North Sea oil and gas strikes against background of offshore industry crisis

As offshore workers on oil rigs operated the Wood Group continue their 48 hour strike, Brian Parkin puts the strike in the context of the wider crisis facing the oil industry, arguing solidarity with these workers is crucial

Oil_platform_in_the_North_Sea

The strike actions in the North Sea offshore oil and gas industry were ratcheted up as the strikes were increased to 48 hour duration on Thursday 4 August on the Shell Alpha, Brent Bravo, Brent Charlie, Nelson, Gannet, Shearwater and Curlew platforms. In addition to all-out strikes, 3 hour stoppages plus an overtime ban has spread to platforms manned by Unite and RMT organised offshore workers.

Wood Group

The platforms that are licenced by Shell are operated by the offshore services company Wood Group based in Aberdeen. Since the fall in oil prices they have cut wages and offshore allowances by up to 30%. This is on top of over 75,000 jobs in the North Sea offshore industry and its direct supply chain having been lost in just over 18 months- during which time the traded price of Brent oil has plummeted from $118 per barrel, down to $29 per barrel by November 2015 and then, with a ‘dead cat bounce’ back up to $42 per barrel at the time of writing.

And in addition to pay and allowances cuts, new ‘3 on 3’ working rotas based three weeks offshore on seven 19 hour shifts per week followed by three weeks onshore on basic stand-by have been imposed. Under such gruelling conditions and with platform manning cut to the bone, there are now very real fears of an erosion in safety standards- particularly with the approach of the 30 year anniversary of the Piper Alpha catastrophe.

Solidarity ahoy!

Since the strike actions began just over one week ago, there has been a mass of solidarity messages and offers of support for the Wood Group workers. Workers in extractive industries across the world have been in constant and direct contact with the strikers who are effectively occupying their platforms. And what this has revealed is the extent to which a global offshore industry- often based on peripatetic and migrant labour- has created a genuinely international workforce with strong bonds of solidarity. And given this new-found and unofficial unity, it is not too fanciful to consider the prospect of an ‘Offshore International’ of workers united by their common experience of cowboy employers, hazardous working conditions and job insecurity ever driven by the capricious trends of the energy markets.

Crisis and contraction

The duty of socialists is to always support workers in struggle – but equally, it is the duty of socialists to warn workers of the dangers beyond the immediate period of their struggle. So in the case of the current – and possibly long-running N Sea offshore dispute there are aspects of the industry as well as the international energy markets that have to be considered.

Firstly there is the jobs attrition that has taken place since 2014 and the extent to which this could impact on the industry’s ‘critical mass’ and its ability to reproduce itself.

UK Oil and gas employment
(Source UK Oil/gas and UK Gov 2015).

Total offshore/onshore employment Jan 2014 : 448,000

Comprising : 36,000 direct offshore, 200,000 supply chain, 112,000 associate services, 100,000 processing and export products related/goods and services

By Jan 2017 the union Unite has suggested that the total job count will fall to at least 328,000 before the industry as a whole enters into a drastic reduction in capacity. This is indicated here by a projected collapse in offshore investment:

UK Offshore capital investment 2014-20 (£bn) (Source UK Oil/gas forecast May 2016).

2014 (Jan)      £15

2016                £8

2017                £7

2018                £5

2020                £2

Also, now compared with the beginning of the North Sea oil and gas boom where initially a few ‘giant’ high reserve and high pressure fields sustained a growing output, the industry in the four main North Sea sectors (Central N Sea, N Central N Sea, North N Sea and West of Shetland) now comprises some 300 smaller and discontinuous fields requiring a continuously maintained and massive 20,000 km sub-sea infrastructure of pipelines, well heads, pressure valve stations and offloading terminals.

As the internal pressure of these more marginal fields falls, then the premature abandoning of these reserves becomes more likely as the world traded price of oil remains low (as expected). Hence UK Oil/gas (May 2016) projected fall in activity from the current ~300 fields to just 150 by 2020.

This catastrophic trend is already reflected in the sharp decline in N Sea exploration and appraisal activity.

N Sea exploration rigs in operation to August 2016 (UK Gov May 2016).

No of rigs

Jan 2015                     57

May 2016                    27

Aug 2016                     19

This sharp decline in both production activity (which can be prolonged with the use of licenced gas or water injection) and exploration is forecast to take place, even if the oil price was to rise above $85 per barrel- double the price as of August 2016.

Falling revenues and rising costs

The decline in revenues from N Sea oil and gas has impacted severely on the economic hopes of the Scottish government. In the 2014-15 financial year revenues were around £16 billion. But within one year this had fallen to £3.2 billion with income now barely breaking even and within two financial years expected to go negative.

This contrasts starkly with current projections for the costs of end of life decommissioning of the offshore infrastructure, which will require some £35 billion to meet international protocols and conventions. And as we now see with Shell and their withdrawal from the Brent fields, companies are less inclined to adhere to their decommissioning obligations against the certainty of declining production revenues and profits.

Against this declining financial situation we also have to consider the sudden drop-off in the contribution that North Sea oil has been making to the overall UK downstream petrochemical industries with only 20% of crude intake into UK refineries coming from N Sea sources.

Conclusion: A strategy needed

Earlier on in this article it was stressed that the duty of socialists in the here and now is to maximise support for the offshore strikers. But beyond the strike horizon there is the by no means lesser matter of the future of the UK continental shelf hydrocarbon resource and whether or not is can be conserved and responsibly exploited as a long-term social asset.

In the meantime the unions must rapidly enlist real solidarity by mobilising support from the massive workforce within the onshore supply base- workforces that will be hammered in the event of the offshore sector being allowed to go into free fall. It also means that the unions have to intensify their campaigns to bring the hydrocarbon industries as a whole into union membership.

But it is also important that independent militant currents such as the Furies be allowed to raise worker consciousness and confidence through their ongoing unofficial and imaginative actions that have done so much to expose the offshore employment abuses and rackets.

It is also time for the Scottish government – particularly the Scottish Greens and the more radical elements of the SNP – realise that if the offshore industry and its onshore processing sectors are going to have secure and long-term future- they are going to have to break from the grip of corporate petro-blackmail and champion the concept of public ownership and democratic control of these irreplaceable assets.

What is certain is that under private operation and laisse faire licensing regimes, a long-term natural endowment that could provide the feedstocks for a new green and hi-tech hydrocarbon revolution, will be squandered and in the process, its workers increasingly alienated and degraded, and ultimately, wasted. A vital step in preventing that outcome will be the victory of the North Sea workers now. But the next stages in hammering-out a strategy of bringing such strategic assets into public ownership and under democratic social control cannot be ignored.

And given some 40 years, in which a working class and its associated social movements and campaigns, have barely been able to withstand the hurricanes of neoliberal crisis- that will be a tall order. But one worth facing if we are going to be able to put some vision back into the long overdue socialist project. Victory to the offshore workers: everywhere!

leave a comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s