UK Oil Sector Warns New Immigration Limits Could Derail Activity

LONDON (Dow Jones Newswires), Oct. 27, 2010

Oil majors operating in the U.K. have warned that government plans to introduce new limits on immigration could delay projects and increase costs, even as the North Sea is feted as undergoing a renaissance.

The industry's trade association and leading companies, including Chevron and Total, say the U.K.'s more onerous immigration requirements could keep out key industry professionals who will be needed to develop ambitious projects, such as in the deep waters of the Shetland Isles. Nearly 20% of the U.K's remaining oil and gas reserves are thought to lie in the highly-touted Shetlands.

A range of business lobbies have complained about the new U.K. restrictions, but the issue is especially pressing in oil and gas, an industry that has suffered from intermittent labor shortages in recent years due to the highly specialized nature of much of the work.

"There is a real fear with every one of the bigger players and some of the bigger contractors," said Patrick Taylor, Chevron Europe Upstream HR Manager. "They know that the skills they need aren't available in the U.K. There just aren't enough people across the industry to make projects happen."

In a speech Monday before a industry lobby, U.K. Prime Minister David Cameron vowed that new rules on immigration wouldn't impede operations for businesses. But energy industry officials say a temporary cap introduced in June has already affected their plans. The temporary cap limits the number of skilled and highly skilled workers companies can bring in from outside the EU until an annual limit is introduced in April.

The U.K. government completed a consultation into the implementation of an immigration limit in September. Final policy changes will be implemented in April. A Home Office spokesperson said Tuesday that Cameron's remarks earlier in the week were not a departure from policy.

In coming years foreign workers are seen as being in particularly high demand in the highly technical areas of decommissioning and deep water projects. The industry views the transfer of skills and the ability to employ people who have worked in regions where these technologies are already established, such as the Gulf of Mexico and Brazil, as crucial to future projects.

"Such periods of high demand have in the past proved difficult to fill with purely European workers," said Jessica Burton, Oil and Gas U.K.'s manager, special projects.

Not everyone agrees that the U.K. oil and gas industry is facing a real labor crunch due to the restrictions.

Jake Molloy, the general secretary of the Offshore Industry Liaison Committee, a major trade union for offshore workers, called the industry's representation of a U.K. skills shortage "nonsense." Molloy said that there are hundreds of engineers within the U.K. available to be trained to work offshore.

Immigration Minister Damien Green said that in the vast majority of cases it would be unfair to blame limits on immigration for recruitment difficulties. "Last year, visas were granted to almost 36,000 workers from outside the EU while we currently have hundreds of thousands of unemployed graduates in subjects such as IT and engineering," he said.

However, the oil industry counters that the types of highly skilled engineers in demand are distinct from the blue collar workers Molloy referred to. The oil industry is particularly concerned that the ability to move employees through intra-company transfers, or ICTs, into the U.K. from other locations may be included in the permanent limit. ICTs are excluded from the temporary cap.

French oil giant Total, which was granted permission to start a £2 billion gas development project west of the Shetlands in March, was allocated two visas under the temporary cap.

The company said it had not yet been affected by the temporary cap, but that ideally it would be able to hire twenty workers from outside the EU a year through sponsorship and intra-company transfers.

"A concern with the cap is that it will restrict our ability to move people round the company," said Brian Wilkie, HR Manager at Total E&P UK. "Wherever possible we want to grow our business within the U.K., but the government has to appreciate that we are a global business."

Chevron is set to decide on a multi-billion pound investment in its Rosebank field west of the Shetlands by 2013 which could create three hundred jobs within the U.K.

The government has not yet made clear its intentions on how the new limit will apply to ICTs. A consultation paper published in June suggested the government may consider making some exceptions for this form of immigration where employees will be in the country for less than 12 months.

However, Tim Finch, the Head of Migration, Equalities and Citizenship at the Institute for Public Policy Research (IPPR), said that significant exceptions for ICTs may be difficult for the government to deliver.

"From a political point of view, public tolerance of immigration has been strained and their understanding will be that a cap will apply to all immigration," he said. Exceptions are already being considered for foreign students. Once these groups - refugees, migrants from within the EU and dependents of legal immigrants - have been taken off the table, the government is left with a very limited number of ways to reduce immigration, ICTs being one of them, he added.

A further complaint is that the limit will create an extra onerous layer of HR administration, which will slow projects and add to costs.

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