Scottish oil jobs drowning in the North Sea

Glasgow, Scotland – It has brought money, prosperity, and jobs but today the North Sea oil industry operating in the waters off Scotland’s coast is in serious crisis.

From 2010 until mid-2014, world oil prices had been relatively stable, at about $110 a barrel. But, plummeting prices – that have now seen Brent crude and US crude dip below $50 a barrel – have forced the North Sea oil and gas industry to slash its workforce – with both BP and Talisman Sinopec announcing hundreds of job cuts this month alone.

“The total number of jobs dependent on the North Sea industry across the whole of the UK is around 450,000 with around half in Scotland,” said Bill Jamieson, founder and editor of Scot-Buzz, a website for Scottish business. “And, Sir Ian Wood, an oil business guru who has long been regarded as an expert on the North Sea oil fields, recently estimated that around 10 percent of all jobs could be lost over the next five years as a result of the lower oil price.”

With the oil industry a wholly reserved matter for the UK government, Scotland’s nationalist first minister Nicola Sturgeon and opposition Scottish Labour leader Jim Murphy appealed to British chancellor George Osborne to ease the pressure on North Sea oil by granting the industry some tax breaks.

The company I work for is quite renowned for not laying people off when there's a downturn. But it's always in the back of your head because you can't look at the oil industry as being a stable job.

by - Anonymous oil and gas worker

“The chancellor has hinted that he will look at this in his forthcoming budget on 18 March,” Jamieson told Al Jazeera.

“That isn’t too far away but such is the immediacy of the crisis that the pressure has been on the UK government to do something before 18 March – maybe to cut the supplementary corporation tax levied on oil companies or, as some would like, to see it scrapped altogether.”

Plummeting prices

As the fall in oil prices continue to put the North Sea oil and gas industry in the spotlight, the current productivity and future viability of Europe’s biggest oil-producing region has once again come into play.

Output in the North Sea has fallen sharply since peaking at more than 2.7 million barrels a day in 1999, but the likes of George Kerevan, a Scottish economist and broadcaster, still see a future for the industry.

“There’s clearly substantial amounts of oil [left in the North Sea] … and demand for oil is not going to go down, demand is not dipping in a secular sense – it happens every couple of decades where the supply overtakes the existing growth in demand and prices fall,” said Kerevan.

“The oil is there, but increasingly in the North Sea sector itself, it’s in smaller and smaller packets – it’s not in the big fields, it’s in smaller fields. And one of the cost problems there is that it’s expensive not just to get the oil out – but to build the production platform and the pipelines … The solution is to cooperate to create a pipeline system that links all the smaller fields – which would be cost effective – to pump the oil out.”

But as today’s job losses take hold in the North Sea, the impact on the morale of workers themselves is also taking on significance. Yet one oil worker, who has plied his trade between the North Sea and other foreign fields for the past 14 years, told Al Jazeera the threat to one’s livelihood was always there.

“The company I work for is quite renowned for not laying people off when there’s a downturn,” said the health and safety officer, who, for reasons of job security, spoke on condition of anonymity. “But it’s always in the back of your head, because you can’t look at the oil industry as being a stable job. I’ve been laid-off twice – so it’s never something that you can look at being the safest of jobs.”

The worker also said the volatile nature of oil prices was something that everyone working offshore accepted.

“There are downturns – but it will pick up again,” he added. “It’s not going to stay like that forever. It’s not going to go on a downward spiral.”

Politics of oil

Just as during the Scottish independence debate last year – the price of oil and its impact on the economy of any future independent Scottish government has also caused bitter political divisions.

With the pro-independence Scottish National Party (SNP) continuing to dominate the Scottish Parliament and riding high in the polls for the forthcoming UK general election in May, Unionist parties have been keen to point out the plummeting oil prices and the perceived pitfalls of Scotland going it alone without the support of the wider UK economy.

Scottish Conservative leader Ruth Davidson said earlier this month a fall in oil prices would have left an independent Scotland with a financial “black hole”.

“The actual structural problem in the North Sea was that production was falling, and it was falling for a variety of reasons. Principally, it was falling because of the 2011 tax rise, which overnight just stopped all future exploration – why bother, if it was going to cost you so much in taxes just to get the oil out.

“So the SNP has been focusing on [what government could do] to help the industry to expand production … And … in a hypothetical debate about an independent Scotland, only an [independent] Scottish government would have the incentive to develop the industry long-term and maximise production.”

That said, the short-term prospects for the North Sea oil industry appear bleak – with more job losses almost certainly on the horizon. 

When asked to comment on the current situation, Oil & Gas UK, the leading representative body for the UK offshore oil and gas industry, referred Al Jazeera to its statement on the recent announcement of job cuts by Talisman Sinopec, in which it reiterated a position that “urgent action is now needed to secure the long-term future of the North Sea”.

“Industry will continue to implement necessary efficiency measures, the new Oil and Gas Authority must be fully established as soon as possible and HM Treasury must act radically to reduce the tax burden,” the statement added.

Follow Alasdair Soussi on Twitter: @AlasdairSoussi