​North Sea oil profit slump threatens projects

Reuters / Andy Buchanan
North Sea oil and gas projects face the chop because of a slump in profits after the global oil price dropped, the 22nd Oil and Gas Survey says.

Carried out by the Aberdeen and Grampian Chamber of Commerce and lawyers Bond Dickinson, the report says 70 percent of North Sea firms have seen their value drop over the last year.

The global price of oil hit record lows earlier this year, falling below $50 per barrel before rallying moderately.

Confidence is at an “all time low,” the survey published on Thursday asserts.

Uisdean Vass from the Bond Dickinson oil and gas team told the Guardian: “The UK oil and gas sector is going through a regulatory and fiscal transition at blistering pace and companies in the sector are understandably increasingly concerned about how they will be affected.

READ MORE: Shell plans to axe 250 North Sea jobs to stay ‘competitive’

READ MORE: ‘Excessive’ perks: BP boss receives £1.7m in pension benefits, despite profit fall

Decommissioning is the bittersweet positive in the survey. Academics have been predicting an imminent spike in decommissioning for years, but that spike is now well and truly upon us.

Decommissioning is not driven by oil price or demand and could be very important in maintaining the value of activity in the North Sea. But the inevitable downside is that it hastens the decline of offshore exploration and production.

In March, it was announced that oil giant Royal Dutch Shell would cut at least 250 jobs and increase workers’ hours at its North Sea operations following a drastic drop in the price of oil.

Of the 2,400 staff and agency contractors currently working in the North Sea, around 10 percent will be fired. The job cuts are in addition to 250 redundancies announced in August, before the oil price started to drop.

The story for those at the top of the North Sea oil industry is rather different.

In April, campaigners in the UK labeled BP chief executive Bob Dudley’s pension scheme “excessive” after it was revealed the chief had pocketed £1.7 million in pension benefits in 2014.

Dudley’s award is roughly 10 times the average pension payment received by a FTSE 100 director and 62 times the average annual salary in the UK.

News of his benefit prompted hostility after BP posted a 10 percent fall in profits in February.

The oil giant also announced it would cut 200 full-time onshore jobs and 100 contractor roles from its North Sea workforce.

The company blamed reduced profits on falling oil prices.