For the vast majority of the UK, a drop in the price of oil is cheered. From the pennies dropping at the petrol pump to the easing of input costs across a wide range of consumer comforts and everyday products, not to mention the implications for energy bills, the recent low-price environment has been a welcome development to society at large. But for those whose household income is heavily, and in some cases entirely, reliant on the extraction of oil, there is less cause for celebration.
Having experienced a prolonged period of Sky-high prices and profits that bred a rather favourable existence offshore, the working lives of those in the North Sea and elsewhere are increasingly under attack by corporate cost-cutting programmes to ease the squeeze on margins. From work schedules to fresh fruit, right through to the home comforts that others take for granted, unions are becoming increasingly vocal about the conduct of companies in relation to worker conditions.
Illustrating how the price pressure is starting to weigh on offshore life, offshore oil and gas exploration and production firm Talisman Sinopec recently confirmed that it was removing Sky television from all its North Sea operations and replacing it with a combination of Freeview and BT Sport, a move it said would deliver annual savings of £600,000.
Talisman changes the channel to cut costs
Explaining its decision, Talisman Sinopec stressed the need to take account of the current oil price environment. A spokeswoman for the company said: "We are not immune to those challenges and are taking appropriate actions to tackle them…We are shaping the future direction of our business – and industry – to protect our long-term sustainability within the sector."
In response to the decision, Jake Molloy, regional organiser for the RMT workers union, suggested that while the challenges to offshore firms were real, they should be wary of focusing on worker conditions to cut costs. "Talisman is the first but they will not be the last," he said. "It is all part of cost efficiency, but there are better ways to improve cost efficiency than removing welfare elements in a difficult work environment."
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
UK Chancellor of the Exchequer George Osborne has announced what he says amounts to £1.3bn of support.
While moving from Sky Sports to BT, both premium paid-for sports programming packages, may appear to be insignificant changes in the grand scheme of life offshore, the timing and prestige of the live Premier League football matches aired by Sky have proved particularly popular with those working offshore, in particular its Super Sunday package of two matches on a day when many workers take down-time.
Fruit and Facebook fading from offshore life
Beyond having television packages switched, offshore workers have also reported a number of other home comforts being tampered with as cost pressures continue to hang heavy over the sector. A number of offshore workers have reported to the unions that communal Wi-Fi access, which enables workers to keep in touch with family and friends through Skype or social networking sites such as Facebook, has been restricted or removed.
There have also been multiple reports of the daily delivery of newspapers to offshore rigs being cut to save money. In one report, a union member working offshore wrote of his despair at the lack of fresh fruit where he was stationed. While individual examples such as the Sky removal and the restriction of Wi-Fi access illustrate how the cost-cutting drives are impacting on offshore life, there are more severe changes that are currently points of contention between companies and unions.
In May of this year, oil and gas firm Bilfinger Salamis UK came in for criticism over its use of contracts that enabled the employer to alter the number of days employees work at any point throughout the work period. An excerpt from one of the clauses in the contract said: "The employee will be advised of the estimated duration accordingly prior to mobilisation, but this may be subject to alteration [at] the sole discretion of the employer to meet operational requirements."
Since the contract, which also stated that "the employer reserves in its sole discretion the right to change work cycles for any assignment", was revealed, it has been heavily criticised as being similar to the controversial ‘zero-hours’ contracts that the Labour party pledged to outlaw if it came to power.
Price pressure rings changes on contracts
In response to the criticism, Bilfinger Salamis denied that the contract could be described as a zero-hours contract, as it guaranteed at least part payment. Defending the use of the contract while highlighting its increasing appeal, the company said: "This contract is not new and has been based largely on a contract that Bilfinger has used for many years, but recent developments – driven by operators and the current economic climate – have required some technical variations."
In response, Molloy said: "I’ve not seen a contract like these before. It means they can virtually do what they please. It’s appalling and has to be outlawed."
An even bigger bone of contention is the move to alter the agreed shift patterns for offshore working practices. As things currently stand, the industry adopts a ‘two weeks on, three weeks off’ ratio of work to leave; however, the Offshore Contractors Association (OCA) is proposing to change it to an equal split of ‘three weeks on, three weeks off’.
Talks between contactors and unions were held in early May and while both parties stated that a ‘potential way forward’ had been discussed, an agreement is yet to be reached. The unions say their members are ‘overwhelmingly in favour’ of strike action in order to stop the changes being pushed through and the threat of industrial action remains.
Explaining the pressure of the oil price on the industry, OCA chief executive Bill Murray said: "We are in a challenging time for the North Sea oil and gas industry. For some time we have experienced unsustainable levels of cost inflation and whilst recognition of the need to reduce this is not new the dramatic fall in the price of oil has accelerated the need to address this."
From the schedule of available Premier League football matches in communal areas to the schedule of fixed hours for workers, life for those operating offshore is feeling the sting of the low oil price environment. However, with hundreds of redundancies in the North Sea announced by Shell and Taqa in recent months adding to the 300 announced by BP in January and an estimated 23,000 job losses forecast by 2019, those suffering hardships and fewer home comforts are least still employed.
As things stand, the workers’ unions and the industry are at loggerheads on how to deal with the financial environment in which the industry finds itself. The cost-cutting programs appear to be hitting staff hard, and the unions are seeking to reverse that. However, with the industry holding up the threat of further job cuts as a defence, the need for both parties to work on a constructive solution is paramount.