The ongoing oil price downturn has hit the oil and gas industry hard, with hundreds of thousands of workers laid off across E&P companies and oilfield services firms since the price of oil began its steep decline from more than $110 a barrel to less than $30 at its nadir last year.
The price of Brent crude has crept up to stabilise at just over $53 at the time of writing, but a sluggish global economy, the limited success of OPEC’s efforts to cut output and the recent rebound of US shale gas production mean that the industry’s period of straitened circumstances is unlikely to go away anytime soon.
Misery for North Sea workers
The North Sea, a mature offshore oil and gas region, has been suffering amid the downturn. The massive push for productivity and efficiency gains on the UK Continental Shelf (and around the world, for that matter) has come at the cost of a huge number of lost jobs across Britain’s oil and gas industry and supply chain.
Industry association Oil & Gas UK has estimated that around 120,000 jobs were cut from the North Sea oil industry between the 2014 oil price peak and the end of 2016, with the sector’s total supported jobs plummeting to 330,000 from a high of more than 450,000.
“We cannot underestimate the impact the global downturn in the industry is having on the UK economy, nor the personal toll for those who have lost their jobs, and the effect on their families and colleagues,” said Oil & Gas UK chief executive Deirdre Michie in June last year. “Competitiveness is improving as a result of the work the sector is doing in this area, but to protect our industry and the skilled jobs it provides we need to see further efficiencies.”
Improving efficiency might have put the North Sea industry as a whole on a better footing, with unit operating costs halving from $30 a barrel in 2015 to $15 in many cases today, but these efforts have offered scant comfort to thousands of offshore workers whose redundancies have contributed to a leaner oil and gas sector.
Aberdeen: mass job losses and tougher working conditions
The impacts of massive lay-offs have been most keenly felt in Aberdeen, the nexus point for the UK oil and gas industry. Unemployment benefit claims in the north-east of Scotland shot up by 72% in December 2015 as the oil price crash continued to bite into industry profit margins, and the knock-on effects of so many job losses have been hugely challenging for the oil-reliant local economy of Aberdeen and the surrounding area. And it’s not only laid-off workers that have been feeling the pain; many existing employees have been forced to accept significantly more demanding working conditions and shrinking benefits.
“Offshore workers are being made to work an extra 320 hours a year for no extra pay, pension arrangements are being slashed and travel allowances removed in some cases,” former offshore worker and RMT union representative Jake Molloy told The Guardian in January last year.
Tensions over these cost-cutting measures have flared up in unprecedented ways. Workers on seven Shell platforms on the North Sea twice went on strike last summer, the first industrial actions in the region for nearly three decades, over Wood Group’s plan to cut pay and allowances by up to 30%.
“Our members have been faced with changes to shift patterns which have seen them working longer offshore for the same pay and as well as having three rounds of redundancies imposed on them,” said Unite regional officer John Boland at the time. “This attack on their pay and allowances has pushed our members too far this time.”
The Oil & Gas Employee Loan Scheme
Supporting offshore workers through the downturn and potentially helping them transition to new careers has proven challenging. The UK Government’s Oil and Gas Workforce Plan, published in July last year, was supposed to help workers to find new employment in the wider engineering sector and stimulate training, but it received a poor hearing from unions, with Unite national officer Tony Devlin describing the plan as a “woefully inadequate” effort that “doesn’t address the race to the bottom which we are seeing in pay, terms and conditions and safety while thousands of jobs are cut and livelihoods are turned upside down”.
Scottish Government-funded mechanisms such as the £12m Oil & Gas Transition Training Fund have gone some way towards providing those support systems for workers, but with the industry already facing the prospect of a skills crisis as a generation of veteran staff moves into retirement age, supporting workers’ moves into other industries does little to address concerns around skills retention. After all, a brain-drain is the last thing operators need as they work to improve efficiency and meet the government’s stated objective of maximising economic recovery in the North Sea.
One innovative idea to help retain skills in the region is being explored by the Energy Jobs Taskforce (EJT) and Skills Development Scotland (SDS), along with other partners, under the Retain Talent and Skills workstream.
The scheme, which was unveiled in May last year and is still being developed, would take inspiration from professional football leagues by facilitating a transfer and loan system for employees. Under the scheme, oil companies would be able to transfer employees on a fixed-term loan basis to other operators in the region. Aberdeen Football Club even took part in a workshop last year, organised by the EJT, to discuss an appropriate model for applying a loan system to the offshore sector.
How would a loan scheme work?
SDS employment support manager Heather Milne describes the scheme as “an initiative for highly valued and skilled staff that are identified as being at risk of redundancy for whom a short-term ‘bridge’ could be found”.
“In an environment where so many jobs are being lost, there are concerns that the skills and talent, for which the sector is so well known, are at jeopardy of being lost permanently,” says Milne. “The purpose of the Employee Loan Scheme – based on principles similar to that operated under FIFA guidance – is to retain that core expertise. Employers can nominate anyone identified as being ‘at risk’ of redundancy, giving loaning companies the vehicle to retain essential skills while not necessarily continuing to pay full employment costs, and giving the receiving company access to a pool of highly skilled workers with the talent and knowledge required to fill skills gaps for an agreed period of time.
“For staff, this scheme could offer a chance for individuals to keep working and deepen professional skills. For employers the scheme offers the chance to retain top talent long term during the downturn. For receiving organisations this scheme offers the chance to attract high-calibre talent for short-term roles.”
Given the complexities of the labour landscape in the North Sea and operational cycles that can require the quick ramping up and down of staff numbers, allowing short-term transfers of staff between platforms makes plenty of sense. What’s more, the scheme has received the much-needed thumbs-up from unions, with RMT, Unite and the Scottish Trades Union Congress having input through their involvement with the EJT. Potential receiving organisations have expressed interest, too.
The scheme could also facilitate, according to Milne, the loaning of offshore staff to other sectors, including “non-oil and gas organisations, charity or third sector organisations and consulting roles”, allowing workers to explore other industries during activity downturns that would otherwise leave them vulnerable to redundancy, while retaining their expertise in anticipation of activity picking up once more.
As Cammy Keith, business manager at Aberdeen-based recruitment consultancy Thorpe Molloy, noted in a March blog post, a loan system could also have an impact on the morale of the UK’s offshore workforce. “I believe [the loan scheme] will make an incredible difference to the morale and motivation of people who are under the shadow of redundancy or are under-utilised in their current position,” Keith wrote.
At this early stage it’s still unclear exactly what form the scheme will take and how successful it will be – Milne acknowledges that “the identification of staff proposed as being available for loan” remains a major obstacle – but the potential of such a system is plain, and it certainly meets the Wood Review’s call for greater cross-industry collaboration in the North Sea. If all stakeholders can be persuaded of the benefits of this kind of employee loan scheme and operators are willing to play ball, it could offer some stability to a workforce in desperate need of it.