Industry report reveals changing face of UK oil and gas industry employment

Out-Law News | 11 Dec 2014 | 3:21 pm | 2 min. read

Total oil and gas industry employment could fall by as much as 35,000 over the next five years, partly driven by an anticipated 50% fall in UK capital spending, according to an industry report.

However research by EY into industry employment trends, commissioned by industry bodies and the Department for Business, Innovation and Skills (BIS), estimated that 12,000 new jobs would be created in the sector over the same period. Firms told EY that they anticipated the need for more decommissioning skills, enhanced oil recovery and technological skills, including the remote operation of vehicles and systems, before 2019.

"The decline in UK capital expenditure is likely to be partially offset by an expected 34% increase in decommissioning spend, together with growing demand for enhanced oil recovery (EOR) skills," said the report. "In addition, the digitalisation of oil fields and the potential development of onshore shale would open up new opportunities for talent development in the sector."

"The proportion of the workforce supporting overseas projects outside of the UKCS [UK Continental Shelf] is likely to increase from 26% to 35% between 2014 and 2019, as global capital expenditure is forecast to rise. Over half of respondents said that their future skills demand will be driven by continued expansion into emerging markets, where UK talent is in high demand. Looking ahead, estimates suggest remaining reserves within the UKCS could provide energy for at least another 35 years," the report said.

The report was commissioned by BIS, offshore trade association Oil and Gas UK and sector skills organisation OPITO as part of the UK government's industrial strategy. Business minister Matthew Hancock said that the report, which also found that 86% of companies had graduate or apprenticeship programmes in place, would "give businesses across the UK the tools they need to create more skilled jobs for Britain's young people".

The UK offshore oil and gas industry currently employs around 375,000 people, accounting for 1 in 80 of the UK workforce; including 94,000 jobs created as a result of local activity generated by the sector. The research found that the oil and gas industry currently employs a lower proportion of over-55s and higher proportion of under-35s than the national average, but that less than a quarter of employees in the sector were women.

The report also found continuing skills shortages preventing firms from recruiting, with 70% of respondents saying that they were continuing to experience difficulties. However, it said that the scale of the shortage was "markedly less pronounced" than in previous years and was limited to "specific" areas including technical safety, drilling, engineering, geosciences and business support services, predominantly in the country's oil and gas "hub" of Aberdeen.

"Almost 43 billion barrels of oil and gas have been extracted from the North Sea, and with potentially some 24 billion still to come, this industry will continue to provide careers here in the UK for many decades to come," said Stephen Marcos Jones, business development director at Oil and Gas UK.

"As one of the most expensive offshore basins globally, with development costs per barrel having increased five times over in the last ten years, this report couldn't have come at a more crucial time for the sector and we believe its guidance will prove invaluable in setting the skills agenda for the sector," he said.

The UK government announced a package of reforms and additional support for the country's oil and gas industry earlier this month, prompted by industry expert Sir Ian Wood's review on how best to maximise recovery of remaining UK Continental Shelf (UKCS) reserves. These included the introduction of a 'basin-wide investment allowance', designed to reduce the effective tax rate for companies investing in the future of the UKCS; financial support for seismic surveys in under-explored areas of the North Sea; and new tax breaks included in this year's Autumn Statement.