AROUND nine out of ten of the oil and gas firms in the North Sea expect more job losses in the area as confidence and activity levels plumb record lows, an authoritative survey has found.

The results of the latest Aberdeen and Grampian Chamber of Commerce Oil and Gas survey, published today, indicate hundreds of further job losses are looming in the North Sea, where firms have already shed around 5,500 posts amid the crude price plunge.

The results add to the evidence that the slump in the oil price since June last year is taking a grim toll on the North Sea as the operators that own fields slash spending on new projects and jobs.

Loading article content

This has resulted in services contractors that help them in areas such as drilling losing work and facing pressure to cut charges, prompting many to lay off staff.

Almost two thirds (62 per cent) of respondents to the survey said they had cut jobs over the past year, in what many fear may have been an excessive response to the downturn.

But with confidence in the North Sea industry at the lowest level seen since the survey began in 2004, there appear to be few reasons to believe the industry has turned a corner.

Eighty five per cent of respondents to the chamber survey agreed the redundancies seen in the industry so far were just the start and will continue into next year.

James Bream, research and policy director at the chamber said: “The low confidence levels being reported come as no surprise and the outlook suggests there will be more pain ahead for the sector.”

The chamber said the new Oil and Gas Authority will have an important role to play in helping the industry fight back.

However, only a minority of respondents think the body has enough power or that its role has been explained properly.

With Brent Crude trading at around $45 per barrel, compared with $115/bbl in June last year, services firms are planning to reduce their reliance on North Sea oil and gas production work.

Around 80 per cent expect an increase in decommissioning work over the next five years, as North Sea fields that have been exhausted or are unprofitable at low oil prices are taken out of production.

Growing numbers of services firms are looking to do more work overseas and to move into the renewable energy sector.

The chamber of commerce said the skills learned in the North Sea could be applied in many other areas. However, it noted confidence in international markets is weak.

Uisdean Vass, oil and gas partner at survey sponsor Bond Dickinson, said the latest findings were probably the most negative ever seen. But he reckoned they still contained some glimmers of hope.

"Over the next three years 28 per cent of contractors expect their numbers of core staff to increase,” noted Mr Vass. “Neither contractors nor operators see the North Sea disappearing. They believe the industry can survive at $50 a barrel and that there will be a price upswing over the next three years with more room for oil company profitability because of enhanced efficiency.”

Oil& Gas UK said yesterday: "There is still much to play for in the UK’s North Sea – in terms of both barrels of oil and gas for the country, highly skilled jobs, and the security that comes with an indigenous energy supply."

Earlier this month the chief executive of the industry body, Deirdre Michie, predicted North Sea firms will continue to curb activity and cut costs in response to the crude price fall.

The chamber of commerce said it estimated there had been a six per cent reduction in the UK workforce of firms in the sector over the 12 months to 30 September. The findings indicate there will be a further 1.8 per cent reduction in the 12 months to September 2016.

Respondents were more optimistic about job prospects at their firms than in the industry as a whole.

Some 44 per cent expected employee numbers to remain the same in the current year while 19 per cent think they will increase.

Fifty eight per cent agreed with the statement that the redundancies made to date were excessive and risk firms losing key skills and competitive advantage.

Only one per cent of respondents were more confident about their activities on the UK Continental Shelf compared with last year, while 79 per cent were less confident.

Sixteen per cent of contractors said they were working at or above their optimum levels in the UK North Sea, the lowest figure since the survey began.

Completed by the Fraser of Allander Institute at Strathclyde University the survey had responses from 128 companies.