A “hard Brexit” could lead to the shutdown of North Sea oil and gas platforms, Oil and Gas UK has warned.
The trade body has released its 2018 economic report, warning that plans to leave the EU could cause a “skills shortage” for vital North Sea services such as Emergency Response and Rescue Vehicles (ERRVs).
It also highlights implications for movement of critical equipment and for growing the UK’s share of the global oilfield services market.
Without standby ERRVs, “platforms would have to shut down operations and production”, according to the report, which said the emergency vessels may not be able to operate if there are issues with recruiting engineers from in or outside the UK.
Oil and Gas UK said around five percent of the total workforce comes from other EU countries, who also make up seven percent of workers offshore.
The report adds that it is “vital” arrangements are put in place between the UK and the EU to allow “continued frictionless movement of people”.
It states: “Some vessels working offshore such as Emergency Response and Rescue Vessels (ERRVs), require skilled engineers.
“If there are difficulties in recruiting them from in or outside the UK, then the ERRVs will not be able to provide the vital standby service to offshore platforms – without which the platforms would have to shut down operations and production.”
Oil and Gas UK warned that a “hard Brexit” scenario could threaten the international competitiveness of the North Sea.
Another concern lies in delays to crucial equipment for North Sea operations coming from the EU, which currently face no customs checks or border delays.
The report cites the example of Bulgaria, where goods took four days to travel to Aberdeen prior to the country joining the EU, but could typically be delayed a further week at border control.
It said “there are concerns that similar delays could be reintroduced when the UK leaves the EU, affecting vital pieces of equipment for operations which currently face no customs checks or border delays”.
The ability of the UK-based companies to service international projects must also not be affected by Brexit, according to the trade body.
It comes as the industry seeks to greatly grow its share of the global oilfield services market as part of the Oil and Gas Authority’s Vision 2035, which involves plans for the supply chain to raise £500billion over the next 17 years.
The trade body has three key requests to the UK government on Brexit – maintaining frictionless access to markets and labour, maintain a strong voice in Europe for the industry and protect energy trading and the internal energy market.
The group is set to officially publish its response to the UK government’s white paper on Brexit in the coming weeks.
Report author, and the organisation’s market intelligence manager, Ross Dornan said they are seeking more information from the government on its stance, however the industry “might have to be realistic about what can be achieved”.
He said: “Our focus has been on working with Government to ensure they understand what our industry needs.
“Frictionless access to goods and services is vital as is ensuring we have a strong voice in Europe. Our industry’s role in maintaining security of energy supply and contributing significantly to the
UK economy and to the low carbon future also needs to be fully understood.
“These priorities along with safeguarding our role in energy trading and the internal energy market will form the core of our submission to the Government’s White Paper.”
Paul de Leeuw, director of the Oil and Gas Institute at the Robert Gordon University, said there is potential for a “domino effect”.
He said: “Nobody knows what the full impact of Brexit will be but what we do know is that it is a 24-hour a day industry and anything that blocks access to skills and equipment could have an impact. However this is not a unique problem to the oil and gas industry.
“If you think about what plays out in the North Sea, we have helicopters crossing borders, ERRVs crossing borders and when that bit of the chain is stopped, it could have a domino effect.
“The government gets that and that’s why the transition mechanism is in place.
“In a hard Brexit scenario, with no transition process in place, that’s when the domino effect could happen.”
His colleague, John Scrimgeour, an emeritus energy advisor at Aberdeen University, said the oilfield services sector is used to handling risk.
He said: “Business all over the world deal with risk all the time so adding uncertainty that they can’t manage themselves tends to multiply the risk. It’s just something in a risky business that they can do without.
“It causes uncertainty and it risks movement of personnel. The mitigating factor for me is that oilfield is better at risk management than many other industries.”
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