Oil slump could take 120,000 UK jobs

AROUND 84,000 jobs were lost in the UK oil industry in 2015, and industry body Oil & Gas UK has warned that 40,000 more could go by the end of the year.

This means that more than 25% of jobs in the industry could be lost in total since the slump in the oil price began. At its peak in 2014, the UK oil and gas industry employed 450,000 people. Employment was both direct and indirect, including jobs in the supply chain and so-called “induced jobs” caused by worker spending in the wider economy, like those in hotels and catering. However, Brent crude is now trading at around US$50/bbl, around half of what it was at its peak, and companies are looking at ways to reduce spending.

The figures published by Oil & Gas UK were compiled by marketing services company Experian, which expects that by the end of 2016, around 330,000 jobs would be connected to the UK oil and gas industry.

Oil & Gas UK chief executive Deirdre Michie said that although 330,000 jobs is still “significant”, further job cuts are inevitable with further falls in investment. Intervention is “critical” to prevent this, she said. She hailed the work already being done in improving performance and efficiency. The average cost of producing a barrel of oil has fallen from US$30 in 2015 to US$17 this year, but Michie believes that more work is necessary. More than 20% of oil fields on the UK continental shelf are producing oil for a unit cost of more than US$50/bbl.

“The industry has been spending more than it is earning since the oil price slump towards the end of 2014.  This is not sustainable and companies have been faced with some very difficult decisions. To survive, the industry has had no choice but to improve its performance. It is looking to find efficiencies to restore competitiveness, to attract investment and stimulate activity in the North Sea. With up to 20bn bbl of oil and gas still to recover, this region is still very much open for business,” she said.

Many companies operating in the UK have announced major job cuts in the past year, including Shell and BP. It is not just jobs that are going though. Oil & Gas UK said in February that investment in the North Sea would fall by around £7bn (US$9.8bn) in 2016 compared to previous years, based on confirmed projects. Michie called at the time for a “coherent approach” by the industry, government and regulators to tackle the problem.