Coronavirus and low oil prices to blame, says trade group
UP TO 30,000 jobs in the UK’s oil and gas industry are at risk due to the coronavirus pandemic and low oil prices, industry trade group Oil & Gas UK (OGUK) has warned. It has called for urgent action to protect jobs and energy security, whilst placing net zero at the core of recovery plans.
OGUK’s report, Business Outlook: Activity and Supply Chain, was published following a member survey.
All the exploration and production companies that responded, along with 93% of responding supply chain companies, reported a “worse” or “significantly worse” outlook for 2020 compared to 2019.
Up to 30,000 direct and indirect jobs could be lost over the next 12–18 months, though the report notes that estimates over this period are uncertain. Additionally, drilling activity could fall 50% compared to 2019 levels, which would achieve record lows.
Furthermore, capital expenditure is expected to fall to between £3.5–4bn (US$4.35–4.97bn), the lowest level observed since 2000. Operational expenditure is expected to fall to around £6–7bn, which is 10–20% lower than what was expected at the beginning of the year.
OGUK adds that revenues and margins across the supply chain are also expected to fall by about 20–30%. Total revenues for the supply chain (from both the UK and export markets) could potentially fall to less than £20bn, almost half the revenues seen in 2014. Margins could fall to between 4–5%, marking a 55% decline over the same period.
To protect industry and help to prevent losses, OGUK proposed a framework to UK and Scottish governments, which involves supporting industry, stimulating recovery, and accelerating the industry’s shift to net zero.
This article is adapted from an earlier online version.
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