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Crisis hit oil industry close to ‘rock bottom’

And oil platform.
And oil platform.

Job losses in the North Sea oil and gas sector are expected to slow as the crisis hit industry approaches “rock bottom.”

New research has found that more than two thirds of companies in the industry have shed staff in the past six months, and four in 10 have cut pay or moved to change benefits.

The survey – conducted by Aberdeen and Grampian Chamber of Commerce (AGCC) in partnership with the Fraser of Allander Institute – predicted more pain to come, but also said the crisis within the industry could be reaching a “turning point.”

Two out of three respondents said the sector had already reached the bottom of the current cycle or will do so within the next 12 months.

A further 25% said they expected the industry to reach its lowest point within two years.

Companies are also looking for new revenue streams, with more than half expecting to move into the renewables or decommissioning arenas within the space of five years.

“We’re likely to remain in an uncertain position through 2017 and ‘the bottom’ will arrive at different times and feel different for each company,” James Bream, AGCC research and policy director, said:

“It is clear that companies are striving to become fitter, leaner and they are working hard to look for new markets to secure their future and employment levels where that is within their control.

“There is no question of complacency in the north east and our brilliant people will continue to demonstrate that the oil and gas sector should be considered a success story in generating economic value for the UK economy.”

While it was found that more companies had reduced both their permanent and contract workforce than at any point in the history of the survey, there were some positive signs.

Six months ago, operators were predicting a 17% cut in numbers.

That figure that has now fallen to 5% as optimism over the future direction of the industry has improved.

However, the research found that significant challenges for the sector remained.

In the spring of 2013, 79% of contractors were working at, or above, optimum levels.

The subsequent fall in the global oil price has led to that figure falling to just 12%, the lowest level since the survey began in 2004.

The research also found the industry faced a number of ongoing challenges – with the low oil price, future skills shortages and the UK’s exit from European Union all on the horizon.

Of the companies surveyed, 58% said they expected no impact from Brexit, but 39% said they expected it would have a negative effect on their business.

Just 2% said they expected Brexit to be positive for their company.

Uisdean Vass, oil and gas Senior Counsel at survey sponsor Bond Dickinson, said: “The green shoots of recovery may be beginning to push through.

“People are slightly more optimistic about the future for both the UKCS and the international oil industry but the improvement is from a very low point.

“The industry has had to adapt and embrace change and agility and companies are emerging from the oil slump as far leaner operations that are more competitive on price and performance.

“Sadly, this has come at the great cost of many thousands of jobs but companies who have shed staff have simply had to rationalise or die.”

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