Hajera Blagg, Friday, February 5th, 2016
The oil industry has been shaken to its foundations and the crisis shows no sign of abating anytime soon. The price of Brent crude oil plummeted at one point this year to less than $30 a barrel – that’s a 70 per cent price drop in only 18 months.
To put this figure into perspective, a decade ago, $90 to $100 a barrel was considered normal.
News of the latest raft of job losses came this week, when Shell announced decimated annual profits of 80 per cent, and added that they plan to shed 10,000 jobs globally.
Another major oil company, BP, also announced its intention to axe 7,000 jobs this week, after posting an annual loss of £4.5bn – the worst performance in its entire history.
‘Not your typical oil bust’
These job losses are neither the end nor the beginning. It’s been estimated that an astounding 70,000 oil-related jobs in the UK have gone since the slump in oil prices in January 2015, a figure which could nearly treble by the time oil prices start to climb again – that’s half the entire UK oil workforce.
Oil has always had cyclical periods of “boom and bust” but industry experts say that the downturn in prices may persist far longer than anything we’ve ever seen.
“There are a number of things happening on the global stage that’s causing the crisis – it’s not your typical oil bust,” explained Unite Scottish secretary Pat Rafferty. “There’s the glut in supply that may be exacerbated by Iran coming back into the market. There’s also the declining Chinese economy and weakening demand, among other issues.”
“What this is not is a North Sea crisis – there’s still plenty of oil there and plenty of future potential,” he added. “It just needs the investment and support.”
Still, an analysis by industry certification body DNV GL showed the impact of the downturn on employment has hit the North Sea the hardest.
DNV GL oil and gas regional director for the UK Hari Vamadevan warned that oil companies aren’t learning the lessons from past boom and bust cycles, when the industry axed jobs to cut costs during a downturn but ultimately paid dearly afterwards with a protracted skills gap.
“As an industry, we have taken quick, cost-cutting action, which has been particularly apparent through a raft of major job cuts over the past 12 months, and further short-term measures are expected, despite concerns over the skills drain,” Vamadevan said.
This is precisely why Unite has argued against slashing jobs in the North Sea – by oil companies attempting to weather a temporary, if lengthy economic downturn through vicious cost-cutting measures, the damage could very well become permanent.
“The skills drain is a huge concern,” explained Unite regional officer Tommy Campbell. “I work with scaffolders and they’re certified to work specifically in oil and gas. When they lose their jobs, maybe they’ll find work on the mainland and eventually their certification runs out. They may never return, and with them will go all those valuable skills that the industry needs.”
Campbell noted that one of the ways in which skills can be retained is by job sharing instead of all-out job cuts.
“We’ve also suggested looking at having younger employees paired with older employees who will be phasing themselves out, so they can hand these skills to the younger workforce.”
“But they’re hasn’t been much interest among employers; they seem to be only fixated on the short-term,” he said. “That’s why state intervention is necessary — for the future of the workforce and the future of the industry.”
Health and safety
For those still lucky enough to have their jobs, offshore workers face decimated terms and conditions as their employers rush to cut costs and appease shareholders – and it could very well be risking workers’ lives.
As oil companies seek to be as efficient as possible, cutting every possible corner means health and safety, too, is placed on the backburner.
Oil companies are trying to make do with less during the downturn, so many of them have switched to what’s called a 3/3 rota. Oil workers are forced to work for three weeks straight on twelve-hour shifts each day, followed by a three-week break.
But Campbell explained that this shift pattern is unsustainable – and extremely dangerous.
“If you were an ambulance service or a fire service, and you went to the Scottish parliament to ask permission for your workforce to work three weeks straight with no break, you’d be laughed out of parliament. Why should it be any different with workers in the oil industry?”
Major oil companies, however, deny that there is a problem, Campbell said. “They say ‘Well there’s no evidence that these work patterns put workers at risk’.”
“But are we going to have to wait until there’s a major incident to do something about it? We’ve spoken to offshore medics and we’ve heard stories that more and more workers are coming to them complaining about fatigue.”
“The workforce is absolutely knackered,” he noted. “And even a 3/3 rota is often not adhered to. Sometimes you’ll have a chopper facing delays in picking up offshore workers at the end of the third week because of poor weather conditions.
“Workers can agree to not work after their shift is over but of course employers encourage them to do so. Let’s not forget, too, that many of these workers aren’t young – they’ve been in the industry for 25 or 30 years.
“But they just keep their head down and do as they’re told because, especially at this time, they fear losing their jobs. It’s effectively a form of blackmail.”
The situation may seem helpless, but as with the foundering steel industry, that doesn’t mean nothing can be done.
Unite, along with other offshore trade unions, have banded together to seek immediate solutions that will not only stem growing job losses but ensure that there is a future for oil.
On Monday (February 8), Unite, the largest offshore trade union, will join the RMT, the GMB, Balpa, and Nautilus in a Scottish TUC-coordinated press conference to speak as one voice representing hundreds of thousands of oil workers.
“This conference is a loud and clear signal that we as a whole are working as one to show that we acknowledge the crisis in the oil industry and that we need to urgently come up with a plan,” explained Rafferty.
“And at the forefront of this plan is protecting jobs and terms and conditions as well as standing strong on health and safety standards,” he said.
Rafferty also last week called for an urgent summit, with the aim of bringing together all interested parties, including industry, the Scottish and Westminster governments, as well as trade unions.
“We’ll be demanding fiscal measures from both governments to address the crisis,” he said. “A number of interventions can help ease the pain as the industry weathers the storm, including tax relief.”
At the same time, Rafferty emphasised, any measure that’s called for must “be for the protection of the workforce and not to prop up oil companies’ profit margins”.
“Let’s be clear – despite the crisis, oil companies are still making money,” Rafferty noted. “They’re far from being skint.”
“Oil companies have had tax breaks recently, but so far they have not passed on that relief to their workers, whose jobs are being slashed and whose terms and conditions are being destroyed. They’ve got be held accountable.”
Unite assistant general secretary Tony Burke echoed the urgent need for a summit, similar to a summit held in October to address the crisis in steel.
“The offshore oil industry is going through the worst crisis ever, with the price of Brent crude going down to $30 a barrel and falling,” he said. “There’s no evidence we’ve seen that that figure is going to go northwards back to anywhere near $50 for quite some time. The industry’s got to learn how to deal with this and we’ve got bring people together. We can’t be doing this on the basis breaking up skilled workforces.”
“That’s the aim of the press conference on Monday — for all the trade unions to speak as one in order unite and protect the workforce at this moment of crisis.
Stay tuned on UNITElive for updates after the offshore trade unions press conference on Monday.