Scottish energy services giant Wood Group PSN announced plans to freeze pay for UK staff and further slash contractor rates.
The north-east business blamed the falling oil price and increasing costs for its decision, which will come into force from the end of next month.
The move is the second time Wood Group which employs around 12,000 people onshore and offshore in the UK and which has a global workforce of 40,000 has cut contractor pay this year after it announced a 10% cut in late spring.
It also follows hard on the heels of PSN picking up its largest single contract of the year last week after it secured a new five-year $750 million deal with oil giant BP.
The agreement will see PSN provide engineering, procurement and construction services to six of BP’s North Sea assets as well as supporting its onshore Forties Pipeline System facility at Grangemouth on the Forth.
The company last week said the BP deal secured 700 jobs and would create a further 150 posts.
PSN yesterday said it was keen to retain its existing staff ration in the UK and said there would be opportunities for contractors to transfer to salaried positions.
“These measures have not been taken lightly, but we believe they are required in light of the cost and efficiency challenges affecting the UK North Sea oil and gas sector, exacerbated by the fall in oil prices,” Dave Stewart, UK managing director of WGPSN, said.
“We understand the need to contribute to creating a sustainable industry and are committed to playing our part to the long-term changes needed.
“Safety and assurance is our top priority and integral to how we do business. Our focus is on assuring the safety of our people and everything we design, construct, operate and maintain, while taking measures to improve efficiency and reduce cost for our customers and safeguarding the future of our industry.
“We are committed to undertaking proactive reviews of our contractor rates on a regular basis to ensure competitiveness within the marketplace.
“Our customers are focused on prioritising their spend and according to Oil & Gas UK’s latest activity survey, production in the sector dipped 8% last year to an average of 1.43 Million Barrels of Oil Equivalent (MMboe) per day.
“Escalating costs at any level has a domino effect on any mature sector and we want to help the long-term health of the industry.”
Shares in Wood Group moved ahead more than 2% in the wake of yesterday’s announcement and eventually closed 23p up at 604p.