Average N. Sea wages fall for the first time in 25 years as job recruitment rates also plunge

N. Sea oil and gas contractor recruitment rates 1995-2015
N. Sea oil and gas contractor recruitment rates 1995-2015

The number of N. Sea oil and gas contractors seeking to recruit workers has plunged from more than 90% in 2013 to less than 20% this year.

And average wages fell last year by 4.5% – the first time such a drop has been recorded in the 25-year history of the annual oil and gas industry survey by Aberdeen and Grampian Chamber of Commerce.

Additionally, 40% of all firms reported making significant changes to terms and conditions of employment (compared to only 25% in the previous survey). The most common changes were to reduce pay to staff, either as salary or reductions in bonus payments.

Moreover, a number of firms reported making changes to shift patterns and working hours, and some firms reported reductions in contributions to pension schemes, medical plans and benefits packages.

This chimes with the reasons given by firms for changes to pay in the last 12 months. The survey identifies that for 72% of contractors and operators/ licensees, the major reason for these changes was to reduce costs as a whole.

This is in line with the 67% of firms in the same questions a year ago, and continues to reflect the focus on costs – especially labour costs – across the industry.

Overall, 67% of companies reduced their employment in the last 12 months. More than two-thirds (68%) of contractors reduced their employment in 2016, while 24% of contractors held employment stable, and only 8% increased employment (down from 15% in the same period a year ago).

Most licensees and operators surveyed reduced employment in the last 12 months.

Contractors on balance reduced both permanent (a balance of minus 54%) and contract staff (a balance of minus 58%) in this period. For contractors, these net balance trends were the lowest level recorded since the survey began.

And in the next 12 months, the survey estimates that there will be a 5% reduction in the headcount of operators, which is considerably reduced from the 17% reduction expected six months ago, and suggests a possible slowing in the rate of job-shedding.

Oil and gas average wages 2004-2015
N. Sea oil and gas average wages 2004-2015

The Scottish Government’s Energy Jobs Taskforce had a minimal effect on respondents with only 6% reporting any impact.

For 4% of firms, the impact has been positive and for 2% it has been negative.

A Chamber spokesman said: “The industry is now much leaner and meaner than it was before the oil price slump and we are more competitive in terms of price and performance.

“Production efficiency has increased by 10% and the cost of producing a barrel of UKCS oil or gas has been cut by nearly half.

“Sadly, that success has been at the expense of thousands of jobs in the industry but for most of those companies which have shed staff it has been a case of rationalise or die.”

In terms of activities, the results show that that 53% of contractors expect to be more involved in renewable energy in the next three to five years and 70% expect to be involved in unconventional oil and gas activity (shale energy) in the UK.

Almost two thirds of contractors expect involvement in unconventional oil and gas activity outside the UK during the same period.

The Oil and Gas Survey is conducted by Aberdeen & Grampian Chamber of Commerce and the results analysed by Strathclyde University’s Fraser of Allander Institute. A total of 130 companies responded to the survey, representing a response rate of 15% of companies contacted.

Gillian Martin, MSP, Aberdeenshire East
Gillian Martin, MSP, Aiberdeenshire East

Meanwhile, the UK government has been using the North Sea as a “cash cow” only to abandon the oil and gas sector in difficult times, with figures showing that the industry has generated more than £600,000 for each person in the North East – or around £300 billion for the UK Treasury.

And the UK government’s’ paltry contribution’ to the Aberdeen city deal works out as only £262 for each person in the North East, according to the SNP.

Grampian MSP Gillian Martin added: “We all know that without greater investment and activity we risk losing vital capacity and skills in the supply chain that will support production and ensure we realise the total value from maximising economic recovery from the North Sea.”

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