UK Unions Urges Gov to Take Stakes in North Sea Projects
UK labour unions have called on the government to invest directly in oil and gas projects in help support the North Sea industry during the crisis. The plea came as UK industry lobby group Oil & Gas UK (OGUK) warned that up to 30,000 jobs could be lost over the next 12-18 months, as it published a report on activity and the supply chain.
The Offshore Co-ordinating Group (OCG), consisting of the United, GMB, RMT, Nautilus International, Balpa and Prospect trade unions, published a report on April 27 on the challenges facing the sector at $20/b Brent. It estimated that more than 3,500 jobs could go by September, with most drilling sector workers having been told that an upturn in activity is not expected until 2022. Subsea firms are also seeing contracts ended and vessels being tied up.
OCG welcomed the government's Job Retention Scheme, which reimburses companies for paying 80% of the wages of furloughed workers up to a £2,500 ($3,000)/month cap, as a "short-term solution." The Department of Business, Energy & Industry Strategy (Beis) recently expanded the scheme's coverage, saying this would benefit an extra 200,000 workers across the UK economy. But OCG said there was little expectation that oil and gas prices would recover once lockdowns are lifted, meaning a more "substantial" intervention in the medium term is needed.
"Fundamentally we believe that the best way to invest tax payers’ future contributions is exactly that, to invest them and not simply use this money as an alternative to welfare state provisions," OCG said. "We are of the opinion that the supply chain is aligned across industry; aligned in the belief that unless we do something different then this downturn will certainly outlast any government-sponsored furlough scheme, but critically it will outlast many of the employers in the supply chain."
The government should invest not as operating partners but as equity partners, offering low-cost loans to operators and making a return when oil prices recover, OCG said.
OCG has also called for an urgent summit meeting with UK ministers to address the crisis.
"We are calling for an immediate intervention to halt the carnage which is occurring in terms of jobs and to ensure a just transition to a carbon neutral state can be achieved," the unions said.
Job losses loom as E&P is slashed
OGUK's activity and supply chain report, published April 28 and based on feedback from members, projects that capital expenditure could fall by around a quarter to between £3.5-4.0bn – its lowest level since 2000. Operating spending is expected to slide by 10-20% from forecasts made at the start of the year, to around £6-7bn, it said, adding that drilling activity could drop halve from last year. It said the sector could contract by 30,000 over the next year to 18 months.
"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 gas industry," OGUK CEO Deirdre Michie said. "If the UK is to maintain its supply of domestic energy, protect jobs and build the critical infrastructure it needs to transition to a net zero future, ours is an industry worth fighting for."
OGUK has proposed a three-stage support scheme, covering the industry's immediate needs, its recovery and its acceleration towards a net zero future. "It includes recommendations to improve current COVID-19 financial packages, retaining a sector leading and progressive regulatory, fiscal and policy framework, as well as the development of a sector deal which will support the supply chain and accelerate the UK towards a net zero future," the group said.