Oil Market Crash May Trigger 30,000 North Sea Jobs Losses

There are rising fears that several thousand North Sea oil and gas jobs could be lost due to the coronavirus or Covid-19 global pandemic’s negative impact on crude prices and the ongoing industry downturn.

A survey conducted by Oil and Gas UK (OGUK), the country’s prominent industry lobby group, suggests many firms in the sector, especially those with exposure to North Sea exploration and related ancillary contracts would struggle to survive.

What’s more, OGUK reckons the industry’s woe may last much longer than the pandemic in a subsequent low price environment. At peak points in trading history the global proxy benchmark Brent, that gets its name from a North Sea crude oil, has fetched as much as $120 per barrel but is currently trading at sub-$20 prices with at best a slow recovery on the horizon.

Based on its polling, OGUK said capital expenditure in the North Sea was expected to fall to about £3.5 billion ($4.4 billion) in 2020. The figure would be the lowest on record adjusted for inflation since North Sea hydrocarbons were first discovered in the 1960s and subsequently commercially tapped from 1971 onward.

Survey feedback also suggests that U.K. continental shelf drilling activity is expected to be down 50% year-on-year.  In a temporary silver lining, around 30% of the companies surveyed said they had been successful in securing funding as part of the U.K. government’s coronavirus assistance package to pay workers in April, May and June and another 40% were exploring options.

But that may not be enough to protect thousands of jobs with cuts amounting to as many as 30,000 or one in five of the approximately 151,000 people directly or indirectly employed by the industry. OGUK said some job losses have already been announced with “many more” in the coming months.

Deirdre Michie, Chief Executive of OGUK, said: “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.

“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.”

Michie said the objective could be achieved via a three-stage plan that would involve addressing of the oil and gas sector’s immediate needs, followed by its industrial recovery and then an accelerated transition to net-zero greenhouse gas emissions. However, there is no short-term panacea and uncertainty is expected to loom for much of the year.