In Aberdeen

Conrad Landin

There was an emergency conference on North Sea oil in Aberdeen on Monday. More than a thousand jobs have been lost since the global oil price collapsed from $110 dollars a barrel to under $50. Two men I met in the lounge car of the Caledonian Sleeper on Sunday evening – strangers to each other – had both held senior positions at major oil companies. They had different axes to grind, but agreed that the North Sea was no longer a profitable option for the major firms, who would pull out altogether before long.

They also dismissed the upcoming summit as a grandstanding exercise. It wasn’t the first time I’d heard this. One union rep called it ‘just more talking and no doing’ when I asked if he was going, though the organisers had said it ‘must not be a talking shop’.

Unite, Britain’s largest union, was represented on the summit platform; the other two unions which organise among offshore workers, RMT and GMB, were not invited. On Tuesday, the RMT organiser Jake Molloy told me unions' hands were tied even at rigs where they had recognition agreements. Union reps don’t negotiate directly with the oil giants, but with contractors who have no power over budgets or the future of the industry. ‘Unions need to come together,’ Molloy said, ‘and find a new approach where we negotiate with bodies that have the power to make decisions.’

Keynote speakers repeated the usual mantras about constructive dialogue and putting party politics aside. In the Autumn Statement, George Osborne cut the supplementary charge on profits from 32 per cent to 30 per cent; delegate after delegate demanded he go further. The secretary of state for Scotland, Alistair Carmichael, said the calls were ‘being heard inside the Treasury’, hinting that there would be an announcement in March’s budget.

At the press conference, Carmichael and the Scottish first minister, Nicola Sturgeon, both dismissed the prospect of a renewed case for public ownership. In Norway, 60 per cent of production is controlled by Statoil, which is two-thirds owned by the state, and can therefore resolve (or cause) a mood of panic on its own. And a company less shackled by short-term profit margins can take wiser decisions over investment. Once standards for exploration and production are set, Unite's John Taylor told me, smaller companies fall into line. Norwegian unions sit down with the employers' association Oljeindustriens Landsforening, which is dominated by Statoil; company negotiators can't pass the buck. Britain’s industry, by contrast, is both privatised and fragmented: no company has a share of more than 15 per cent.

In the conference hall, Sturgeon talked of encouraging the discovery of new fields through an ‘exploration tax credit’. Malcolm Webb, the head of the industry lobby group Oil and Gas UK, agreed: ‘There currently remains a major resource that would be a national disgrace not to explore.’ One of the oil executives on the train said this was a non-starter. ‘Geologists know the North Sea, they know what’s there and where it is.’ Later on, he said: ‘We’re doomed.’

Taylor said he ‘couldn’t disagree more’ with the suggestion. ‘Drilling companies wouldn’t be spending money on exploration if nothing’s there,’ he said. But a maximum of 15 exploration wells will be drilled this year; speakers said we’d need 80 to 100 each year to sustain current production levels.

Oil refinery workers in the United States announced a national strike on Monday. In the North Sea, platform workers are resisting plans to change shift patterns from ‘two weeks on, three weeks off’ to equal time. Unions say it will lead to greater fatigue and a shortfall of maintenance staff. The 1988 Piper Alpha disaster is still a raw memory for the ageing workforce. On working conditions at least, this week’s jamboree has done little to move the conversation on.


  • 13 February 2015 at 3:53pm
    ghosted says:
    Everyone complains about the high government take for the UK North Sea, which seems fair - at least when compared with other mature regions - and this could clearly be tackled in order to try and safeguard jobs.

    There are also broader problems, in terms of the oil industry and rising costs. Even before the recent price collapse, super-majors had been complaining about how costs had risen far faster than oil had. As a result, they took steps to protect dividends and reduce project spending. This trend has accelerated.

    At the other industry jamboree this week, IP week, there was talk of how while lower oil prices would put pressure on reducing these costs. Amid talk of 100,000 job losses from service companies ( around the world, the UK North Sea is seen as being highly at risk. The region has among the highest opex requirements in the world and once some of those fields go offline, they may never come back on.