There is no “silver bullet” answer to the problems facing the North Sea as oil prices remain at around half the level they were last year, the boss of Wood Group has said.
But Bob Keiller, the chief executive of Wood Group, pointed to the “higher cost culture” in the North Sea basin as one area that will need adjusted in order to ensure that jobs in the region remained sustainable.
His firm Wood Group was among the first to cut the rates it paid to independent contractors last year – not once but twice.
According to the firm’s annual accounts for the year, Wood Group managed to save its North Sea customers such as Talisman Sinopec, BP and Enquest about 20% of their costs with the move.
Mr Keiller admits it wasn’t easy but it was necessary – and most of the 1,300 workers affected “accepted” the move, he insisted.
“It is never a pleasant thing to do to ask anyone to take a downturn there,” he told the Press & Journal on a phone call from London.
“The consultation with the UK contractors during the first round of cuts set the stall out. By the second round of cuts we did, it was accepted pretty well by most of the people in the organisation.
“It probably wasn’t welcome but they accepted it was a necessary part of the market correction.
“We treat people with respect at all times. This is not about being vindictive. It is an adjustment in response to market conditions. Just the same way these rates went up considerably in the last three to four years.
“Some people choose to work in the role of contractor as opposed to taking staff jobs. They get the upside and the challenge in equal measures,” he added.
But he also said that the situation facing the North Sea wasn’t all doom and gloom.
He said the new regulator, the Oil and Gas Authority led by Andy Samuel “has the ears of the right people” in the industry already which was “encouraging”. Nor does he expect a “sudden rush to the door” to decommission rigs and other assets that would prevent the maximising of economic recovery of hydrocarbons.
But he does worry about the continuing lack of any new exploration and project developments on the horizon.
“If you look at Oil and Gas UK’s figures, they reckon 2/3 of production is still viable at $50 a barrel.
“It is not all gloom and doom in that sense.
“Where it worries me is we don’t have an attractive investment environment for new projects, drilling and exploration activity, which ultimately becomes the feedstock for the whole industry.
“If that were allowed to disappear that would be worrying.”
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