North Sea hammer blow as one in three oil and gas firms plan to cut more jobs this year

Re-evaluating Strategies, the fifth annual Bank of Scotland analysis on the oil and gas industry, including its supply chain, found that nearly a third (32%) of businesses plan to cut more jobs this year as the oil price takes longer to recover than expected.

And the report revealed that for every six jobs lost in 2015 just one new job was created.

Scottish firms have been badly hit by the slump in oil prices, with almost six in 10 (57%) recording that their business has been severely or quite badly affecte, against a UK-wide average of 41%.

But despite the downturn over a fifth (22%) of businesses are still looking at North Sea expansion opportunities.

Read more: Good times ahead for North Sea oil industry, Economy Secretary says

Jake Molloy, regional organiser of the offshore energy branch of the RMT union was worried about the state of the industry with a demoralised workforce living in daily fear for their jobs and about the ramifications on the wider Scottish economy and jobs in related sectors.

He said: "You keep thinking you will reach the bottom, you'll plateau, there is only so much you can cut, but no, it's just relentless. There just doesn't seem to be a bottom and that's a real worry, not just for the jobs going and the jobs at risk, it's the ever present threat which is undermining the attitudes, the behaviours and the culture and will inevitably have a detrimental effect on the workforce.

Read more: New blow for North Sea oil industry as nations fail to agree to cut output

"Aberdeen in particular will have to deal with this because I don't think we have seen the worst yet. Everything from taxi drivers, road transport, helicopters, supply vessels, standby vessels (rely on the industry).

"The writing could be on the wall for a lot of the supply chain companies if this relentless drive to reduce costs and cut and cut and cut continues."

Early month Harkand, based in London and Aberdeen, launched in 2013 with the aim of becoming a major global player in the inspection repair and maintenance sector for offshore operations by 2018, became a supply chain victim of the devastating downturn.

It's European business is being wound down with the loss of 171 jobs - with 98 in Aberdeen.

The BoS report found expansion was being "entirely driven by smaller and mid-sized companies who find it much easier to diversify and embrace new technology" while none of the larger firms surveyed have planned any North Sea growth.

Just over two-thirds, or 67%, of firms are looking at international opportunities, down on 91% last year, largely driven by a considerable drop in interest in North America and the Middle East.

Read more: Growth in Scotland to slow to snail’s pace amid North Sea downturn

Meanwhile around one in four firms surveyed said they had grown through the downturn by diversifying into new sectors and investing in new technology.

The survey indicated firms' plans for diversification have shifted, with only 31% now giving a high priority to onshore shale gas - extracted from the ground by the controversial fracking method - compared to 47% last year.

Asked when they expect oil prices to recover, in in three of firms stated it would be 2018 before the price of Brent crude oil reached 75 to 80 US dollars a barrel while 38% believed the rise would happen no sooner than 2020.

On Friday, Brent crude was at close to $50 a barrel. Industry body Oil and Gas UK has estimated that around 20 per cent of UK production is uneconomic at a $50-per-barrel oil price.

Stuart White of Bank of Scotland, said: "With oil prices currently hovering around the 50-dollar mark there is hope that prices have bottomed out and have begun to slowly and modestly recover.

"Many businesses however, undoubtedly face more difficult decisions on cost savings, jobs and investment.

"While the blow from depressed oil prices has been severe for many businesses and individuals impacted by job losses, the sector is proving itself to be among one of the most resilient industries in the UK."

Jackie Baillie, Scottish Labour's economy spokeswoman, said: "Scotland's oil and gas industry can have a bright future if proper steps are taken to identify and protect assets, that is why Labour called for the creation of a new public body to do just that."

Twelve days ago Shell said it was to cut 475 jobs in the North Sea, with most of the losses at its headquarters in Aberdeen.

The job cuts followed Shell's takeover of oil and gas exploration firm BG Group, and what was described as a "lower for longer" oil price environment.

The cuts came on top of more than 10,000 job losses Shell announced over the past two years.

The Scottish Government admitted it was a difficult time for the industry and workforce and recognised the need for "collaborative action" saying it is engaging closely with the industry, trade unions and regulator to "overcome the current challenges and secure a long term future for the sector".

A government spokeman said: “The Scottish Government is focused on creating a competitive and supportive business environment and promoting innovation throughout the supply chain - however, the UK Government retains control of the key taxation levers affecting the sector, and must take the action needed to protect jobs and, hence, we will seek to engage constructively with them, to that end.

“Efficiency initiatives are starting to produce results – for example a considerable effort from industry to improve production efficiency has led to an increase in annual production for the first time in fifteen years and we are aware of some good practice by employers working in partnership with their workers to reduce inefficiencies while protecting and enhancing health and safety.

"As this report notes, more than a fifth of businesses are still looking at North Sea expansion opportunities and a quarter of the firms surveyed had grown through the downturn through diversifying into new sectors and investing in new technology.

“The Energy Jobs Taskforce is also working with industry partners to help the supply chain react to the current challenges in the industry - indeed, the Cabinet Secretary and Minister received positive feedback on the work of the Task Force on Friday during their trip to Aberdeen and heard its work is crucial to ensuring the sector comes through the challenges it faces.