Strike threatens to further undermine UK North Sea’s competitive position

Thrugelmir

Just the news Nic and Alex must have been dreading.

Perhaps like the UK’s coal mines in the 1970s, Britain’s offshore oil and gas-fields are not as attractive an investment opportunity as they once were. After producing 42 billion barrels over fifty years, escalating costs and limited exploration opportunities now mean there are an increasing number of more geologically and fiscally attractive locations elsewhere. Any strike action would be likely to reinforce this situation, pushing up the costs and risks of doing business in the UK North Sea.

Oil and gas is one of the most international of business sectors, with capital flowing freely across borders. Multinational oil companies assess and compare projects across the globe when they make investment decisions, and strike action would inevitably push UKCS projects further down the list. As well as persuading some companies to move their investment elsewhere, a strike – combined with the current low oil price - could push others into job-shedding mergers or even bankruptcy. So if the strike goes ahead it will inevitably mean lower UK oil and gas production and fewer jobs in the longer term.

Bill Murray, chief executive of the Offshore Contractors Association, has already pointed this out: "The need to make efficiencies and increase productivity in order to prevent further redundancies and prolong the life of the North Sea is well understood by the industry following a period of unsustainable cost inflation. Strike action would only serve to make investment in the North Sea less attractive and jeopardise the long-term future of the industry.”

On the other hand, if pay and conditions are cut, the labour force is mobile enough to move to where things are better. A survey by recruitment group Oil and Gas People of more than 1,000 North Sea workers showed that more than 70 per cent of UK-based respondents would consider moving overseas, where they believe they will find better job security, conditions and wages. Kevin Forbes, managing director of Oil and Gas People, said: “This is bad news for the UK industry. Only six months ago it was reporting a huge skills shortage.”

The two unions involved in the threatened UK action are the GMB and Unite, both of which claim there is massive support among their members – who on average earn just under three times the average UK wage - for the action, despite the massive challenge the sector is facing from low oil prices. The GMB Union said there was “overwhelming support” for an official strike ballot in a similar vote among its members at the end of March, although it didn’t give an exact figure.

Unite said "knee jerk cuts to jobs and standards" would undermine "future prosperity and safety" in the industry. It said 93.5 percent of members covered by the Offshore Contractors Agreement (OCA) were in favour of proceeding to an industrial action ballot, “which could affect operations on nearly every installation across North Sea.” About 2,500 workers, including electricians, plumbers, mechanics and riggers, will be asked to consider a range of options, including strike action.

The unions’ main objection is the change to shift patterns from two weeks on and two weeks off, to three weeks on and three weeks off, which they say could affect safety. The GMB claimed that “proper risk assessments and consultation have not taken place and the new rotas will have an adverse impact on member’s safety, health and quality time”.

The unions are also objecting to job cuts, which they claim already amount to 10,000 in the offshore sector since the oil price slump. But it is difficult to see how strike action could possibly improve the outlook for employment – quite the reverse, unless public funds are brought in. The unions should perhaps be more honest with their members, and warn them that while action might safeguard current pay and conditions in the short term, it could also help ensure the jobs will not be there for the next generation.

The GMB claimed the cuts were “blatant opportunism” on the part of some of the oil companies and contractors. But the challenge facing oil and gas companies is very real – for example, data from insolvency specialists Begbies Traynor, reported in The Telegraph, showed that the number of UK oil and gas businesses experiencing “significant” financial distress increased by 69 percent to 486 in the fourth quarter last year, compared with 288 companies a year earlier. Julie Palmer, partner at Begbies Traynor said: “In the absence of successful consolidation, we expect that as many as fifty companies in the sector face administration in the next eighteen months.”

The unions are now putting together an electoral register that is robust enough to withstand any potential legal challenges, a process which could take some time, according to the GMB. In the meantime, the industry will be hoping the unions don’t take offshore oil and gas down the same route that put the final nails in the coffin of UK coal.

http://www.offshoreaberdeen.com/focus/opinion-strike-threatens-to-further-undermine-uk-north-sea-s-competitive-position,offshore-aberdeen