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

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

@seadog – hats off for your lwayers drafting the contract that way. Fingers crossed for you they don’t lay you all off and pocket the change.

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

Yes this is very possible. The fact he Saudis continue to pump oil whereas previously they have reduced production to push the price back up is very significant. @P-Jay “the price will go back up in a few months” is almost certainly wrong. Yes the Saudi’s need a higher oil price to balance the books but they also have the lowest cost of production, they also have very deep pockets to bear the pain. From an aggressive business perspective they can afford to drive others to the wall. ISIS raises a lot of funds through oil sales, by pushing the price down they materially reduce their funds for terrorism.

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 summation 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 link

Jimmy, the current marginal tax rate on some crude produced in the North sea is 81%. Yes really. It’s a summation 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.