According to a report from the Bank of Scotland and Lloyds Bank Group, almost a third of UK oil and gas companies are planning to cut jobs in order to retain financial viability following difficulties faced by the industry in recent times.
According to the fifth annual ‘Re-evaluating Strategies’ report, more than 40% of the oil and gas companies surveyed said that they are planning to cut more costs in the coming year in order to bounce back from a downturn driven largely (at least for oil companies) by plummeting wholesale prices for oil, as well as the beginnings of a global turn in focus towards renewable energy. Last year, global investment in renewables was double that invested in fossil fuel companies.
The job cuts will not be as severe as last year, the report claims, when some 51% of the 141 surveyed companies made redundancies, but nonetheless indicate that the industry is currently on the back foot.
The report said: “Executives’ responses indicate the total cuts across the North Sea and the onshore supply chain may still number in the thousands. About two-fifths of the companies expecting further cuts are based in Scotland, though the numbers involved are relatively small at about 20 jobs per company on average. A sixth of the others facing cuts are in London, and their forecasts are heavier at more than 100 posts per company on average.”
Oil companies in particular have been struggling, with commodity costs falling fast, reaching under $30 a barrel in the first quarter of this year. Prices have since begun to move upwards once more and currently sit at around $50 per barrel, but the fallout from the price drops is still being felt in the industry.
Bank of Scotland’s area director, Stuart White, said: “the decline in the price of oil has made headlines around the world, and its knock-on impact on investment and employment has created economic headwinds that are being felt, not just by the industry but across the wider economy.”
The general expectation among oil companies according to Mr White is that prices are unlikely to “recover to a sustained level of $75-80 per barrel until 2020 or later.”
As such, many companies are looking towards diversification, including into renewable technology, in order to retain financial viability and future lifespan generally.
Indeed, according to a spokesperson from the Scottish government, “a quarter of the firms surveyed had grown through the downturn through diversifying into new sectors and investing in new technology.”
