Royal Dutch Shell Group .com Rotating Header Image

50,000 offshore workers’ jobs in jeopardy

FT Home

By Ed Crooks, Energy Editor

Published: February 12 2009 02:00 | Last updated: February 12 2009 02:00

Up to 50,000 jobs could be lost in the offshore oil and gas industry over the next two years because of a fall in investment caused by plunging oil prices, the industry association warned yesterday.

The jobs at risk represent one in eight of the industry’s workforce of 400,000.

At today’s oil price and cost levels, two-thirds of potential new field developments would be only marginally profitable at best, according to Oil & Gas UK, which represents offshore operators and suppliers. New North Sea developments typically need an oil price of more than $40 per barrel to break even: yesterday Brent crude traded at about $45.

The industry is urging the government to provide more tax breaks to encourage investment and help for smaller oil companies that are struggling to raise funds because of the financial crisis.

Malcolm Webb, O&GUK’s chief executive, said the industry was entering “a period of adjustment.

“It will come back again but we want to make sure the collateral damage to the infrastructure is not too great,” he said.

The North Sea’s infrastructure, much of it installed in the 1970s, is ageing. The region’s old fields are running dry and the new ones being discovered are typically very small.

Production fell about 5 per cent last year to 2.63m barrels equivalent of oil and gas. That decline was slower than the 7.5 per cent annual average for 2002-07 but was achieved only thanks to heavy investment of about £5bn a year in recent years.

O&GUK expects investment in 2009 to be lower than last year’s £4.8bn, which was in turn less than in 2007 and 2006, but said the decline could be anything from 6 to 27 per cent.

If investment falls steeply, the industry argued, jobs would be lost and output would fall faster.

The downturn has already hit Oilexco, a Canadian-based company that had been the most active driller of wells in the North Sea. It has put its UK business into administration.

Royal Dutch Shell said last month it was delaying development of the Pierce field. Other companies have been thinking about similar moves.

Mr Webb said he was “very hopeful” there would be help for the industry in the Budget, probably through a “value allowance”, a new tax relief for companies developing more difficult fields.

However, he said the Treasury had also indicated that further help might be available, perhaps through a more generous tax allowance for exploration wells, as used by Norway.

Carl Hughes, lead partner for energy at Deloitte, the professional services firm, drew a contrast between the treatment of the oil and gas industry and the help provided to carmakers.

“The automotive sector, where the majority of companies are foreign owned, can attract a £2.3bn financial injection in the form of loan guarantees, when its contribution to UK economic growth is significantly less than the oil and gas sector,” he said.

The oil and gas industry, including the supply chain, employed more than twice as many people as the automotive industry, he added.

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net, shell2004.com, shellshareholders.org, don-marketing.com and cybergriping.com are all owned by John Donovan. There is also a Wikipedia article: royaldutchshellplc.com

Comments are closed.

%d bloggers like this: