Minister in plea to save North Sea oil jobs

Oil estimates made by the SNP before the referendum are coming under scrutiny as the oil price continues to drop. Picture: AP

Energy minister Fergus Ewing acknowledged that the industry is facing “challenging times” but said it was “essential” that the oil and gas companies avoid cost-cutting by laying off workers.

Mr Ewing’s remarks came as Aberdeen-based Wood Group PSN revealed it is to cut rates paid to UK contract staff by up to 10 per cent in the latest setback caused by plunging oil prices. Global prices have now dipped below $60 a barrel – from about $110 in the summer.

Mr Ewing was told at Holyrood yesterday that about 1,000 jobs have been lost in the North-east in recent months as firms slash costs and “thousands more are on the line”. There are now growing fears of the long-term impact on Scotland’s economy if widespread lay-offs leave the industry unable to “take up where it left off” when the oil price recovers.

Opposition parties are calling on the Scottish Government to take action to mitigate the impact on firms which operate in the North Sea, with the UK industry supporting more than 300,000 jobs.

Labour’s Lewis Macdonald said: “The minister will be well aware that 1,000 jobs have gone already in the past few months and that thousands more are on the line. Employers in the sector cannot afford to shed staff today and expect to recruit staff tomorrow.

CONNECT WITH THE SCOTSMAN

• Subscribe to our daily newsletter (requires registration) and get the latest news, sport and business headlines delivered to your inbox every morning

• You can also follow us on Facebook, Twitter and Google +

“Will he [Mr Ewing] encourage the sector to protect jobs in order to maintain continuity, keep confidence high and provide security for the workforce both on and offshore?”

The energy minister said: “Yes, I think that’s a fair and sensible approach that Lewis Macdonald has highlighted.” The Scottish Government is encouraging all companies “small, medium and enormous” to take on young people, Mr Ewing said.

“A great many of them do, but there’s more that can be done and it’s essential that, in these very challenging times, companies do not cut costs by cutting the number of young people they employ.”

The full extent of the impact of the crisis on Scotland will depend on how long it lasts, Mr Ewing said. A range of forecasts have suggested that prices will rebound from the current low levels.

But he said it is now “imperative” that the UK government sets out its plans for tax breaks on new investment by March next year to give greater clarity.

This follows feedback from recent meetings with oil industry representatives and trade union delegations, the minister added.

“The essential element is this – until the tax changes promised by George Osborne and Danny Alexander a couple of weeks ago are delivered, there will not be further and new investment in the industry because they do not have the detail.

• Bill Jamieson: Oil price sits well in our pockets

“Therefore, that is why it is essential that the promised new measures are brought forward in the Budget in March. Any later than that and I think there would be extremely serious repercussions.”

The minister said Scotland’s oil and gas industry is “in many ways the best in the world.”

He added: “They face considerable pressures at the moment because of high costs and low oil prices.

“However, the prediction that many make is that the oil price will recover and the horizon may not be that far away.”

Oil prices have been falling over the past six months as a result of weak demand in many countries due to insipid economic growth, coupled with surging US production.

It has prompted market turmoil and plunged major oil economies, including Russia, into recession. Tory North-east Scotland MSP Alex Johnstone said: “For the economy of Scotland and particularly in the North-east, the service industry is vitally important.”

He called on the minister to take action to “encourage confidence in that industry to prevent any attempt to downsize or relocate to other markets from the North-east, and ensure that we are in a position to take up where we left off when prices eventually recover.”

Oil services giant Wood Group PSN announced yesterday rates paid to UK offshore and onshore contract staff will be reduced by up to a tenth from the end of January. The salaries of the “majority” of Wood Group onshore employees will also be frozen, it said.

• Leaders: Oil price shows perils of crude economics

UK managing director Dave Stewart said: “These measures have not been taken lightly, but we believe they are required in light of the cost and efficiency challenges affecting the UK North Sea oil and gas sector, exacerbated by the fall in oil prices.

“We understand the need to contribute to creating a sustainable industry and are committed to playing our part to the long-term changes needed.”

Mr Stewart also highlighted a recent oil and gas industry survey which suggested production dipped by 8 per cent last year.

He said: “We are committed to undertaking proactive reviews of our contractor rates on a regular basis to ensure competitiveness within the marketplace.

“Escalating costs at any level have a domino effect on any mature sector and we want to help the long-term health of the industry.”

Wood Group employs around 12,000 people in the UK.

The company, founded by Sir Ian Wood, last week announced it will create 150 new jobs after securing a BP contract worth almost £500 million.

“WGPSN is keen to retain people and increase its staff ratio in the UK, so there will be opportunities for contractors to transfer to staff positions,” it said.

The concerns for Scotland’s oil industry, a key plank of the country’s economy, follow a stark warning earlier this month that as many as 35,000 industry jobs could go in the next five years. A study, commissioned by industry body Oil & Gas UK, industry skills and safety body Opito and the Department for Business, Innovation and Skills, said jobs could be cut from 375,000 to 340,000 by 2019.

Shell UK announced in August that it is to cut 250 onshore jobs from its North Sea operation in Aberdeen, while Chevron announced plans in June to cut 225 jobs in the city.

Fears over the North Sea industry come against an improving unemployment picture in Scotland yesterday.

The country’s jobless total fell by 11,000 between August and October to stand at 156,000, according to official figures.

Labour calls for inquiry into government’s use of oil stats

AN OFFICIAL inquiry into the “politicisation” of Scottish Government statistics has been demanded over plunging oil prices.

Labour says the lowly global oil price of $59 a barrel is about half the value forecast in official SNP government statistics during the referendum.

The pro-Union camp claimed during the referendum campaign that the SNP was deliberately exaggerating the value of oil to Scotland’s economy to encourage a Yes vote.

Economist Professor Ronald MacDonald of the University of Glasgow, said yesterday that the plummeting oil price “calls into considerable question and doubt the many statements made by the SNP on oil revenues in the run up to the referendum vote”.

Labour’s shadow finance secretary Jackie Baillie said the issue is not about “re-fighting the referendum”.

She added: “The SNP Scottish Government’s wildly inaccurate figures raise serious questions about whether we can trust what they are telling us and whether civil servants came under undue political pressure to over-estimate the oil price for political reasons.

“The economic forecasts published by the Scottish Government are now ludicrously at odds with the real world.

“We need an inquiry into how these statistics were prepared and full disclosure of all internal government documents relating to the publication of the Oil and Gas Analytical Bulletins.”

But energy minister Fergus Ewing yesterday brushed aside the calls for the probe, branding it “an academic inquiry of some sort”.

He added: “Frankly, I haven’t really the time for that. We’re too busy working with the oil industry to help them here and now.”

• OIl and gas firms feel the strain of crude price drop

SCOTSMAN TABLET AND IPHONE APPS

• Download your free 30-day trial for our iPad, Android and Kindle apps

• Keep up to date with all aspects of Scottish life with The Scotsman iPhone app, completely free to download and use