OGUK Maintains 30,000 Job Cut Prediction

OGUK Maintains 30,000 Job Cut Prediction
OGUK estimated last year that the level of direct and indirect employment supported by the sector could contract by up to 30,000. The organization still believes this remains a reasonable estimate.

In 2020, Oil & Gas UK (OGUK) estimated that the level of direct and indirect employment supported by the sector could contract by up to 30,000, based on anticipated investment and activity levels in 2020-21.

The trade body revealed in its 2021 Business Outlook report, which was released Tuesday, that it believes this remains a reasonable estimate, but added that it is still too early to make a full assessment of the impact of the downturn on the number of jobs that have been lost from the industry over the last year.

OGUK highlighted in the report that The Fraser of Allander Institute has estimated that unemployment claim rates in Aberdeen and Aberdeenshire increased by 136 percent and 124 percent respectively over the last year. OGUK said this trend was also reflected in other oil and gas regional hubs, such as the north east of England, which it revealed has seen unemployment claimants rise by 40,000.

Despite these rises, OGUK noted in its report that there are some tentative signs that 2021 could see greater stability in employment levels. According to OGUK’s website, more than 300,000 jobs are currently supported in the UK by oil and gas production, when direct employment, indirect employment, and induced jobs are taken into account.

In 2020, $16 billion (GBP 11.6 billion) was spent on the development and operation of UKCS oil and gas resources and infrastructure, OGUK’s report shows. The organization noted that this is 23 percent lower than in 2019 ($20.7 billion (GBP 15 billion)) and the lowest total expenditure since 2004 (in real terms), as exploration and production companies reduced activity and investment in response to Covid-19 safety and operational requirements and sought to conserve cash in unprecedented market conditions.

Capital investment in the basin also dropped by 33 percent to $5.1 billion (GBP 3.7 billion) last year as a result of activity deferrals and cancellations, according to OGUK, which now estimates that around $4.1 billion (GBP 3 billion) of previously expected capital investment has been deferred in 2020 and 2021.

“The effects of Covid-19 have really undermined energy communities, causing a rise in unemployment and a slump in activity,” OGUK chief executive Deirdre Michie said in an organization statement.

“A climate-friendly future needs significant investment in indigenous opportunities so companies right across the sector can continue to develop low-carbon solutions. That is why we are working with the government to deliver a transformational North Sea Transition deal, which will drive forward Carbon Capture and Storage, hydrogen, and low-carbon projects across the UK,” Michie added.

“This is an industry which continues to play a critical role in the economy, supporting hundreds of thousands of jobs in industrial heartlands across the nation, generating affordable energy for millions and providing billions in value to the economy,” Michie continued.

“But we cannot continue on this trajectory without vital support. Companies are in a fragile state. We need the recognition that our industry is a key player in a successful energy transition – one which won’t be possible without the inclusion of our sector,” the OGUK chief went on to state.

Commenting on OGUK’s latest business outlook report, Graham Hollis, an office senior partner for Deloitte in Aberdeen, labelled it “a clear account of the challenges and opportunities facing the oil and gas sector”.

“While the industry is used to the highs and lows of economic and price cycles, the last twelve months have been like nothing ever seen before. Firms have been in survival mode, responding to both the downturn in oil price and the difficulties associated with Covid-19,” Hollis said.

“However, the pandemic has also turned into a ‘fast-forward’ scenario for the industry, which brings with it a number of opportunities, and it is vital to capitalize on this. Pivoting towards a new energy future remains key, and the sector has a critical role to play, working with the UK and Scottish Governments to help build a sustainable recovery on the road to net zero,” he added.

“Looking forward, firms will need to look for ways to bolster their operations through investment and transformative strategies as they navigate the lingering impact of the pandemic,” Hollis continued.

To contact the author, email andreas.exarheas@rigzone.com


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