THE PRICE of oil has hit its lowest level since 2003 following the lifting of Western sanctions against Iran – a development which will do little to ease fears of job cuts in the North Sea.
A barrel of Brent crude slumped to $28.62 by the end of Monday, its lowest level in 13 years, sparked by fears that the end of Iranian sanctions will worsen the existing problem of oversupply.
University of Aberdeen professor of petroleum economics Alex Kemp said it looked unlikely that the oil price will recover in the early part of this year.
Last week BP announced that it was shedding 600 jobs in the North Sea on the back of the tumbling price. It is not known how many workers in Shetland will lose their jobs at this stage, though it is expected to be well into double figures.
That announcement – the latest in a series of blows for employment in the region – has attracted relatively little attention in the national media in comparison to other industries, such as this week’s latest blow for the steel sector.
Kemp told the BBC on Monday that the price dropping below $30 a barrel, older fields where production is now quite low but operating costs remain high would be particularly vulnerable.
“The industry is cashflow negative and has been for a couple of years,” he said, “so this will be a very tough year for the North Sea, and it’s difficult to see the price coming up much in the very short term – that is, over the next few months.”
Last week’s BP announcement prompted local politicians to express concern that the industry was being too hasty in cutting highly-qualified jobs.
They fear it could imperil the North Sea industry’s future once oil prices eventually recover.
The Scottish Parliament’s economy committee has said that the industry must work with trade unions and the government to get the most out of the North Sea before decommissioning fields.
Its chairman Murdo Fraser said: “The challenges the industry is facing as a consequence of the significant and sustained fall in the price of crude oil represent a serious threat to our economic wellbeing, especially to the livelihoods of those employed in the industry and those communities who depend on it.
“We call on those involved to continue to work together to maximise the economic recovery of oil and gas rather than rush to decommissioning.”