Oil Price Plunge 'To Cost 120,000 Jobs'

10 June 2016, 07:15 | Updated: 10 June 2016, 07:16

Oil Rig North Sea

The UK's oil and gas industry is on course to lose more than 120,000 jobs in two years following the plunge in the price of oil, according to research.

Jobs supported by the sector will have dropped by more than a quarter at the end of this year, compared to its peak of 450,000 in 2014, industry trade body Oil and Gas UK has found.

Its latest figures show employment was slashed by about 84,000 to around 370,000 last year, with a further 40,000 jobs set to be cut in 2016.

The total number of jobs supported by the sector is expected to stand at 330,000 at the close of this year.

The gloomy update comes as North Sea operators and supply chain companies continue to make swingeing cuts in an effort to drive down costs since the price of oil plummeted from its peak of around 115 US dollars in 2015. Brent crude currently sits at around 51 US dollars a barrel.

Deirdre Michie, chief executive of Oil & Gas UK, said: "The industry has been spending more than it is earning since the oil price slump towards the end of 2014.

"This is not sustainable and companies have been faced with some very difficult decisions.

"To survive, the industry has had no choice but to improve its performance. It is looking to find efficiencies to restore competitiveness, to attract investment and stimulate activity in the North Sea. With up to 20 billion barrels of oil and gas still to recover, this region is still very much open for business.''

The research - carried out by Experian - comes as the number of exploration and appraisal wells set to be drilled this year is expected to be less than half that of 2015, according to Oil and Gas UK.

It added that more than 20% of the oil fields on the UK Continental Shelf are currently operating at a higher unit cost than the current oil price.

A separate study by the Bank of Scotland revealed on Monday that a third of the UK's oil and gas firms are planning further job cuts this year as a result of the price slump.

The bank's latest report on the industry found 43% of companies are planning further cost-cutting measures, while 32% of businesses are planning to cut jobs.

Ms Michie added: "330,000 jobs is still a significant number, but the total employment we will sustainably provide depends on the level of investment attracted into the basin.

"If investment falls, then so will jobs. The interventions we make now will be critical to shape the industry's direction and help stem future losses.''

Scottish Labour Economy spokesperson Jackie Baillie said: "These are stark figures which underline the scale of the oil jobs crisis.

"We need both short and long term responses to this crisis. Labour has called for a public agency to protect strategic investments.

"In the short term we need to support workers. The SNP's flagship training fund has not delivered anywhere near enough support.

"The SNP ignored the oil jobs crisis for months because it was politically embarrassing for them. We need to see much more regular reporting of the impact of the changing oil price on jobs and the economy. ''

A Scottish Government spokesman said: "While oil prices have been recovering from their previous low levels and there is some improvement in investor sentiment, this remains a challenging time for the industry and the workforce, as these latest figures show. We are engaging closely with the industry, trade unions and regulator to overcome the current challenges to ensure a long term future for the sector.

"These figures highlight the significant footprint of the oil and gas sector across the economy of the UK and a significant impact on Scotland. We are focused on creating a competitive and supportive business environment and promoting innovation throughout the supply chain - however, it is the UK Government that retains control of the key taxation levers affecting the sector, and that must take the action needed to incentivise investment to protect jobs.

"The Energy Jobs Taskforce is also working with industry partners to help the supply chain react to the current challenges in the industry. Ministers received positive feedback on the work of the Taskforce last week during their trip to Aberdeen and heard about the crucial work taking place to ensure the sector comes through the challenges it faces and that the economy of the region can rebound in response to any recovery in production.''