Scotland’s oil city suffers as prices plunge


The Scottish oil city of Aberdeen, long used to the energy industry’s ups and downs, is gritting its teeth and praying for the price of black gold to rise once more.
“The situation is critical, 65,000 jobs from the industry and the supply chain are already gone. Some companies say 2016 is a black hole,” said Jake Molloy, responsible for offshore workers in the RMT trade union.
“All of Aberdeen is affected, and there’s worse to come.”
An austere city of grey granite on Scotland’s northeast coast, Aberdeen’s booming oil industry once fueled nationalist ambitions for Scottish independence, as well as a rash of posh shops, upmarket eateries and swanky hotels.
Now worry reigns: restaurants are emptier, hotels quieter and taxis are idle as subcontractors and other workers who once serviced nearby North Sea oilfields are laid off.
Oil prices have plunged to about $50 (44 euros) a barrel from around $115 in June last year, reducing the commercial viability of many fields and accelerating plans for their decommissioning.
“I knew there were redundancies but I was surprised they chose me, after I had worked hard for years for them,” said Raymond Lovie, 48, who worked for a subsea oilfield infrastructure manufacturer.
Unemployment came as a heavy blow to Lovie, his voice catching as he explained he had just adopted a young boy.
In what is usually a highly mobile industry, jobs abroad are also drying up as low oil prices squeeze industries worldwide.
“Normally they would transfer to other countries, in Africa, Mexico… but every region in the world is contracting and making sure their own people are employed,” the RMT’s Molloy said.
The member of parliament for Aberdeen South, Callum McCaig, said he recognized the city’s “difficult situation” but added that Aberdeen’s unemployment rate was still lower than elsewhere in Scotland.
The huge task of decommissioning North Sea oil and gas facilities is set to gather pace, bringing new employment opportunities that could compensate for some of the jobs lost.
Engineers will have to carefully dismantle hundreds of platforms, pipelines and other structures, some as tall as the Eiffel Tower, in deep, icy and turbulent waters.
“It will be a £50 billion to £60 billion ($77 billion to $93 billion, 68 billion to 82 billion euros) process over at least 30 to 40 years. But decommissioning will not reverse the number of jobs if the industry gets smaller,” said Chris Young, author of a report for auditing and tax consultancy KPMG.
Industry body Oil & Gas UK said the number of jobs supported by the sector has contracted by 15 percent since the start of 2014 to 375,000.
The government is treading carefully, given that the closure of some wells could make exploiting others more expensive, which in turn may lead to their closure.
A study by energy, metals and mining consultancy Wood Mackenzie showed that 140 oil fields could be closed within five years, and that even if oil prices rise to $70 a barrel, 50 fields would have to cease activity earlier than expected.
Meanwhile, new field openings continue to decline, with 14 drilled last year and fewer likely this year.
“Decommissioning is inevitable but it is not necessarily a bad thing. It will give plenty of work to the service industry,” said Colin Welsh, chief executive at Simmons & Company, an investment bank specializing in the energy industry.
Lawmaker McCaig has called on the government to use tax breaks to ensure that companies picked for the task hire Scottish and other British supply chain businesses.
“Decommissioning is an opportunity for Aberdeen to open a new phase, to develop new technologies and skills.”


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