The health, economic, and oil price crises during the coronavirus pandemic hit the UK offshore oil and gas industry just as it had recovered from the previous oil price collapse in 2015-2016.
Operators had returned investing in the UK North Sea and the supply chain had started to feel the positive effects of renewed optimism after the 2016 oil price lows.
But this year’s COVID-19 ‘black swan’ upended all forecasts about the global economy and the oil and gas industry and is likely to alter people’s behaviour and mobility patterns for months and years to come, potentially changing the trajectory of global oil demand in the long term.
The UK offshore oil and gas industry and its supply chain were hit hard by the pandemic and the subsequent crash in global oil demand and oil prices. Industry estimates that around 7,500 jobs had been made redundant by early July, after warning in late April that the sector could lose up to 30,000 jobs within 18 months if market conditions persist.
Between April and July, oil prices doubled to around $40 per barrel, but operators have slashed capital expenditures (capex) for this year. There is high uncertainty about what would next year bring for the oil and gas industry.
The workforce in the UK offshore industry has suffered from this year’s collapse. Yet, going forward, the sector and its employment numbers could benefit from new technology and a green recovery, through upskilling the existing workforce and training new recruits to be ready for a more digital future of offshore operations.
Even before the current crisis, OPITO, the global not-for-profit skills body for the energy industry, said in 2019 that advances in technology, internationalisation, and the transition to a lower-carbon future were accelerating demands for changing skills in the oil and gas sector. The UK offshore industry will need technology-savvy, multi-skilled, and increasingly flexible workforce as the sector changes toward more digitally-enabled operations.
Roles in data science and automation, which do not currently exist, will be needed in the coming years, OPITO said.
After the COVID-19 crisis, the opportunity in the UK offshore sector lies in a sector deal with the government and employing more people in more hydrogen, floating wind, and carbon capture and storage (CCS) projects that could help the UK and the UK offshore basin on their road to net zero by 2050.
OGUK, the leading representative body for the UK’s offshore oil and gas industry, warned in its Business Outlook 2020: Activity and Supply Chain report that up to 30,000 jobs could be lost over the next 12–18 months, if action to help the sector weather this storm is not successful.
“Our report proposes a three-stage framework to address immediate needs, spur the recovery and accelerate the transition to a net-zero future. This will require us to work closely with the UK and Scottish governments to make the most of the supply chain capability developed over recent decades. At the same time we have to ensure this continues to be a competitive basin attracting the investment we need in oil and gas to meet the UK’s current energy needs, while working together to deliver its net zero target,” OGUK Chief Executive Deirdre Michie said.
By early July, 7,500 jobs in the UK oil and gas sector had been made redundant, Michie told a hearing of the Scottish Affairs Committee on 9 July.
The acceleration to net zero and the plans for a green recovery are opportunities for the workforce in the offshore sector to contribute to those goals, she said.
“The skills that we have in the industry today will be crucial to how we make sure that this industry decarbonises its own activities and then looks to support the economy and the country move to managing its emissions with stimulating carbon capture and storage at scale and, also, the hydrogen economy,” Michie said.
The sector is now dealing with the so-called ‘protect phase’ – to protect the health of offshore workers. Then comes the recovery phase, and then the third phase of acceleration toward net zero, she noted.
In June, OGUK called on the policy makers to not leave behind the energy communities in the green recovery plans.
“We can’t afford for communities like the North East of Scotland or the East of England to be left behind. We urgently need a green recovery which enables our industry to meet as much of the UK’s oil and gas demand from domestic resources while developing the critical solutions which will help reduce emissions in other industries and wider society. This is the fair, sustainable and inclusive transition which will allow the UK to meet its climate ambitions in a way which supports jobs, skills and energy communities,” Michie said.
The offshore industry is going through one of the worst downturns in recent memory, in which the immediate impact of this year’s oil and gas price plunge is greater than in the previous crash. The supply chain is again under stress to stay afloat while operators slash investments and defer projects.
But the skills in the industry, together with new skills in technology and data science areas, will help the sector when oil and gas prices recover. The offshore experience and the supply chain shifting more business to renewable energy projects, hydrogen facilities, and carbon capture and storage projects could also help the UK energy industry and the UK as a whole to accelerate its efforts to become a net-zero economy by 2050. In view of these prospects, training and upskillng of the workforce will be crucial to ensure that the offshore industry is well-prepared for the phases that would follow the immediate ‘protect phase’—recovery and acceleration of the energy transition.
The skills of the workers in the offshore sector and the future skills that employees could gain from training and upskilling could help meet the workforce demands of the green recovery and increased technology use in the energy sector.
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