Wood Group PSN (WGPSN) has said it is cutting the rates paid to its UK-based limited company offshore and onshore contract workers in response to "cost efficiency challenges affecting the UK North Sea oil and gas sector."
In addition, salaries will be frozen for the majority of UK-based Wood Group onshore employees, said the firm. The rate cut comes as many firms in the offshore industry have been making job cuts, including operators, rig contractors and service firms.
The move will be the second time onshore contract workers for Wood Group have seen a salary cut this year. In May, the firm said it was challenging the rising costs in the basin by decrasing UK onshore contractor rates by 10% from June 1. Wood Group CEO Bob Keiller (pictured) has been vocal about rising costs in the basin, even before the oil price started falling in June. Speaking at Offshore Europe last year he said the industry needed to "re-baseline salaries."
Reports on the North Sea have raised concerns about high operating costs. According to Oil & Gas UK, operating costs rose 15.5% last year. Production efficiency on North Sea assets is around 60%, meaning for 40% of the time the they should be producing they are not.
Today, Wood Group PSN said it would introduce an up to 10% decrease in UK offshore and onshore contractors’ rates will be effective from 31 January 2015.
Dave Stewart, UK managing director of WGPSN says: “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.
“Safety and assurance is our top priority and integral to how we do business. Our focus is on assuring the safety of our people and everything we design, construct, operate and maintain, while taking measures to improve efficiency and reduce cost for our customers and safeguarding the future of our industry.
“We are committed to undertaking proactive reviews of our contractor rates on a regular basis to ensure competitiveness within the marketplace.
“Our customers are focused on prioritising their spend and according to Oil & Gas UK’s latest activity survey, production in the sector dipped eight per cent last year to an average of 1.43MM boe/d. Escalating costs at any level has a domino effect on any mature sector and we want to help the long-term health of the industry.”
WGPSN is keen to retain people and increase its staff ratio in the UK, so there will be opportunities for contractors to transfer to WGPSN staff positions.
Wood Group employs approximately 12,000 people onshore and offshore in the UK.
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