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UK Offshore Sector Calls for Government Support

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By The Maritime Executive 04-28-2020 05:27:39

The UK's offshore oil and gas unions have launched a campaign to petition the government for direct support for the UK North Sea oil sector. 

According to the Offshore Co-ordinating Group (OCG) - a consortium formed by the unions Unite Scotland, GMB, RMT, Nautilus International, Balpa, and Prospect - as many as 3,500 offshore workers could be affected by layoffs by September. Most have been told that business will not return to normal levels until 2022, and more and more rigs are coming off of contract and heading into layup. 

To respond to this challenge, the group is calling on the UK government to invest taxpayer funds directly in the offshore oil and gas industry by lending money at low cost to offshore operators. Under the proposed scheme, this "carrot" would be followed with a stick - the threat of revoking licenses for operators who do not take part. It also calls for operators to support collective bargaining and engage with the unions. 

“The trade unions are clear that the actions of the industry right now [rig layups] risk the government energy objectives and will severely damage the UK economy, and that cannot be allowed to happen. 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," said OCG vice chair John Boland in a statement. 

OGUK predicts large-scale job losses

In a report issued Tuesday, the powerful industry association Oil and Gas UK (OGUK) predicted an even larger employment impact due to the ongoing oil price collapse, forecasting up to 30,000 lost jobs in the UK offshore sector and the supporting supply chain. 

Brent hit a 20-year low of $16 per barrel on April 22, and the WTI recently hit negative territory for the first time in history. In a new OGUK survey, all E&P companies and 93 percent of supply chain firms reported a worse or significantly worse outlook for 2020. 

OGUK predicts that UK North Sea capex may fall to a 20-year low of about $4 billion; adjusted for inflation, it would be among the lowest annual investment levels since the region's oil industry took off in the 1970s. Drilling activity may fall by half year-over-year, and opex cuts of 10-20 percent are expected. 

“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. 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," said OGUK chief executive Deirdre Michie in a statement. 

Much like Unite, OGUK is appealing to governments and regulators to support a "three-stage framework" to support the sector in dealing with the COVID crisis. This framework would include government support for the industry's immediate needs, then its recovery, then its transition to zero emissions. "[The framework] 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," said OGUK.