North Sea oil in decline - the impact on Scotland and workers
November 2021
By Frieda Park
North Sea gas and oil have been a major part of the Scottish economy in recent decades. Even though it is now in decline, in 2019, according to the Scottish Government, the industry still provided 5% of Scotland’s GDP (£8.8bn) in extraction alone. Despite financial and other services dominating the economy, oil remains important and a big employer of working class people in its extraction, refining, transportation and supply chains.
The first gas came ashore in late 1966 and the first oil in 1975. Seventeen years later, in 1992, Britain was the 5th largest producer of oil and gas in the world. BP was one of the first companies to strike oil in the North Sea. In 1974 the British Government owned 68% of the company. This share was subsequently sold off under Thatcher’s drive to privatisation. (1) Little benefit accrued to the people of Scotland or the UK from this vast wealth. Oil and gas were extracted as quickly as possible and the profits went into the coffers of huge oil companies. Production peaked in 1999. Nearly a quarter of fields are currently running at a loss and the oil is running out in existing fields. New developments are likely to be medium or small scale which might not be attractive for companies to exploit. In 2014 Saudi over-production, aimed at undermining US shale oil, led to a slump in demand for North Sea oil and the estimated loss of 75,000 on and off-shore jobs in Britain.
Though at first the North Sea was dominated by the big oil companies this has now diversified and includes more companies each with a smaller share such as Ineos, China National Petroleum Corporation (a Chinese state-owned enterprise) and private equity backed companies like Chrysoar.
POLITICAL IMPORTANCE
Oil has also been a key feature of Scottish politics as nearly all UK offshore oil and gas reserves are off the coast of Scotland. This helped boost the SNP campaign for independence as it argued, selfishly, that keeping the oil wealth for Scotland would make it rich. They never, however, addressed the issue of who actually owned the oil and who really gets the wealth. The SNP’s long standing slogan was “Its Scotland’s oil” and even at the time of the independence referendum in 2014 it was arguing for the importance of the oil industry to the economic health of an independent Scotland. However, the oil is running out and with the pressure now on to aim for net zero carbon emissions and COP26 in Glasgow, basing Scotland’s future prosperity on oil seems redundant. This is causing problems for the SNP as it tries to square its professed commitment to a green economy with having to give up oil and one of its central arguments for an economically viable independent country. Nicola Sturgeon has tried to sit on the fence over the proposed development of the Cambo oil field off Shetland, attempting to avoid stating a view for or against and putting the onus back on the UK government.
WORKERS IN THE NORTH SEA
Workers in the oil and gas industry are no strangers to the challenges facing so many other sections of the working class today, seeing their pay and conditions eroded by casualisation and bogus self-employment. In addition, they face the problems of a declining industry and the phasing out of fossil fuels to halt climate change. It was with a view to addressing the latter question that environmental groups, Friends of the Earth Scotland, Greenpeace and Platform, supported by The RMT and Unite, conducted research in 2020 and 2021 among workers in the offshore industry aiming to look at how a just transition from working in oil to green industries could be achieved. The results revealed a lot not only about the challenges and possibilities of this but also about the conditions of those employed in the industry. (2) & (3)
By mid-2019, 30,600 were employed offshore in oil and gas. However, the report warns that there are no accurate, unbiased figures. During the coronavirus lockdown, with demand for oil slumping, the workforce at September 2020 was estimated to be 23,000
In terms of the respondents to the survey it was interesting that 51% lived in Aberdeenshire and Moray, Fife and Angus and the Highlands and Islands, i.e. relatively local. 34.8% of respondents identified themselves as union members: the biggest being RMT-OILC with 51% followed by Unite. This may well be skewed by the fact that the unions were promoting the survey.
The precarious work arising from casualisation was highlighted by workers as the main problem they faced, exacerbated by the volatility of the industry. This has made workers vulnerable to pay cuts. One worker quoted in the report summed it up:
“Morale is low, certainly in Aberdeen where 75% of the people are contractors...companies repeatedly cut the rates of contractors, saying ‘your rates are cut 10% next month, take it or leave it’. I know guys who have had two or three pay cuts over six months, no negotiations, nothing. If one engineering company cuts rates, all the others do too. I’ve honestly long suspected there is a cartel around this, you’ll find that if one cuts by 10%, the others will follow in a week or two.
When the oil price is low, the companies just cut rates arbitrarily, but when demand is on the rise again, the rates start to rise too.
There have always been a lot of contractors, but maybe if you go back thirty years, the BPs and Shells employed a lot of engineers themselves. In 1990, BP basically outsourced all of their engineers to Brown and Root, with a lot of engineers taking the golden handshake of two years’ salary before moving to be contractors.” (2)
In 2014 oil workers took a big hit, experiencing pay cuts, reductions in numbers and a change to shift patterns, so that they spent an extra 5 weeks offshore for the same pay.
Safety issues are important in a high-risk environment. As well as day to day safety concerns there have been rig disasters and helicopter crashes. The Piper Alpha fire in 1988 led to 167 deaths and prompted an upsurge in union membership including the establishment of a new union, OILC. OILC is now part of the RMT.
Yet safety did not feature as prominently as one might expect among workers concerns. The average response indicated that workers were neither totally satisfied nor dissatisfied. The report’s authors speculate that unsatisfactory safety standards have become so normal that they are simply accepted, compounded by the feeling that there is nothing that workers can do about it for fear of victimisation. There is no formal role for trade unions on safety committees.
Another huge area of dissatisfaction was round training and certification to work. As self-employed contractors, workers have to foot the bill for this themselves. A further report by the environmental organisations in 2021 explored this in more depth. (3) The report cites a figure of 74.5% of workers as being self-employed. It found that:
- Workers were paying on average over £1800 in training costs per year.
- 69% spent over £2000 of their own money on training including safety and trade-specific courses in the last two years, which is up 15% from before 2015.
- 65% said their employer contributed 0% to their training costs including safety and first aid training in the past two years, which is up from 45% before 2015
- There was a lack of passporting between different companies within the industry and from it across to renewables. That is to say, safety and training certificates are not recognised even when they are relevant and up-to-date. Workers are, therefore, continually being required to repeat training. This even happens sometimes with their current employer.
The reasons workers identified for these problems were:
- Negligence by government and regulatory bodies
- Increased casualisation of the offshore oil & gas workforce
- Lack of support for workers and communities
- Profiteering training companies
UNION ORGANISATION
It has been notoriously difficult to organise in the North Sea due to the location of workplaces – platforms far out in the deep seas. This has been made worse by the casualisation of the workforce making it difficult to know who is employed where and to organise collectively. But there has been industrial action and unions remain active. A year on from Piper Alpha there was a strike of 7000 oil workers over safety concerns – something which some thought impossible to organise. There were further strikes the following year over union recognition, safety and pay, with 74 installations affected. There are other examples - in July 2016, 400 Unite members went on strike for 24 hours on Shell platforms against pay cuts and rota changes. July 2018 saw Unite members go on strike against Total imposing new rotas. The strike lasted till September when Total eventually revised the rotas after losing production of 13 million cubic metres of gas per day and around 70,000 barrels of oil per day. Unite members took further action in March the following year, once again over rotas. (4)
To improve joint working between unions in the sector the Offshore Coordinating Group was launched in February 2016 and is composed of all the unions operating offshore, including UNITE, RMT, GMB, Nautilus International, Prospect and BALPA. However, last year 8 oil companies announced that they were ending a long-standing collective bargaining agreement so that they could cut costs. Nevertheless, in February this year, the RMT, Unite and the GMB announced that they had reached an agreement with 13 contractors in the North Sea to establish a collective bargaining framework for thousands of engineering and maintenance workers.
THE FUTURE FOR WORKERS
Workers want secure, well-paid jobs that make use of their skills and experience. The highest level of dissatisfaction in terms of their work was with job insecurity. Such is the disillusionment with precarious work and other issues among offshore workers that 81.7% of respondents to the survey said they would consider moving out of the industry. There was a lot of positivity about moving to similar jobs in green industries, particularly off-shore wind, renewables and decommissioning oil rigs. More than half of workers were willing to consider a just transition out of oil and gas and into green industries if there was training in place. However, there was a low level of confidence in Government support. Workers felt that government at all levels had failed: local, Scottish and UK. They highlighted issues such as:
- The inadequacy of Universal Credit
- Lack of regulation round labour standards
- Contracts going overseas
- Lack of investment in regional development
- Training
Despite all the challenges unions are still fighting for their members interests. Workers themselves have clearly expressed a desire for secure jobs which value and reward their skills. However, there is little sign of the Scottish or UK governments responding to these justified demands for better conditions now and supporting moves out of oil extraction to green jobs in the future. Instead matters are still being left to the market and the very companies which have attacked workers and undermined working conditions and pay.
(1) The Grangemouth refinery was also sold off as part of this privatisation and the ensuing vicious attacks on the workers and their union at the plant is the subject of Taking on a corporate giant – Ineos, Unite and Grangemouth - a chapter in If you don’t run, they can’t chase you by Neil Findlay reviewed in this issue of The Socialist Correspondent.
(4) Through time: offshore strikes in the North Sea (offshore-technology.com)
North Sea Oil Rig pic by Gary Bembridge
...last year 8 oil companies announced that they were ending a long-standing collective bargaining agreement so that they could cut costs.
