Recently, we've seen a lot of hand-wringing over the drop in oil price and there are real concerns for global markets, etc. But the one that got my goat more than any other dropped just this morning...
Former BP boss Lord Browne says North Sea oil costs are "out of control" and must "come right down".
CUT COSTS?!? HOW?!
Most contracts are based on lowest possible bids as is. Seriously, anyone who has eaten the food on the Tartan platform would agree.
I worked at Grangemouth for over 7 years during Lord Browne's austerity reign of terror when a lot of work was done by long term contract. These contracts would often be tendered by companies at cost level or below. They'd do this in order to get an 'in', after all, this was BP! Even then seen as a Huuuge contract to land.
Year after year we'd toil for little to no real profit, merely utilising equipment to prove our worth as a contractor and our value as a service company just waiting for the re-tendering process to begin so we could up our prices to somewhere we could at least make some money. Every time we would be met by BP with demands for a reduction in costs and prices...This all sounds eerily familiar....
What would the outcome of cost cutting be?
Well, from my own personal/very selfish/Lord Browne-ian point of view, the sort of belt-tightening LB is talking about will lead to a vast reduction in service jobs. Basically platforms will pare down to the bare minimum legal requirement of equipment up-keep and as a result, companies like mine will be stretched to a point where they will have to consider lay-offs.
Market forces you may say...yes, kind of.
Once the energy traders and investors have re-aligned their portfolios and oil prices rise once more these companies will be caught in a mad scramble to repair and replace their previously (currently) ignored equipment so that they can keep up and make as much money as possible (naturally, this money will be pumped back into those platforms and workers' pockets via pay rises and improved facilities, definitely NOT scraped off the top and pumped into investors' pockets).
Instead of 2 week Shutdowns, you'd need 3 or 4 week shutdowns and also instead of 3 or 4 man crews, you will need 8 and 9 man crews to complete the increased work within the allotted time-frame.
Unfortunately, as the work dried up, service companies laid off many capable workers. When the work ramps up the crews will be filled with people dragged off Union Street (or its Norwich/Great Yarmouth equivalent) and thrown through a swimming pool, straight onto a chopper...We have all worked with someone who has genuinely made us question our particular choice of career path, these people will be packing our three/four man cabins once the work ramps up, mark my words!
These words are particularly unhelpful in the current climate of tumbling oil prices as the market is driving all things at the moment. If there's one thing we've learnt over the last 10 or 15 years it's that the market is as strong and robust as a recently-orphaned infant deer in a woodland glen. This one comment alone will probably cost at least 100 jobs...Thanks LB!!!
These are not British companies I'm referring to, virtually any service company worth its salt is a worldwide enterprise (Baker Hughes/Halliburton/Schlumberger et al) and as such is subject to closing whole countries operations down if they deem them unprofitable. Should operators decide to raise prices to chase the dwindling oil price then whole offices around the UK may close, I have seen it before and no doubt, will see it again...Thanks LB!!!
I suppose if these guys and girls do end up having to choose another path, there's always a zero-hour contract available with Sports Direct.
At least some of my friends will lose their jobs over the next few years and they will not deserve to, if you want to cut costs there is at least one area I can think of. The last time I looked at the car park at Aberdeen & Norwich Heliport were not filled with Aston Martins and Bentleys, the car park at BP and their ilk's head offices are PACKED with them
THERE'S THE COSTS YOU CAN CUT!!
Neil Hannon Rocks!!