The oil and gas sector is one of the UK’s major employers, but it has had a torrid time over recent years, amid dwindling North Sea reserves and a difficult economic climate. Employment levels in the sector have dropped from a high of around 450,000 four years ago to a little over 300,000 today. But the picture for 2018 looks brighter. Here, we look at the latest market trends.
Increasing activity in North Sea brings hope
The pattern of rig after rig closing and nothing new replacing it has been all too familiar over recent years. However, at least five successful exploration attempts in 2017 led to the discovery of around 400 million BOE of reserves. 2018 has therefore got off to a far more promising start within the industry, and it seems almost ironic that after years of job losses, there is now the very real possibility of a skills shortage.
Deirdre Michie, the CEO of Oil and Gas UK was with Alix Thom, the industry body’s Skills and Employment Manager, at Westminster last week, where the pair gave evidence before the Scottish Affairs Committee. Ms Thom said: “We are actually now anecdotally starting to hear companies talk about [skill] shortages in the future if the activity as we hope begins to grow.”
She commented that last year, job losses in the sector stood at four percent, compared to 19 percent in 2016 and 15 percent in 2015. The signs that the industry is gradually beginning to stabilise and even return to an upward trajectory are undeniable. However, in Scotland, where almost 50 percent of employment comes from the sector, public opinion and trust in the industry will not be recovered overnight.
Clair Ridge, to the west of the Shetland Islands is one of the largest new developments, not just in the North Sea, but the entire world. Construction started on the £4.5 billion project in 2016, and it is expected to yield 640 BOE of recoverable resources over the next 30 years. Commissioning of the brand new bridge linked platforms is now close to completion, and the facility will begin production before the end of the year.
The even better news, though, is this is just the beginning. As many as 16 new developments are expected to get the go ahead over the remainder of 2018 and the first quarter of 2019. This would be more new projects in one year than have been sanctioned over the past three years put together.
Keeping the momentum
The industry outlook is therefore better than it has been in years, but there is still much to do. Understanding public perception of the industry and how it has been affected by the downturn is key to turning it around and getting the skills back where they are needed. Only then can the sector look forward to a steady recovery, both upstream and downstream, and effectively re-establish itself as one of the core industries that forms the backbone of the UK economy.