THE man leading the North Sea oil and gas industry’s efforts to boost efficiency in response to the crude price slump has said more jobs cuts are inevitable in the area where activity will fall this year.
John Pearson, chair of Oil & Gas UK’s Efficiency Task Force, said the North Sea faces a tough year as firms make further cuts in spending on new projects in a move which will inflict more pain on the supply chain.
“Activity is down and will stay down for a bit. In the near term activity is slowing down across the industry,” he said.
“Will there be a net reduction in the UK oil and gas labour force? I think it’s inevitable.”
Mr Pearson’s comments will reinforce concern about the implications of the downturn in the North Sea for Scotland. Oil and gas firms have shed thousands of jobs since the crude price started plunging in June 2014, amid plentiful supplies and muted demand.
Oil & Gas UK warned last month that around half the fields in the North Sea would make losses this year if Brent crude remained around $30.
While Brent has rallied to around $40/bbl in recent days amid hopes major producers will curb output, Mr Pearson did not forecast any recovery in North Sea activity.
He is unusually well placed to monitor sector developments having spent the last six months heading the task force established by the trade body in September.
Mr Pearson also heads the North Sea operations of Amec Foster Wheeler, which employs 4,500 people in the North Sea helping firms develop new fields and run existing facilities.
The engineering giant had seen work on new projects dry up and come under pressure from firms that own oil and gas fields to cut prices. Its North Sea revenues fell around 15 per cent last year.
Mr Pearson said he expects there to be a “slight reduction” in the company’s North Sea workforce this year, with losses concentrated offshore.
In August the company said worker numbers in the North Sea had fallen by about five per cent in the first half of last year.
However, Mr Pearson said the North Sea industry was making progress with efforts to get itself in the shape required to secure a long term future.
Last month Oil & Gas UK said the industry is on track to reduce production costs to $17 per barrel this year, down 40 per cent from $29.30 in 2014.
Mr Pearson said the North Sea industry could enjoy a long future if costs could be reduced to $15 per barrel and sustained at that level.
He believes the industry has recognised the need to focus on efficiency and not just on short term cost savings.
Amec Foster Wheeler believes it can capitalise on the efficiency drive and expects to have a long term future in Aberdeen.
Mr Pearson noted the firm developed a new office in the city with a 25 year plan in mind.
While Oil & Gas UK has said George Osborne should slash North Sea taxes in The Budget next week, Mr Pearson said the Treasury, the industry and the regulator are working together much more closely than before. “The conversations are really good,” he noted.
Amec Foster Wheeler’s trading profit fell 19 per cent to £374m in 2015, from £457m the preceding year.
The company plans to sell its Global Power Group boiler unit as it aims to halve net debt within 15 months.
It slashed total dividend payments by 33 per cent annually, to 29p per share, from 43.3p to save cash.
It is searching for a replacement for Samir Brikho who resigned as chief executive in January.
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