The flow of bad news on the oil and gas industry in Scotland shows no sign of abating. According to the most recent assessment by the trade association Oil and Gas UK, the drop in the oil price has already cost around 5,500 jobs and now several companies have added to the grim total.
First, the drilling contractor Ensco announced it would lose more than 100 staff after scrapping two new rigs. Then, Wood Group said it would be shedding 200 more following their plans to move to a three-week-on/three-week-off shift pattern. Shell also confirmed it is planning the same three-week-on pattern, which raises the realistic concern there will be more job losses there too.
On the top of the downward pressure brought to bear on hours and pay in the industry, the new losses are yet another set-back for the 200,000 or so who work in oil and gas. But could there be at least some good news amid the gloom?
On the face of it, it would appear so with the announcement that SSE is spending £565 million to acquire a 20 per cent stake in the Great Laggan gas fields around 75 miles off Shetland. It will also invest a further £350 million over the next three years towards the costs of bringing the four fields onstream.
At a time when oil and gas companies are failing to make the investment the industry needs, SSE's decision is welcome, but the details of the deal reveal it is far from a sign of a turnaround. SSE has done a good deal, but the reason Total is selling its stake in the first place is because it is needs to reduce its exposure to the North Sea following the price slump. The deal is an opportunity created by the slump, not any kind of sign that the slump is over.
However, if SSE's investment is not a sign of a turnaround, it is a least a sign of hope that it will come one day. Total may have been looking to sell since March because of the state of the industry, but SSE is spending nearly £1bn in the clear expectation that prices will recover at some point and that, when they do, it will be in a position to benefit. Amid the news of job losses, this can reasonably be seen as a vote of confidence in the long-term commercial prospects of the Great Laggan fields and an indication that the crisis will bottom out.
It will only do so, though, if more investment is forthcoming and the best prospect for that is greater collaborative working in the industry. The creation of the Oil and Gas Authority, which has the powers to drive such collaboration, will help achieve this, but the UK Government will also have to ensure it is doing all it can to ensure the tax regime on the oil and gas industry is not making matters worse. SSE may have found itself a nice little bargain, but the bleak times are far from over and Scotland's oil and gas companies require all the help they can get.
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