast for the price of oil sitting at $31 (£20) a barrel.
The price of a barrel of Brent crude – the benchmark for oil purchases worldwide – is down by around 60 per cent since June.
Bank of America Merrill Lynch predicted that Brent could tumble as low as $31 by April.
The continuing weakness has led to projects being scrapped, jobs slashed and wages cut, with the North Sea oil sector at crisis point, experts said.
BP became the latest company to confirm job cuts and is slashing 200 onshore staff and 100 contractor roles from its 3,500 staff in the North Sea oil industry.
It is the latest in a series of blows which include:
US-based North Sea oil producer ConocoPhillips has announced it will cut 230 British jobs;
Royal Dutch Shell and Qatar have shelved a £4.3billion project in the Middle East;
Oil services firms including Wood Group and Petrofac are cutting rates by around 10 per cent and freezing pay;
Royal Dutch Shell last year announced 250 job cuts and Chevron cut 225 posts;
Predictions that 15,000 jobs could be lost in the North Sea industry.
Trade unions described the losses as a ‘devastating blow’, while Energy Minister Fergus Ewing described it as ‘ the most serious jobs situation Scotland has faced in living memory’.
But the plunging oil price has been a particular blow to the SNP as it undermines claims that an independent Scotland can rely on its natural resources.
Bank of England Governor Mark Carney, appearing before the Treasury Select Committee earlier this week, said the oil price fall was ‘ net positive’ for the UK economy but a ‘ negative shock f or Scotland’.
The UK’s oil industry is demanding that government cuts the high taxes it pays.
Malcolm Webb, chief executive of industry body Oil & Gas UK, called for ‘urgent action’ to halt the decline and asked the Treasury to radically reduce the tax burden. He added: ‘Tax rates ranging from 60 per cent to 80 per cent are no longer sustainable.’
Industry veteran Sir Ian Wood, who completed a review of the UK offshore oil industry for the Government, has said as many as 15,000 jobs could be lost in the region.
The industry supports more than 450,000 jobs, with around 62,000 employed directly in exploration.
Announcing the job cuts, Trevor Garlick, regional president for BP North Sea, said: ‘We are committed to the North Sea and can see a long-term future for our business here.
‘ However, given the well - documented challenges of operating in this maturing region and in toughening market conditions, we are taking specific steps to ensure our business remains competitive and robust, and we are aligning with the wider industry.’
UK Energy Secretary Ed Davey travelled to Aberdeen yesterday to meet industry leaders to ‘address the challenges the North Sea industry faces’.
First Minister Nicola Sturgeon announced this week that a new taskforce, chaired by Scottish Enterprise chief Lena Wilson, would focus on supporting energy sector jobs, but with particular focus on oil and gas.
Chancellor George Osborne is due to unveil his final budget in March, before the election in May.
UK Energy Secretary Ed Davey said: ‘I can’t prejudge what the Chancellor will announce in the March Budget but I wouldn’t be coming to Scotland today to talk to the industry if we weren’t thinking about those issues. The threat to jobs has been brought home by the news from BP today. We have great sympathy with all those directly affected.’
However, Mr Ewing said: ‘It is clear to me that the UK Government has accepted it must act on tax. My question is why wait in respect of the supplementary charge until March?
‘This is the most serious jobs situation Scotland has faced in living memory.’
Rising production costs coupled with the global drop in fuel prices have forced energy companies to operate in tougher market conditions in the North Sea.
Drilling for new oilfields in UK waters has fallen by a fifth, while exploration in other North Sea countries remains buoyant.
RMT union organiser Jake Molloy said he fears the industry is on the brink of a repeat of the 1986 oil collapse which saw 20,000 jobs lost in Scotland and 50,000 throughout the UK.
He added: ‘We don’t have time – time is not on our side here. If the “slash and burn” approach adopted by the majors continues, you cannot turn the clock back.
‘We’ve literally got weeks to try to address these tactics and then, thereafter, once people go we are into a situation where a lot of the older i nfrastructure i s at r i sk and t he l ocal economy will begin to suffer. We need inter- vention now. There is no time to waste.’
Aberdeen North MP Frank Doran, said: ‘ The current downturn is beginning to look very like the 1980s situation, with potentially extremely damaging consequences – throughout the whole UK, but particularly Aberdeen and the North East.
‘Oil jobs are well-paid jobs, much higher than most other industries, and the drop in spending power of businesses and individuals located predominantly in the North-East will be severe.
‘ The consequences will run through the whole supply chain and that supply chain stretches from Shetland to Cornwall’.
‘Potentially damaging consequences’ ‘Time is not on our side here’
THE great days of North Sea oil, the black gold that for decades poured billions into the British economy, may finally be coming to an end.
The price per barrel has collapsed by 60 per cent to less than $50, is predicted to slide still lower to $31 and some analysts say it may stay below $50 for as much as three years.
There is no escaping the fact that lower prices at the fuel pumps are a great help to hard-pressed family budgets. But the North Sea is, overnight, uneconomic and the impact of shrinking investment and cost-cutting will be felt most keenly here in Scotland.
It is hard to avoid the conclusion that the job losses announced yesterday by BP and ConocoPhillips are a mere straw in the wind. Worse, much worse, is to come for employment in a key sector.
Whither the SNP in all this? Fresh from trumpeting oil at $110 a barrel as the bedrock of an independent Scotland, it has belatedly launched a taskforce to save energy jobs while blaming Westminster for levying too much tax on the sector.
SNP energy minister Fergus Ewing – prepared not so long ago to use those selfsame taxes to prop up a go- it- alone Scotland – is now demanding action from Westminster.
At least he has grasped this crisis is beyond him and his separatist party. This is about the British economy and it falls to the UK Government to do what it can.
The price of oil is dictated globally. The tax regime and support for hard-pressed firms, incentivising keeping workers on, are the only levers Westminster can apply.
Mark Carney, governor of the Bank of England, said the fall in fuel prices would benefit the UK but that Scotland would suffer a disproportionate economic hit as s o much of oi l e mployment and infrastructure is here.
He added, though, that the damage would be limited by our ongoing membership of the greater UK.
So l et the SNP spare us i ts antiWestminster posturing and taskforces seemingly designed more to spare its blushes than save jobs.
Oil’s woes are too big and serious for narrow party political point-scoring.