Friday, December 19, 2014

North Sea oil industry 'close to collapse': Experts' warning that oil price plunge is not all good news for UK economy

  • Oil tycoon and government adviser Sir Ian Wood says 10% of jobs could go
  • Premier Oil boss Robin Allan says at current oil prices it is 'almost impossible to make money'
  • Brent crude has nearly halved in price on world markets since June 
By Laura Chesters For The Daily Mail

The tumbling oil price has left the UK’s North Sea oil industry ‘close to collapse’ experts warned today
North Sea oil and gas tycoon and government adviser Sir Ian Wood has said around 10 per cent of jobs may go, while Robin Allan, chairman of the independent explorers' association Brindex and Premier Oil executive, said today that at current oil prices it is ‘almost impossible to make money’.
A report into the sector found 35,000 jobs could go over the next five years following the sharp fall in the price of oil. Brent crude has nearly halved since June and touched over a five-year low this week amid increased US shale oil supply and the continued output from Opec.
Scroll down for video 
Oil woes: A report into the sector found 35,000 jobs could go over the next five years following the sharp fall in the price of oi. with Brent crude having nearly halved since June
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Oil woes: A report into the sector found 35,000 jobs could go over the next five years following the sharp fall in the price of oi. with Brent crude having nearly halved since June
Today Brent crude stood at around $63 a barrel having bounced from the low of $58.50 hit on Tuesday.
Allan told the BBC: ‘It's almost impossible to make money at these oil prices It's a huge crisis. This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country.’
A number of oil explorers and services firms have announced plans to slash jobs. US giant ConocoPhillips is cutting 230 out of 1,650 jobs in the UK, and oil services firm Schlumberger cut back its UK-based fleet of geological survey ships.
BP, Shell and Petrofac have cut contractor rates and yesterday FTSE 250 oil services firm Wood Group – founded by Sir Ian Wood - said it is cutting pay for 1,300 North Sea contractors by 10 per cent from January and will freeze the salaries of its 4,000-strong UK workforce next year.
But although the fall in oil price is bad news for the industry it has been a welcome relief for the wider economy.
Accountants PricewaterhouseCoopers said the falling oil price 'should be a net benefit to our economy as a whole, even if there is some losers in the UK oil and gas sector and in particular places like Aberdeen'.
PwC chief economist John Hawksworth, said: ‘In essence, an oil price fall acts like a tax cut for the economy, but a particularly favourable one in the sense that the burden of lost revenue is primarily borne by the major oil producers.'
He added: ‘As an illustration, in our shale oil report from February 2013, we estimated that a $50 (£32) fall in the oil price, if sustained, could lead to the level of UK GDP being around 3 per cent higher in the long run.’
UK consumers are already reaping the benefits with falling inflation pushing up spending power, providing a knock-on effect for suppliers of consumer goods, he said.

The tumbling oil price has left the UK’s North Sea oil industry ‘close to collapse’ experts warned today
North Sea oil and gas tycoon and government adviser Sir Ian Wood has said around 10 per cent of jobs may go, while Robin Allan, chairman of the independent explorers' association Brindex and Premier Oil executive, said today that at current oil prices it is ‘almost impossible to make money’.
A report into the sector found 35,000 jobs could go over the next five years following the sharp fall in the price of oil. Brent crude has nearly halved since June and touched over a five-year low this week amid increased US shale oil supply and the continued output from Opec.
Scroll down for video 
Oil woes: A report into the sector found 35,000 jobs could go over the next five years following the sharp fall in the price of oi. with Brent crude having nearly halved since June
+1
Oil woes: A report into the sector found 35,000 jobs could go over the next five years following the sharp fall in the price of oi. with Brent crude having nearly halved since June
Today Brent crude stood at around $63 a barrel having bounced from the low of $58.50 hit on Tuesday.
Allan told the BBC: ‘It's almost impossible to make money at these oil prices It's a huge crisis. This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country.’
A number of oil explorers and services firms have announced plans to slash jobs. US giant ConocoPhillips is cutting 230 out of 1,650 jobs in the UK, and oil services firm Schlumberger cut back its UK-based fleet of geological survey ships.
BP, Shell and Petrofac have cut contractor rates and yesterday FTSE 250 oil services firm Wood Group – founded by Sir Ian Wood - said it is cutting pay for 1,300 North Sea contractors by 10 per cent from January and will freeze the salaries of its 4,000-strong UK workforce next year.
But although the fall in oil price is bad news for the industry it has been a welcome relief for the wider economy.
Accountants PricewaterhouseCoopers said the falling oil price 'should be a net benefit to our economy as a whole, even if there is some losers in the UK oil and gas sector and in particular places like Aberdeen'.
PwC chief economist John Hawksworth, said: ‘In essence, an oil price fall acts like a tax cut for the economy, but a particularly favourable one in the sense that the burden of lost revenue is primarily borne by the major oil producers.'
He added: ‘As an illustration, in our shale oil report from February 2013, we estimated that a $50 (£32) fall in the oil price, if sustained, could lead to the level of UK GDP being around 3 per cent higher in the long run.’
UK consumers are already reaping the benefits with falling inflation pushing up spending power, providing a knock-on effect for suppliers of consumer goods, he said.
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