Fifth of oil and gas firms expect to slash jobs in 2021

About one in five oil and gas companies expect to cut more jobs in 2021 after a bruising year for the sector in which half of contractors said their workforce had declined, according to a major survey published today.

Nearly a quarter of respondents were not at all optimistic about the future of Aberdeen as an energy hub. Picture: Andy Buchanan/AFP via Getty Images.

The figures from Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute and KPMG, for the six months to October, cast new light on the problems being faced by the UK's North Sea industry.

The study found 22 per cent of contractors laid off more than a tenth of their workforce in 2020. While not as bad as the downturn in 2016, caused by a plummeting oil price, the decline is significant for the companies and the basin.

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More than three quarters of the firms surveyed said they had tapped into some form of government support during the pandemic, with many of those taking advantage of the furlough scheme. A net balance of -76 per cent are less confident about activities going forward, with the latest results marking the lowest recorded levels of confidence in global markets in the history of the survey.

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Shane Taylor, research and policy manager at Aberdeen & Grampian Chamber of Commerce, said: "Although government support has had clear value in supporting firms and jobs through this challenging period of suppressed demand, the only sustainable way to give businesses and workers clarity is a clear route to heightened levels of activity in the future."

Earlier this year, the price of a barrel of oil dropped to levels not seen in more than two decades. Brent crude briefly dipped below $19 (£14).

The decline was caused in part by an argument between Saudi Arabia and Russia, two of the world's three biggest oil producers, which increased production and flooded the market. Meanwhile, demand fell because of the pandemic. Brent is now trading at around $46.

The survey also found that nearly a quarter were not at all optimistic about the future of Aberdeen as an energy hub, while a further 27 per cent were only slightly optimistic. In last year's survey, only 9 per cent of companies reported not being at all optimistic.

North Sea companies are concerned about an uncertain future as the UK is slowly putting itself on a course to drastically reduce emissions. But experts say there can still be a role for the offshore oil and gas industry, which will require major investment in the likes of offshore wind.

Martin Findlay, senior partner at KPMG in Aberdeen, said: “From the significant oil price decline, which started earlier in the year, to a global pandemic, and localised lockdown in Aberdeen, the oil and gas industry has, once again, endured profound challenge and uncertainty. However, there is room for some optimism. The industry, unlike so many others, is incredibly resilient and frequently deals with instability and challenge.

“Climate change and diversification – once seen as a threat to the industry – also offers new opportunities and our findings suggest the sector is starting to embrace change. As technology and innovation improve, driving down the cost barrier and driving up the return on investment, we can expect to see further moves into new greener spaces as the industry goes through a slow, but steady transformation.”

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