North Sea oil companies "close to collapse"

Graham_Devon

Just wondering if this is true, or a bit of squealing and sensationalism?

The profits made have been vast, apparently, according to previous articles over the last few years. So it seems bizzare that a month of lower oil prices has the same companies close to collapse?

"It's almost impossible to make money at these oil prices", Mr Allan, who is a director of Premier Oil in addition to chairing Brindex, told the BBC. "It's a huge crisis."

"This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country.

"It's close to collapse. In terms of new investments - there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks. Budgets for 2015 are being cut by everyone."

Mr Allan said many of the job cuts across the industry would not have been publicly announced. Oil workers are often employed as contractors, which are easier for employers to cut.

His remarks echo comments made by the veteran oil man and government adviser Sir Ian Wood, who last week predicted a wave of job losses in the North Sea over the next 18 months.

Where does that leave oil rich areas such as Aberdeen? What about the oil money flowing into London?

http://www.bbc.co.uk/news/business-30525539

MFW_ASAP

I wish the "Yes" campaigners had won the referendum, can you imagine the Scottish squeeky bums right now if they had?

C_Mababejive

Oil and gas exploration is a tremendously expensive and high risk operation. There has to be a good return on investment otherwise it isnt worth doing. Cheap oil can have major consequences as well as benefits.

HAMISH_MCTAVISH

It is true to an extent, but it's not quite as drastic as those comments make out, so there's some sensationalism in there as well.

Aberdeen always contracts a bit when the oil price falls dramatically.

Then expands again when it rises.

In terms of the total effect for Aberdeen, it's serious by Aberdeen terms, but that's mild by comparison to what happens elsewhere. When the oil price fell to the $30 range in the recession, our unemployment rose from 1% to 3%. It's now at 1.5%, and it may rise slightly, but that would still be better than elsewhere.

We've had pretty much double digit house price growth here for the last few years, new peaks, etc etc etc, so if it falls back a bit that's hardly a crisis.

The Wood comments last week noted the current oil price, if it stays this low, would require 30K odd job cuts by the end of the decade from the 330K oil workers in the UK. Most of those are not in Aberdeen by the way, we only have around 40K oil workers based here.

A lot of those small oil companies are exploiting marginal fields that rely on a high price, this is one of the things we kept warning the separatists about in the referendum, there's plenty of oil there but a lot of it is not economically viable to extract.

Production will continue, and production is the majority of work offshore, those jobs and companies will continue as they've always done, sweating the assets that have already been paid for. There may be some boardroom panic, or distressed sales, but the production will continue.

Exploration for new wells will grind to a halt, and that is most of the new investment, those exploration assets will be tasked elsewhere and local contractor rates will fall dramatically. But that's a small percentage of the overall workforce.

If oil fell to the 30's and stayed there for a decade, Aberdeen would hurt.

If oil falls to the 60's and stays there for a couple of years, not so much.

So it's very much a tale of two parts....

purch

Currently the Oil price is just noise.

The World was about to come to an end a few years ago when the price skyrocketed, now it's about to end because it's fallen over a short period.

The Economics of Oil needs to be considered over a longer period of time.

GDB2222

The collapse in the oil price was bound to come, given fracking is bringing online much new production and OPEC's reaction of not dropping their production was predictable. Besides that, for strategic reasons, countries want to have their own domestic oil production, for much the same reasons as they want to be food-sufficient. Fracking is viable at $60-75, so that or lower will be the new price of oil.

It makes sense for the lower cost countries in OPEC to keep pumping oil, in order to drive prices down below the level at which new fracking wells are viable. That way they keep their monopoly. It makes sense for current energy importers to encourage or even subsidise fracking, so as to become self sufficient in energy and break the OPEC cartel.

What is likely to be the effect on Aberdeen if oil stays at $60 long term?

GDB2222

ruggedtoast

Does anyone know how much oil and gas the UK uses in comparison to how much it produces?

the_flying_pig

HAMISH_MCTAVISH wrote: »

It is true to an extent, but it's not quite as drastic as those comments make out, so there's some sensationalism in there as well.

Aberdeen always contracts a bit when the oil price falls dramatically.

Then expands again when it rises.

In terms of the total effect for Aberdeen, it's serious by Aberdeen terms, but that's mild by comparison to what happens elsewhere. When the oil price fell to the $30 range in the recession, our unemployment rose from 1% to 3%. It's now at 1.5%, and it may rise slightly, but that would still be better than elsewhere.

We've had pretty much double digit house price growth here for the last few years, new peaks, etc etc etc, so if it falls back a bit that's hardly a crisis.

The Wood comments last week noted the current oil price, if it stays this low, would require 30K odd job cuts by the end of the decade from the 330K oil workers in the UK. Most of those are not in Aberdeen by the way, we only have around 40K oil workers based here.

A lot of those small oil companies are exploiting marginal fields that rely on a high price, this is one of the things we kept warning the separatists about in the referendum, there's plenty of oil there but a lot of it is not economically viable to extract.

Production will continue, and production is the majority of work offshore, those jobs and companies will continue as they've always done, sweating the assets that have already been paid for. There may be some boardroom panic, or distressed sales, but the production will continue.

Exploration for new wells will grind to a halt, and that is most of the new investment, those exploration assets will be tasked elsewhere and local contractor rates will fall dramatically. But that's a small percentage of the overall workforce.

If oil fell to the 30's and stayed there for a decade, Aberdeen would hurt.

If oil falls to the 60's and stays there for a couple of years, not so much.

So it's very much a tale of two parts....

:rotfl:

Talk about a one track mind, H. Took you six sentences to turn a discussion of a potentially far reaching economic phenomenon into a (bullish, natch) round to Aberdeen house prices.

Thrugelmir

ruggedtoast wrote: »

Does anyone know how much oil and gas the UK uses in comparison to how much it produces?

Net importer. So a lower price is actually beneficial.

The issue for the North Sea producers unlike the US fracking operations. Is that the tap cannot be turned on or off.

carslet

HAMISH_MCTAVISH wrote: »

If oil fell to the 30's and stayed there for a decade, Aberdeen would hurt.

If oil falls to the 60's and stays there for a couple of years, not so much.

So it's very much a tale of two parts....

If oil fell to the 30's and stayed there for couple of years, Aberdeen would close. and be deserted

If oil falls to the 60's and stays there for a couple of years, Aberdeen would hurt badly.

It says on the BBC website that they need $80 a barrel to break even,
Quote:
And as a lot of production ceases to make money below $80 barrel (it's now in the region of $63), North Sea producers and those in their supply chain now face pressure to cut costs sharply.