Oil and Gas UK order wages probe to compare N. Sea contractor pay rates as part of 40% industry cost-cutting drive

N. Sea costs must drop by 40% - say Oil and Gas UK
N. Sea costs must drop by 40% – say Oil and Gas UK

News Update: 2.00pm 7 May 2015

 The GMB trade union has today announced that it has put its strike ballot on hold pending more talks with employers in the dispute pay and terms for offshore N. Sea workers.

Oil and Gas UK has commissioned a new study of daily rates paid to independent contractors in the North Sea.

The results of this survey – will be used by the oil companies to benchmark their rates against the market – will be provided only to Oil and Gas UK members taking part.

However, the results of the contractors’ pay rates survey could prove provocative in terms of management-worker relations – where the major trade unions have recently balloted members over strike action – if they are used to drive down rates across the industry.

This development was revealed at an invite-only briefing by Oil and Gas UK to members in Aberdeen. A spokesman for the industry association said:

“Although tough decisions on resources and projects are having to be taken by individual companies, there is also now a concerted effort to work together to tackle the fundamental behaviours that have driven cost escalation in the North Sea.

“The goal is to achieve a more internationally competitive oil and gas province and attract the fresh investment needed to unlock the North Sea’s remaining potential.

“Achieving this will require a 40 per cent reduction in the industry’s cost base.”

“While production efficiency has increased by 5 per cent since 2013, further gains can be made by sharing examples of good practice. In this vein, best practice in delivering planned shutdowns is being collated by an Oil & Gas UK workgroup for publication this summer.”

While the industry is tackling challenges on a number of fronts including rising costs, low oil prices and a plateau in production, there is little doubt that significant reserves of up to 23 billion barrels of oil and gas equivalent remain to be extracted from the North Sea – if the price is right.

As well as trying to find a ‘benchmark’ pay rate for contractors across the industry, Oil and Gas UK is also trying to minimise operator down time by setting up a database of spare parts held in inventories across the sector. This will allow replacement equipment to be sourced quickly and efficiently with the aim of reducing production downtime.

Nine oil and gas operators have already logged their inventories of spare parts and examples of success are emerging – a pump exchange between two operators enabled the continuation of well production for 18 weeks allowing the operator to avoid a 13-week lead time for delivery of the replacement pump. 

And Arup has been appointed by Oil & Gas UK and Decom North Sea to identify the barriers that currently prevent the industry from implementing new technology in managing late life assets. Guidance on the best available practices for identifying, qualifying and adopting new technologies will be published this autumn.

Meanwhile, Step Change in Safety is carrying out a mapping exercise of control of work and training processes to identify priority areas where standardisation will achieve improvements in efficiency. The findings will help to reduce duplication of standards relating to safety critical roles and tasks in its four traditional work streams (Helicopter Safety Steering Group, Human Factors & Competence, Asset Integrity and Workforce Engagement). 

Oonagh Werngren, Oil & Gas UK operations director, commented: “Our vision for 2020 is an industry actively exploring and maximising recovery of the UK’s oil and gas, a supply chain providing a strong engine for growth with lifting costs less than $20-barrel.

“The sector now has to deliver the bold action and behavioural change needed to make the vision a reality – and everyone has a part to play.”


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