UP to 30,000 North Sea oil and gas sector jobs could be lost this year amid the devastation caused by the coronavirus industry leaders have warned as they called for more Government help for firms.
Oil & Gas UK said the challenges posed by the coronavirus and the resulting fall in oil and gas prices have left the sector facing problems on a historic scale.
North Sea at 'breaking point' as oil price turns negative in US
The industry body reckons the fallout from the drop in the revenues earned from North Sea production will take a grim toll on firms across the supply chain.
Cuts in spending by companies that operate oil and gas fields could force many firms that provide support services out of business, with alarming implications for jobs.
The businesses that keep going are likely to make deep cuts in spending to increase their chances of survival.
Oil & Gas UK noted many companies in the North Sea are still struggling to overcome the impact of the deep downturn triggered by the oil price slump that started in 2014.
It reckons the problems caused by the fall in oil and gas prices this year may prove to be even more profound.
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It may take 12 to 18 months for the full impact to become clear. However, Oil & Gas UK said the findings of a member survey indicated the number of jobs supported by the industry could contract by up to 30,000 during that period. That suggests around one in five existing jobs could disappear.
The industry is thought to support around 150,000 jobs, including people working for firms that operate oil and gas fields and for services firms.
“With historic low oil and gas prices coming so soon after one of the most severe downturns our sector has experienced, these findings confirm an especially bleak outlook for the UK’s oil and industry,” said Oil & Gas UK chief executive Deirdre Michie.
She called on governments to provide a programme of support that protected jobs and recognised the important role the sector could play in safeguarding the supply of energy for the UK and in the development of lower carbon energy sources.
“Ours is an industry worth fighting for,” declared Ms Michie.
Oil & Gas UK wants a three-part response that will involve a range of measures to support the industry now, stimulate a recovery and accelerate the transition to a net zero future.
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The findings of the member survey underlined the scale of the impact of the turmoil seen in oil and gas markets this year.
The Brent crude price fell to a 20-year low of $16 per barrel last week, during which rates in the US turned negative. This meant traders had to pay people to take barrels of West Texas Intermediate crude off their hands.
Brent sold for $19.56/bbl yesterday afternoon. It fetched around $70/bbl in January.
Gas prices have been at 14-year lows.
Oil & Gas UK said all the exploration and production firms that responded to the survey and 93% of supply chain businesses felt the outlook for 2020 had worsened since the start of the year, in some cases severely.
Total spending on new North Sea facilities is now expected to fall to between £3.5-4 billion this year, the lowest investment since 2000. In March investment of £4bn to £4.5bn was forecast. It totalled £5.5bn in 2019.
Many firms are likely to defer work. Only a small number of new fields are likely to gain investment approval.
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Spending on running costs is expected to be up to 20% lower than had been expected, at around £6bn – to £7bn.
Exploration and appraisal drilling could fall by 50% to a record low level. Anticipated demand for drilling rigs this year has collapsed.
Some 30% of respondents had managed to get support under the coronavirus support measures announced by the UK Government.
Around 40% are investigating the programmes.
Oil & Gas UK wants the programme under which the Government helps cover the wages of employees placed on furlough to be extended at least until the end of this year.
“It is important that the government recognises that it will take the oil and gas industry longer to recover than other parts of the economy,” it said.
The organisation also wants the government to agree a longer-term sector deal to support the supply chain and accelerate the UK towards a net zero future.
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