Steve Kirby: dark days for the UK’s oil and gas industry

Materials World magazine
,
1 Sep 2016

Steve Kirby discusses why these are dark days for the UK’s oil and gas industry. 

Best-kept secret in Britain

Within the profession, it is a common thought that the oil and gas industry is probably Britain’s best-kept secret. Other than knowing the cost of petrol and previous high-profile publicity such as the Royal inauguration of Forties Field in 1975 and Piper Alpha in 1988, the public is generally unaware of the industry, its scale and the technical importance of the UK.

Unfortunately, there seems to be a similar lack of awareness in government. Amber Rudd took more than a year to visit Aberdeen – Europe’s energy capital – after her appointment as Secretary of State for Energy and Climate Change, despite the city enduring its most challenging 12 months on record.

In June 2016, Oil & Gas UK published a short article showing the impact of the oil price downturn on jobs in the industry. To quote, ‘Brent crude is currently trading at around US$50 a barrel, less than half the price it was in 2014 when jobs linked to the sector peaked at over 450,000. Jobs supported fell by an estimated 84,000 to around 370,000 in 2015, and are forecast to have fallen by a further 40,000 by the end of this year.’ Similarly, Norway appears to be heading for 40,000 job losses by the end of 2016.

Strangely, very little of this news seems to be in the mainstream media, especially when compared to the events surrounding Tata Steel and its proposed reorganisation. To quote Jake Malloy, Regional Organiser of the Rail, Maritime and Transport Union, ‘This is the equivalent of a steelworks being closed every week for the past year.’ 

The number of people losing their jobs has some immediate issues. The average age of offshore workers is around 41 – similar data is not readily available for onshore workers. These numbers hide a problem in the demographics of the workforce. 

In response to previous downturns, oil companies and contractors have slashed recruitment and training. Consequently, there is a significant proportion of oilfield workers over 45 years old, then the next big tranche is aged around 30. In addition to the loss of jobs, there will be a number in the over-55s group looking at their options and taking retirement. With these people going, a lot of knowledge and experience will be lost to the industry. The much-anticipated ‘great crew change’ is arriving five or six years earlier than expected.

In addition to the price downturn and loss of personnel, the industry now has another, probably unexpected, challenge coming over the horizon – Brexit.

The Wood Report, published in February 2014, made a number of recommendations to maximise economic recovery from the UK sector of the North Sea (UKCS). One of the key recommendations in the report calls on operators to collaborate more than ever before to ensure that their fields remain economical.

The Government tasked Sir Ian Wood to focus on the UKCS – the continued recovery from the North Sea is a pan-european issue, involving, principally, the UK, Norway, Denmark and the Netherlands. The issue of collaboration between these countries is equally important in maximising economic recovery from the area as a whole. 

It is reasonable to say that development of the North Sea mirrors Britain’s membership of the EEC, later the EU. From the early 1970s, this membership allowed the free flow of goods, services and people between member states, allowing techniques and knowledge to move between the UK and the Netherlands in the Southern North Sea, and Norway in the Northern sector. 

In 2013, the EU published the Offshore Directive, aimed at harmonising existing divergent and fragmented regulatory framework applying to the safety of offshore oil and gas operations in Europe. The Directive, broadly based on the UK’s current offshore safety regime, provides a common base of working throughout the EU.

Now, collaboration between operators in different countries is simple and straightforward. The current system allows personnel with suitable skills and experience to move as appropriate between projects in the North Sea countries. Equipment and services can move throughout the North Sea area with minimal fuss. Operating standards and specifications are generally similar. 

If Brexit really does become Brexit, it is difficult to see an easy solution to freedom of movement restrictions. In many ways, it calls into question the UK and Aberdeen’s future role as Europe’s energy capital and technology centre.

In summary, it looks like the oil and gas industry, especially in the UK, is suffering the perfect storm of low energy prices, high operating costs, loss of knowledgeable workers and possible restriction on the movement of experienced personnel. It may lead to an acceleration of platform and infrastructure decommissioning balanced against the desire to maximise economic recovery. It is a dark time in the industry with no clear way forward. 

Steve Kirby recently retired after a 35-year career in the oil industry, principally in drilling engineering. Steve first became involved in well decommissioning in 1994. Working for BP, he managed a number of programmes plugging suspended subsea exploration wells from well intervention vessels (LWIV) and was Well Engineer on the abandonment of the Donan field – a ‘world first’, using an LWIV. He was Well Engineer for the North West Hutton decommissioning project. After BP, Steve worked as a Consulting Engineer on abandonment projects and provided input for several Decommissioning Cost Provision Deeds, before working as Wells Advisor with Oil & Gas UK, contributing to its range of published guidelines.