North Sea firms expect more job loses as confidence slumps to all-time low

The chamber’s 23rd Oil and Gas Survey, carried out in partnership with Strathclyde University’s Fraser of Allander Institute, and sponsored by law firm Bond Dickinson, found 78 per cent of respondents expected to be more involved in decommissioning work in the next three to five years, while two-thirds of contractors expected more involvement in unconventional oil and gas activities.

North Sea job losses are expected to continue as confidence in the industry struggles to bounce back from a record low, the report says.

Confidence among contractors was found to be at an all-time low as the lowest level of firms now working at or above optimum levels since the studies began 11 years ago.

The report says salary trends in the industry have changed significantly, with less than half (49 per cent) of firms holding wages constant and 9 per cent reducing them by more than 5 per cent. Some companies have slashed salaries by as much as 25 per cent, it adds.

And nearly half forecast greater involvement in renewables work.

Four in five firms said they were less confident about their prospects than a year ago, compared with just 1 per cent who were more confident.

Just 16 per cent of contractors reported working at or above optimum levels - the lowest level since the survey began in 2004.

And about 80 per cent of respondents reported an “abnormal” increase in the number of projects being cancelled.

The survey found confidence had not been helped by a high level of recent redundancies in the industry.

Some 64 per cent of firms said they had reduced their workforce in 2015, compared with just 14 per cent who increased numbers.

More than eight in 10 contractors questioned said they thought job losses would continue over the next year.

Uisdean Vass, oil and gas partner at Bond Dickinson, described the study as “probably the most negative survey we have ever had”.

But said that “while there is little to be positive about in the short term, there are some glimmers of hope”.

He said: “Over the next three years 28 per cent of contractors expect their numbers of core staff to increase. Neither contractors nor operators see the North Sea disappearing.

“They believe the industry can survive at $50 a barrel and that there will be a price upswing over the next three years with more room for oil company profitability because of enhanced efficiency.

“Contractors will also benefit from enhanced efficiency.

“As the old saying goes, ‘What doesn’t kill you makes you stronger’.”

He added: “Firms identified decommissioning experience as the number one skill required over the next three years which is a bitter-sweet positive.

“An increase in decommissioning activity will inevitably herald a decline in offshore exploration and production so in a certain sense the industry will feed on the body of infrastructure which supports it.”