Aberdeen City Council has called for a summit, bringing together governments, trade unions and industry bodies, to see if there are way to save jobs in the city.
The industry has seen a tide of cut backs and redundancies in the facing of the plummeting oil price, which reached a five-year low this month. ConocoPhillips recently announced plans to reduce its staff headcount in the UK by 230 out of 1650 posts. The low oil prices come just as the industry is experiencing its highest operating costs, low exploration rates and falling production. Production fell 8% in 2013, yet operating costs rose 15.5% to an all time high, according to Oil & Gas UK data.
High levels of spending seen in 2014 were already expected to fall, after a small number of large projects completed. A recent report by business advisory firm EY predicted 35,000 jobs would be lost in the industry in 2014-2019, with 12,000 new jobs creates through retirements. In total, the industry supports an estimated 450,000 jobs in the UK
Jenny Laing, leader of Aberdeen City Council, has called on the Scottish and UK Governments to attend the summit. "The aim will be to ensure an agreement to develop a strategic plan to ensure job losses are either avoided or kept to a minimum," she says. "It must concern us all that the price of oil has dropped so heavily in such a short space of time and we need to agree a strategy to deal with fluctuations that undermine confidence in the North Sea."
While a claim the industry was "close to collapse," made earlier this week, has largely been refuted, most agree some projects will be put on hold or scapped.
There already has been concern about the industry's future for some time. In 2013, the government commissioned former Wood Group chairman Sir Ian Wood to carry out a review of the industry and set out what needed to be done to revive the poor exploration rates and falling production levels, as well as low production efficiency.
His report was published in February this year and sparked the creation of a new regulator for the North Sea, the Oil & Gas Authority, for which a new CEO has been appointed but is not expected to be fully up and running for some time. The Maximizing Recovery review, or The Wood Review, also recommended the UK's fiscal regime towards oil and gas is reviewed in its entirety, due to it putting off investors, with high rates and complex allowances, and lacking exploration incentives.
In a recent statement, Sir Ian said: "The industry does face a very difficult year to 18 months, which will see a slow down in investment, the loss of some offshore production, up to 10%, and the possible loss of around 15,000 jobs within and industry which employs 375,000, although this is difficult to estimate. It will be a touch time for the industry and the people that work in it, but we are entering a downturn from which we will recovery."
A Scottish Government spokesman said: "The Scottish Government is continuing to do all that it can to support Scotland's oil and gas sector, including supporting innovation with a £10m investment in the Oil and Gas Innovation Council, through skills investment with Energy Skills Scotland and through company support provided by Scottish Enterprise and HIE which has seen international activity of Scottish supply chain companies grow to £10 billion in 2012-13, an increase of 22% on the previous year.
"As we have long said, what the industry requires is a stable predictable fiscal regime, and that substantial tax incentives are needed to achieve the objective of maximizing recovery. Unless the UK Government acts to bring in further measures, the likelihood is some fields will cease production early."
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