Bank of America warns of ‘devastating drop’ in N. Sea oil output as threat of industrial action looms over pay cuts

OCA logo2Talks aimed at averting strike action by offshore energy workers in the North Sea are set to be held between management and unions next week.

 

The meetings have been sparked by proposals which would reduced the pay and conditions of thousands of workers as oil companies, and in turn, major contractors seek to cut their costs in the face of a 50% fall in crude N. Sea oil prices since last summer.

 

Members of the trade union UNITE are to be asked whether there should be a ballot for industrial action over proposed changes to shift patterns, holiday pay, sick pay and pensions. If affirmative, this consultative ballot could be followed by an industrial ballot.

 

Talks between the Offshore Contractors Association (whose members include, for example, Wood Group, Sparrows, Stork, AMEC, Aker and Bilfinger) and UNITE are due to be held n Aberdeen on February 25 over proposals to change the terms of the Offshore Contractors Agreement, which covers some 10,000 workers (not all of whom are trade union members).

 

Meanwhile, total oil output from the North Sea is forecast to fall by 20% between now and 2020 as the fall in crude prices makes the cost of production uneconomic at around $50-barrel compared to $110-barrel last year.

 

The Global Energy Report by Bank of America/ Merrill Lynch said: “The fast drop in global oil prices is likely to have devastating consequences for the region. Re-investment in older North Sea oil fields will simply tumble on $50-barrel”.

 

While benchmark Brent crude last week traded at just under $60-barrel, Bank of America/ Merrill Lynch forecasts that prices will fall in the near future to around $40-barrel while supply continues to exceed demand.

 

BP and Shell are among a number of major oil companies which have already announced reductions in capital investment in exploration as a result of the collapse in wholesale prices.

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