A CONTINUED slide in oil prices to a fresh five-year low has cast further shadows over Scotland’s North Sea industry, which could face thousands of job losses in the coming years.
Prices fell heavily yesterday after the International Energy Agency (IEA) lowered its forecast for global demand next year, triggering a sharp fall on the London stock exchange as oil-related shares were hit hard.
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An industry report earlier this week warned that up to 35,000 jobs in the oil and gas sector could be lost over the next five years and highlighted that the North Sea is one of the world’s most expensive offshore basins.
However, accounting firm PwC said yesterday that slashing industry costs could save up to £15 billion, protect jobs and prolong the lifespan of North Sea fields.
Falling oil prices, declining production and the rising costs of decommissioning could be tackled by operators making 40 per cent efficiency savings over the next five years, the company added.
The firm’s oil and gas team said more could be done to reduce the average price of oil extraction from £17 per barrel to £14 to make programmes more affordable and safeguard jobs.
Brian Campbell, energy specialist at PwC in Scotland, said: “If firms don’t wake up to the problem and recognise that they have the ability to take control and make substantial cost savings while sustaining their operations, then we could see more projects mothballed in the near future. They have the power to effect change – it’s time they used it.”
Labour MSP Richard Baker welcomed the report, but said efficiency savings should be made through changes to workforce planning and industry practices rather than by job cuts.
Mr Baker, who is Labour’s Westminster candidate for Aberdeen North, called on the industry to examine cost-saving ideas such as using similar equipment across the sector.
He said: “Reducing costs and delivering efficiency savings can be done without job losses and can at the same time make the industry more profitable if this planning is done.”
Conservative MSP Alex Johnstone said: “Cost-cutting is vital in the North Sea if the industry is to remain in a healthy condition. It’s good that people in positions of responsibility are thinking about how more effort needs to be made to keep industry costs down in order to protect the sector and preserve employment.”
A spokeswoman for trade body Oil & Gas UK said: “The oil and gas industry is realistic about the scale of the challenge it faces, which includes a slump in exploration activity, decline in production and rising operating costs along with the significant fall in oil price.
“There is no single solution to bring down costs, however, with strong commitment from HM Treasury to ensure the fiscal regime will regain its international competitiveness, the swift implementation of the recommendations outlined in the Wood Review and industry action on cost and efficiency there is potential for being a little more optimistic about the future.”
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