Page 12 - Euroil Week 17 2020

EurOil POLICY EurOil
UK unions call for part- nationalisation of oil industry
UK
Trade unions want the government to invest directly in oil and gas projects.
UK North Sea trade unions have called on the government to invest taxpayer money directly in oil and gas projects to help shield the industry from its worst crisis in decades.
The plea came from Offshore Co-ordinating Group (OCG), comprising six major unions including Unite, RMT and GMB. It has claimed that more than 3,500 UK workers could be laid off by September as a result of the market tur- moil. Earlier the RMT (The National Union of Rail, Maritime and Transport Workers) urged the government to acquire stakes in North Sea operating companies.
“We see it as vital that we get the government to invest in projects, not as operating partners but as equity partners, providing low-cost loans to operators,” OCG said in a statement. “The projects that were on the books for 2020/21 were based on an oil price of $x while the oil price is now at $y; therefore the government could bridge the gap with an investment, rather than paying benefits ... Keep workers working, keep the economy going and growing.”
The unions welcomed welfare payments to furloughed workers as a “short-term solution”, with “little expectation” that the lifting of restric- tions would lead to a substantial oil price recov- ery. The UK recently expanded the coverage of its coronavirus (COVID-19) job retention scheme, under which companies can claim a grant cover- ing 80% of the wages of furloughed employees, up to a cap of GBP2,500 ($3,130) per month.
However, OCG said longer-term support was also needed.
“Our market has now fundamentally changed. Our economy is fundamentally chang- ing and therefore it is time for a fundamental change in our industry,” the group said.
The UK’s Department for Business, Energy and Industrial Strategy (BEIS) and its upstream regulator, the Oil and Gas Authority (OGA), are yet to comment on the unions’ proposals.
Industry lobby group Oil & Gas UK (OGUK) has described the oil price collapse as a “body blow” to the sector.
Capital expenditure in the UK offshore could slump by a quarter this year, OGUK warns, although operators so far oppose any move to nationalise the sector. The OGUK wants the government to roll out a support package for the
sector that protects not only operators but also the supply chain and jobs.
UK oil production has revived in recent years, supported by investments made prior to the pre- vious downturn that began in late 2014. How- ever, with Brent hitting a more than two-decade low of $16 per barrel last week, some supply is no longer profitable and the majority of operators are cutting all discretionary capital spending.
The OCG estimates that around 25 mobile drilling units are stationed, inactive, off Scot- land’s east coast, with more along the shore of Norway. Servicing firms have been hurt not only by the drop in investment but also delays or can- cellations to maintenance, including at the For- ties pipeline system, which operator Ineos has now pushed back until 2021.
“With those drillers go the well service com- panies, drilling fluids, wire line, tubulars and a whole host of other supply chain companies,” the OCG continued. “Our conservative esti- mates suggest we could be looking at upwards of 3,500 workers displaced by September 2020, and most of the drilling sector workers have been told it will be 2022 before there is any upturn in activity.”
Around 1,000 jobs could be lost directly from drilling contractors alone, it warned.
“We are calling for an immediate intervention to halt the carnage which is occurring in terms of jobs and to ensure a just transition to a carbon neutral state can be achieved,” the group said.
Partial nationalisation in the oil and gas industry is also under consideration in the US.
Speaking at a White House event on April 24, US Treasury Secretary Steven Mnuchin did not rule out the US government acquiring stakes in struggling US energy companies.
“The President has asked me to work with the Secretary of Energy and we’re looking at a whole bunch of alternatives,” Mnuchin told reporters. “That is one of the alternatives, but there are many of them,” he said, referring to potential stake acquisitions.
US President Donald Trump also asked Mnuchin to look into the government bulk-buy- ing plane tickets cheaply to support the airline industry and then reselling them to consumers. He also suggested the US could acquire more oil cheaply for later use. ™
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Week 17 30•April•2020