More than 5000 jobs have been lost in the UK North Sea sector and more losses are likely, the CEO of trade body Oil & Gas UK says.
Deirdre Michie, Oil & Gas UK’s recently appointed CEO, told reporters during a briefing in Aberdeen that this is a challenging time for the industry.
But, while the industry had its challenges, there was a prize worth fighting for, she says, with some 20 billion bbl yet to be produced form the North Sea.
“We have seen costs escalate, opex double over the last five years, we’ve also seen production efficiency drop from 80-60%," she said. "The drop in the oil price has only served to underline that position further. But, it’s helped bring these issues into sharp focus.
"At US$110/bbl the industry was facing problems. At $60/bbl, it is a huge issue with many fields not actually producing enough cash to cover operating costs.” In fact, at the end of 2014, Oil & Gas UK estimated that at $50/bbl, 20% of fields were loss making.
The industry has been and continues to act. The Wood Review, which recommended the creation of a new regulator, the Oil and Gas Authority, was commissioned before the oil price took a nose dive. Various work groups are looking at areas including people, logistics, efficiency, and late life management, as well as how to reduce the tax burden on key infrastructure. How to implement new technology to support late life management and standardization and simplification, sharing spare parts inventory and supply vessel utilization are also being looked at.
“The industry needs to improve efficiency,” adds Michie. “We are looking to promote co-operation between companies to achieve efficiency, such as through spare parts inventory and supply vessel utilization. We are also looking to improve turnarounds and where to adopt new technology to manage late life assets. We are also looking at how to standardize and simplify. We are also looking at what other industries have done and are reporting back.”
But, trade unions are also threatening industrial action over possible contractual changes. Michie says there would be "no winners" if a strike went ahead. “Our focus needs to be on relentless cost and efficiency,” she said. ”The industry needs to change and adapt to a more sustainable model going forward. It needs to be leaner as we go forward. The challenges in this industry are not going to be solved by industrial action.”
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Image: Deirdre Michie, Oil & Gas UK CEO
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