[Closed] N Sea oil industry. What's the feeling at the moment?

North sea didnt like me anyway,sands not great for my kit on the northern uk sector. Although we are still on track for a project in dutch southern sector end of q2 , and a new platform instalation on going atm and using our less fancy but stronger products despite what going on..... And we are progressing on a big hpht project in norgwegian sector

All in all we have more work in north sea than we have for the previous 5 years of high prices.

According to the speach we had last week my specialist area growing at a high % and our order books are healthy manf are back to 2 shifts and we are using aberdeen as a skills base for expertise , manufacturing and engineering even though no work is run directly from there.

How ever they are trying to use the market as a whole to try and cut our compensation,......and getting serious push back.

Off to turkmenistan for xmas though 🙁 - thats short, low rate gas wells though.

Off to [s]turkmenistan [/s] hide under the stairs for xmas though

Give up this illusion that you work away form home. 😉

We have a very healthy order book for supplying valves to the north sea and beyond. They don't seem to show signs of slowing down just yet. Late 2015 will be interesting to see what happens though.

Same old, though I see BP are the latest to cut a load of jobs in Aberdeen

edit: didn't notice you meant north sea only

One step back from the sharp end of t_r and the rest, oil&gas performance improvement software; however an alternative take is that the reduced price - for how long, no-one knows - means that improvements, efficiencies and reduction o losses (or deferred production) may mean higher investment in some areas..

We had a 5% cut in our bonus but the 2 on 3 off rotation looks to still be staying, it he OPEC countries just want to stop it being viable to produce west Texas oil, once they have broke. All the small companies and the like it will go back up.

We had a slightly quiet spell around the end of the summer for new orders, back to more or less normal now.

Still getting plenty interest from recruiters so I think companies still need analysts/engineers (for now at least).

Its dire according to my brother and my dad. My dad's had to take a pay cut - the first and only in 20yrs working on the rigs, and my brother's company, a global company that provides services to the oil companies (wire line testing), is decimating its workforce. He also tells me Shell are getting rid of 2000 people and other oil companies are getting rid of similar numbers of people.

Time for a war to push the price up?

It is slowing but obviously certain areas are going to be more affected than others. I'd slightly ignore whats going on at BP they were going to cut jobs anyway as over the last 5 years they've sold something like 40% of assets worldwide but have nearly the same number of staff as before, the board were going to notice that anomaly eventually.

Not looking good for the future. I so a fair bit of work at the early stages of things and there's not too much coming. Next to no exploration drilling this year. This means that folks at the later end of things are really going to feel the pinch in the next couple of years. The latest round of drops in oil price aren't helping but there's more of an underlying problem with massive cost increases and ageing infrastructure. We really need to work out a way to get the lift costs down to keep the industry alive. Lean(er) times ahead for a good few years I reckon.

I can confirm its pretty grim at the moment. Maybe unlike the posts above I work for an operator and the axe man cometh to the tune of 20% of staff. That's across the board but expect non subsurface staff to be hit potentially even more. I've been around the industry for just over 20 years so these things do happen and companies do get fat so now is the time for a diet and refocus of the business. What does perplex me is the ratio of subsurface staff to all the others is about 1:10, I've never understood that you 'need' say 1 geologist and 10 other legal/procurement/hr/middle management.

This was the reason I moved out of a North Sea centric role as its only going one way...

my wifes quite nervous at the mo (geophysicist at a small north sea company)

but she reckons the real news is rumours of a BIG buyout in the pipeline

There's been an underlying message for the last couple of years that operating costs are way too high in the north sea so there's been a slow squeeze on all that. Oil prices of late are not helping but its certainly getting the message home that we have to reduce costs.
Bp are going to announce job cuts on Wednesday but they are more concerned globally and are slaves to their share price so not really a marker for the north sea. i'm kind of surprised they're still around.

Kimbers, thats been going round on and off for a long time. Having said that now could be the time for it at a relatively cheap price but there are a few things which don't really add up. The 'purchaser' has been refocusing the business and offloading non core fields and assets so why potentially get more out of scope developments and there is the small case of ongoing litigation. Never say never though....

Sounds very similar to Oz mining recently, when it's good it's great when it's not everybody goes home.

I think most people who have been in the oil business for a while have seen this before at least once. This is why oil companies have to pay good salaries - because everyone knows that things can get bad very fast, and then what do you do with a degree in geophysics?

The crazy thing is that everyone knows that the price will go back up again, but they act like today's trend is the permanent one. Just like they pretended that the "up" trend was the permanent one.

wobbliscott - Member
Its dire according to my brother and my dad. My dad's had to take a pay cut - the first and only in 20yrs working on the rigs, and my brother's company, a global company that provides services to the oil companies (wire line testing), is decimating its workforce. He also tells me Shell are getting rid of 2000 people and other oil companies are getting rid of similar numbers of people.

What do your brother and dad do? Plenty of trades are booming at the moment. As the platforms get older the maintenance of them becomes a full time business. Getting a bed space at the moment is not likely.

Shell do not actually employ that many people offshore, they contract out the majority of the roles they previously had shellies do. But with the decommissioning of the Brents then a lot of people will eventually will need to find pastures new. But that is taking so long to do that panic shouldn't set in yet.

The real issues are the lack of drilling in the N.Sea and the sky high wages (how you can pay someone £40k to do an admin assistant type role is beyond me). It's not really the falling oil price at the moment that's the issue. Yes oil sitting below $70 a barrel will put some of the more marginal stuff on the back burner for the time being, as the majority of the stuff that's been sanctioned and a good bit down the line will mostly go ahead.

As has been said already it's the back end of 2015 where things will get interesting in the N.Sea due to lack of drilling and if oil doesn't rebound above $80 a barrel as there are a number of fields where $80 a barrel makes them economical.

Edit: Oh and the decommissioning stuff will probably get pushed out even further unless there's an urgent need for it.

Worked in the oil Industry for 15 yrs. Production will slow and the emphasis will shift to research and development. Looking for new fields etc. As soon as the price rises again the emphasis will switch back to production and so the cycle will start again. I don't really associate Aberdeen with oil production as such more of a centre of operations for purchasing and shipping components globally. We have seen a slight drop in the order book but nothing major yet.

I want to buy a disused oil rig as the base of my evil organisation. Obviously I need to be able to tow it to a sub-tropical region. How much would one cost, roughly?

BIG buyout.....wonder what rumour that could be then? I'm guessing that it won't be one of the traditional super majors buying more assets as their global portfolios and likely higher ror's elsewhere globally would preclude this.

Unfortunately when you look at average daily production rates from the top 10 producers in the UK sector of the N.Sea during 2013 you can see just how far production levels have dropped over time. Good job oil price has been what us has been until recently.

Do not know if there is a Johan Svedrup to be discovered in the N Sea or WOS.....wish there was!

Cost is obviously a function of price x consumption. McKinsey have noted that price inflation has far exceeded normal inflation rates and as facilities age, require diesel fuel as they have become fuel gas deficient and more environmentally friendly chemicals to deal with higher water cuts, etc. price of a number of these commodities consumed is directly related to raw crude prices too.

How to solve?

Better fiscal support - better to have some tax revenue rather than none?

Critical assessment of actual required work activity - do we really, really have to do this?

Try to better understand what factors are truly impacting productivity - has increased permitting and planning really pushed work productivity back so far?

Review current rota patterns?

Blanket salary reductions?

However, none of the above help deal with the fundamental reserves and production volume issues.

Shell will buy BP while the oil price is low. All new projects to be delayed or scraped. Some companies will go to the wall as their loans are based on a much high price per barrel. As for the North Sea, everything will be squeezed.

As a processing Geophysicist we are finding that a lot of exploration & processing projects are being canned. Word has it that the exploration should pick up again by end-2015 which doesn't help my order book. Fortunately exploration offshore East and West Africa is thriving 🙂

Just a side noteUltimate ,you in management "how you can pay someone £40k to do an admin assistant type role is beyond me"
I would say if you didn't people would choose a job where they get to sleep in there own bed not on a potential bomb, not fly in a helicopter and see there family at night.
I don't work in admin by the way
You could do as some companies do and replace the labour with cheap Asian labour(on the vessel side anyway) still don't understand why this was allowed and this was on vessels operating only in North Sea

Time for a war to push the price up?

@kimbers market rumours of shell and bp merger, seems a bit unlikely to me

The Norwegian sector is also slowing down with many lay offs.
Statoil have suspended more rig contracts due to over capacity as they put it.
http://tinyurl.com/mzl5u24

@maddyutah, I'm not disputing the wages paid to offshore workers as the risks involved offshore are much more than they are for someone working in an office, so in reality all these people doing on-shore jobs at super inflated wages are the real problem as far as costs go.

A lot of the Aberdeen market is now focused overseas or on the services side as opposed to E&P, so they won't feel the pressure of falling prices until later in 2015.

Kuwait have said they expect $65 a barrel to continue for the next 6-7 months. That added with Saudi selling oil to Asian markets cheap will mean it's not going to go back up anytime soon as Saudi in particular want to get rid of the extra oil coming out of the shale plays in the US, where there cost per barrel is something like $70-$80 compared with Saudi's $12-$20.

In terms of a mega deal, Halliburton and Baker already announced they were merging a few weeks ago now in a $35bn deal. Not sure who else would be making an announcement but the way price is going and the focus on operating costs then I'd be surprised if one or two other big service companies don't follow suit and you'll probably find that some of the smaller independent E&P companies will merge as the low price starts to bite for them.

Some interesting feedback, appreciate it.

I guess in terms of pay rates, then they will be based upon what organisations believe are necessary to attract and retain staff performing particular roles?

Interesting that rate cuts have (based upon press reports) only been applied to certain contract staff to date. Perhaps the industry as a whole needs to consider reducing all employee rates by similar amounts and perhaps, like the public sector, agree a wage freeze for x years? If everyone did it then firms would not have to worry about staff leaving to join their competitors? However, unless oil price increases or new reserves added and production increases this may not positively impact the bottom line for too long.

Norway...yep they have the same issues. Wonder if they will modify their more generous work patterns (in terms of time off) where I believe offshore workers work 2 weeks on and 4 weeks off? Unfortunately moving back to a 2/2 would also hurt employment levels whilst reducing costs. Perhaps that oil fund interest could alleviate the pain by supporting investment in alternative industries which in turn support re-employment.

Risk associated with offshore work? Most certainly, but you would hope that post Piper that all possible risk reduction barriers are in place and functioning correctly. I know some folks who say they would rather take the chopper flight and work offshore than commute to work using their cars due to their personal perception of risk.

The conspiracy theories are good...Saudi's trying to 'curtail' US shale oil, US trying to modify the behaviour of Vlad? Regardless where supply is higher than demand then prices typically decrease. However as investment then production may then decrease prices increase, investment happens and it all happens yet again.....

[url= http://www.bbc.co.uk/news/uk-scotland-scotland-business-30395972 ]35,000 jobs to go [/url]

[url= http://www.eveningexpress.co.uk/news/local/offshore-industry-will-need-12-000-new-workers-by-2019-1.727930 ]12,000 jobs needed[/url]

😕

don't forget all the secret oil fields promised by the Yes campaigners should mean we're swimming in the stuff by xmas

If everyone did it then firms would not have to worry about staff leaving to join their competitors?

Salaries are a red herring - companies cut positions to make it look to the shareholders like they are doing something, and then the next day hire the same people to do the same work as a contractor for a lot more money. Unless you lot are being paid a hell of a lot more than me, salaries are not a significant cost compared with the investments companies make in a project.

DrJ,

I don't subscribe to the concept that new recruits would not enter the industry (not an individual company) if there was a reduction in all current salary levels plus a freeze on increases for a short period. Reason being that where would folks trained and capable take their skills? Yes, some make look to other parts of the world or industries but similar issues are happening elsewhere too. Additionally starting salaries for some functions are not too shabby even with x% reduction from current.

However I do agree with the reduction in salaries, etc being but a drop in the ocean of current expenditures, and don't start to consider the burden of expat v local.

Redundancies and rate cuts are happening all around me at the moment. It's not a relaxing feeling. But I'm personally the busiest I've been for 12 months. I work a lot at FEED and detailed design of subsea projects, but that has pretty much dried up for me in Aberdeen. No big projects will happen in the North Sea in the next two years. Thankfully I'm being kept busy with Perth and Houston projects, plus helping a new business venture being funded by Goldman Sachs.

Perhaps the industry needs to crack the sub-basalt seismic challenge too...

Whether you subscribe or not, it has happened in the past when students dropped plans to study oil related subjects. I used to teach geology and when oil prices were low we had a devil of a job to fill the course.

Anyway, it ain't gonna happen. Companies go to a lot of trouble to keep employees in the dark about what others get, so there's no way in hell that they'll implement an industry-wide pay structure.

Ok, for those who had not started their studies I can see that, but would those who have studies ongoing or have just entered the industry with the key and valued skill-sets (Geo-ists, Engineers, etc) be sufficient to continue to see a potentially declining and decommissioned N.Sea through it's life - assuming they want to work in the region of course?

Unfortunately unless there is proper industry co-operation then a regional (short-term) solution to cost v production will certainly be a challenge to enact.

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

Yes Jim apparently the North Sea industry is going down the toilet! However reading between the lines, my guess would be Premier have had a shit year and they're getting the excuses in now ahead of the market announcement that they'll miss profit forecast for the year.

It's a cyclical industry that has its ups and downs. It'll be fine within 6 months. Just look back at the ladst time prices dropped it didn't last and prices were swiftly back towards the $80-$100 mark.

Premier have been looking into high risk hard to recover in harsh enviroment oil They have a fair bit of investment into these areas in the ns and know that this wont be profitable in these climes.

The ship I work on has just been paid off early from a 5 year contract. Looks like we will be sitting at anchor for about 6 months to a year in las Palmas, Canaries.

It will be a worrying and very dull time. Hoping the company gets us working in the rest of the fleet on a rotation basis. We're getting all right noises for the company though, promises that there is no risk of redundancies, ship is looking good for future work.

But they will say that as Statoil had to pay $350m to us in penalties to cut the contract early. 😯

Not looking good for BP employees / contractors (and I'm tangentially involved here) - http://www.bbc.co.uk/news/uk-scotland-scotland-business-30817678

Pay freeze for us this year, not surprising. Not much work either so that might turn into redundancies at this rate.

Nae pay rises at my lot this year. Or Xmas presents. Office folk got em thou!

Any pay rise for us will be quite surprising. Being sensible I'd rather see my job continue at a lower pay if it came to it. The benefits make a lot of difference, pension, health and death cover, any training needed. I'll be able to find other work, but it'll be through agencies and short term.

Just had the probing texts from one of my old colleagues as things not looking good for those left there.

We were heavily involved with delivering Premier`s new field.... 😥

We've all been put on consultation today so not a good day really.

Interested in which Co's.....no need to name directly....just some clues that would mean something to folks in the industry.

Me? US (Calif) headquartered supermajor, with Abz offices behind the often incorrectly stated biggest hole in UK. TBH, although I no longer have a job with them, I was personally treated well in comparison to some other Co's.

Finding a new job is getting tougher daily 'though....

Don't work anywhere near it, but I share an office with a company which produces temperature sensors for the oil industry and says a few projects have been put back on the shelf for a bit - pretty much anywhere that's not in the middle east - even in the US they're slowing down.

Seems short sighted to me though, Dad is a big wig for Bapco and reckon they won't tolerate a sub $50 a barrel price for long, they need at least $80 in Saudi just run the country - (or there abouts) they've got cash reserves for years but Russia will buckle soon, or there will be WW3, ether way prices will rise within months.

ether way prices will rise within months.

BP seem to think prices will remain at the $50/barrel area for 2 to 3 years.

Benz, know who you mean, I have some mates who work there. Operator here with the main north sea office in Dyce. The packages on offer aren't bad but the issue is (as you say) where to go next. If you go either voluntarily or not there isn't a huge difference unless your nearing retirement.

Of course with a low oil price and a glut of people on the market looking for jobs then it'll be a case of expanding horizons in terms of location. Either way I can see a bumpy few months coming up!

But they will say that as Statoil had to pay $350m to us in penalties to cut the contract early

BP seem to think prices will remain at the $50/barrel area for 2 to 3 years.

The result of the next Opec meeting in June will define the next few years for sure.

Interesting article from Robert Preston on the BBC website today, essentially he is saying the Saudis will keep the price low until a number of US shale gas companies go bust and their backers get their fingers burnt sufficiently badly that they won't invest in the industry again. It's all about market share in the long term, expect the price to stay low for a couple of years.

Juan, perhaps we should now be looking beyond petroleum for sure. There are jobs out there but unfortunately some of those advertised or even offered seem to be being 'postponed' or withdrawn.

We'll know things are really on the way down when Abz Audi cease to become one of the top dealerships by sales.

Having tax on profits cut to 30% would help investment but you have to generate profit in the first instance. I'm sure there are now many fields where production has declined over time such that at current and near-term projected prices they are running at a loss. Issue is that Co's cannot afford to decom them either.

I just hope that any cost cutting does not lead to the creation of high risk situations offshore.

"Interested in which Co's.....no need to name directly....just some clues that would mean something to folks in the industry.

Me? US (Calif) headquartered supermajor, with Abz offices behind the often incorrectly stated biggest hole in UK. TBH, although I no longer have a job with them, I was personally treated well in comparison to some other Co's.

Finding a new job is getting tougher daily 'though...."

Whats your skillset benz. We seem to be one of the few that are hiring. - not schlum or bakerburton.

I've spent the last 4 months negotiating a deal in Dubai. It's paid off big time. Leaving in March......

Yes, see what you did there Benz?. There are quite a lot of vacancies and Australia is still pretty hot at the moment. I think I'm going to ride it out and see if/what becomes compulsory. Having spent 15 years in the service sector prior to moving to an operator I do have a healthy set of contacts who may well be hearing from me. Don't know if I and the family could handle rotation work but that may have to be an option. Maybe we should arrange a little job fare contact share session between us!

Looking at a career change to work offshore too but seems like a bad time to make a move or is it ?

Im heading to oz in march on rotation for 2 pretty large completion campaigns

Seem to be doing a fair bit of recompleting old wells.....which not normal for us.....

Can someone please explain why the oil industry should receive fiscal support / tax cuts? Serious question. When they make shit loads of cash while things are good, how are they complaining of lack of cash in a bit of a down turn.

Because its an industry that creates a significant amount of wealth, invests in a significant amount of R&D, especially into green technologies and 'beyond fossil fuel' technologies, a lot of people outside of the industry rely on its success and it increases the UK's power and standing in the world.

Why would it be a good idea to let it collapse? Who benefits from that?

I don't understand why some people think we'd be better off as an impoverished nation devoid of any wealth, power or influence in the world.

I'm not saying let it collapse, I just don't see why it can't support itself.

I completely realise I'm probably over simplifying things and that the oil industry underpins a lot of investments elsewhere.

Can someone please explain why the oil industry should receive fiscal support / tax cuts? Serious question. When they make shit loads of cash while things are good, how are they complaining of lack of cash in a bit of a down turn.

Jimmy, the current marginal tax rate on some crude produced in the North sea is 81%. Yes really. It's a somethingion of corporation tax (that is ringfenced and cannot be offset to other parts of the business), Petroleum Revenue Tax, and a supplementary tax that was introduced because "profits were too high". Name another business that is taxed to anything like the same degree. Non PRT fields pay at a rate of 62%. I for one don't want to see taxes lowered below that of other companies but at present rates it will accelerate the end of field life for a lot of operators.

I'm not saying let it collapse, I just don't see why it can't support itself.

It can, but not indefinitely at those tax rates.

Can someone please explain why the oil industry should receive fiscal support / tax cuts?

Was gonna reply but gonefishin said it all really. Surely we should be looking to get as much life as possible from the last days of N Sea, not taxing the companies so much that they leave while there's still a lot of oil in the ground? It seems like they make "shit loads of cash" but in fact the return on investment is rather small.

I'm not sure if any of the folks on here can tutor me a bit about decommissioning...

Let's assume a particular field is running at a loss - production well down the decline curve and no sign of sales revenues increasing due to price forecast to remain low for the next x years. Basically running at a loss each and every day. In any normal business business would likely shut down. However, if company running said field do not have a positive balance sheet / cash reserves, who pays for the decommissioning?

DrJ also makes a good point....it might surprise some folks how little the return on investment can be.

Benz

To answer your question on decommissioning, the companies get tax relief to the amount of the decommissioning during the years that the field is making a profit. The company knows about the liability and should make allowance for the period when there will be a negative cashflow. Companies are vetted by DECC (the government)that they have the financial strength to sustain these negative cashflows.

Iirc if you take out revenue from north sea oil the uk economy has flatlined since the 90s

There was an ace BBC doc on a while back called the oilmen I think ?

Edit this was it
http://www.bbc.co.uk/programmes/b00lbnyn

At the high oil prices we saw the oil industry and North Sea oil is highly profitable. Not surprisingly in a recession like we saw from 2008 onwards the government sought to raise extra tax from the industry in order to minimise the burden on individual tax payers. At these lower prices it is right that we reducethe tax burden and that is exactly what Osbourne has said he will do in the budget. However, there will job losses and there will be a reduction in investment, its going on all round the world. the interviews I saw on TV last night the oil workers where realistic, they know that's the name of the game. Sturgeon of course reverted to type and just blamed everyone else.

I'm sure I also heard that most of the cash was sunk into the property market in the south east, leading to our current housing boom reliant economy !

@kimbers Russian oil/gas money more likely. Also if what you say has an element of truth think about why those people chose not to invest in other businesses, they have a free choice.

Schlumberger announced 7% cut in workforce, 9,000 jobs [url= http://www.theguardian.com/business/2015/jan/16/schlumberger-job-cuts-oil-prices-plunge ]link[/url]

Jimmy, the current marginal tax rate on some crude produced in the North sea is 81%. Yes really. It's a somethingion of corporation tax (that is ringfenced and cannot be offset to other parts of the business), Petroleum Revenue Tax, and a supplementary tax that was introduced because "profits were too high". Name another business that is taxed to anything like the same degree. Non PRT fields pay at a rate of 62%. I for one don't want to see taxes lowered below that of other companies but at present rates it will accelerate the end of field life for a lot of operators.

It really frustrates me that most news articles mentioning the oil industry asking for "tax cuts" omit these tariffs and the higher rate of corporation tax paid by the industry.

UK tax revenue from O&G industry

2008/2009 = £12.4 billion
2013/2014 = £4.7 billion

TBH would not have been surprised if tax rates increased to make up for the reduction....we'll see what Dod has to say in March....

Saudis will keep the price low until a number of US shale gas companies go bust

I was in Saudi back in Nov, and the papers there were reporting that as well as battering shale, they wanted to batter Russia and Iran (for Syria), and that they have enough capital to keep the prices like this for the next 3 years.

We've currently got lots of work in Australia (where I'm off to shortly), China/Taiwan and the SAP.

Not recruiting just yet though.

Saudis will keep the price low until a number of US shale gas companies go bust

I don't think that's true in the slightest.

America is the odd one out in the world as it has a ban on exports. Therefore the oil price worldwide only really acts as an upper limit to them, if it's cheaper to use domestic reserves then that's what gets used, and shale to them is pretty cheap.

Counter intuitively if they lifted the export ban their gasoline price would drop as the shale oil could be traded on the open market, further dropping price as the USA is set up for refining heavy sour crudes like PCF or Maya so they could export the shale oil and import the heavy crudes.

As Sobriety said, this is really aimed at hurting Russia.

Therefore the oil price worldwide only really acts as an upper limit to them, if it's cheaper to use domestic reserves then that's what gets used, and shale to them is pretty cheap.

At $100 per barrel, US shale is economic. At $50 it's not. There has been a lot of production of shale but very little actual profit.

It's also battering everyone whose pension fund invested in oil company stock ie all of them.