Black gold to bleak times as 80% of oil giants plan to cut workforces

Published on Monday 23 November 2009 21:58

EIGHTY per cent of the major companies operating in the North Sea oil industry are planning to cut their contract workforce over the next three years – despite signs of a rising confidence within the industry.

And 40 per cent of the oil giants also expect to reduce their core staff over the same period, according to a report published yesterday by the Aberdeen and Grampian Chamber of Commerce.

The Chamber's latest oil and gas survey reveals a rising confidence in the sector, particularly within the contractor community looking towards opportunities in international markets.

But the report also warns of a "changing dynamic" in the labour market as the industry continues to grapple with price volatility, the global financial downturn, uncertain demand and curtailed or delayed investment.

The report's author, Cliff Lockyer, of the Fraser of Allander Institute for Research on the Scottish Economy, said that the downturn had already led to significant changes in pay and the terms and conditions of many oil workers.

He said: "Whereas in 2007 over 90 per cent of all respondents reported increasing pay, only 49 per cent reported increasing pay in 2009 and the average increase in pay eased to four per cent.

"A number of respondents reported pay freezes and rate reductions of 10 per cent being requested by clients."

One in five of the companies surveyed also reported "substantial changes" to the terms and conditions of their employees. These included the ending of bonus payments and increased pension costs. The report revealed: "Over the next three years, 20 per cent (55 per cent in the previous survey] of operators expect to increase and 40 per cent reduce their core staff."

Eighty per cent of oil "majors" expected to reduce contract staff while only 20 per cent were planning to increase the number of contractors they hired.

The report went on: "Among contractors, 50 per cent (52 per cent in the previous survey] expect to increase their core staff and 28 per cent (26 per cent previously] increase their contract staff over the next three years."

The proportion of contractors reporting working at or above optimum levels in the UK Continental Shelf has also eased to the lowest levels recorded since the survey began 11 years ago.

But the survey points to signs of rising business confidence looking towards next year. Robert Collier, the chief executive of the Chamber, said: "The change in confidence is more marked in the international context, which may have an up as well as a downside.

"The export of skills and products is good, but we must ensure that fiscal policy also encourages the industry to remain firmly anchored to the UK Continental Shelf.

"In many ways, the information about employment trends contained in the report is the most intriguing. Firms continue to recruit in this recession which is in marked contrast to the big dips in recruitment which were reported in the surveys we produced in 1999 and 2004. Whether this is for replacing staff (60 per cent] or for additional staff (40 per cent], the industry appears to have avoided losing valuable talent this time round."

Bob Ruddiman, the head of energy at McGrigors, the law firm which sponsored the survey, said: "The industry appears to have learned lessons from previous downturns and has been mindful of the need to have a skilled workforce to capitalise on future opportunity."