200 Jobs a Day Being Lost as North Sea Profitability Plunges to 20 Year Low
A profound slump in oil prices since the summer of 2014 has crushed the profitability of the North Sea oil sector, new official data show.
A profound slump in oil prices since the summer of 2014 has crushed the profitability of the North Sea oil sector, new official data show.
Figures published by the Office for National Statistics (ONS) reveal the total rate of return on investment for producers fell from just two per cent in the third quarter of last year to a pitiful 0.6 per cent between October and December, the Daily Telegraph reports. For 2015 as a whole, the 3.5 per cent return was the lowest since ONS records began in 1997.
Total return “expresses how much a profit a company makes as a percentage of the capital used to produce it”, says the paper. Even the dire fall in the latest numbers – profitability has fallen from 65 per cent – is probably masking a more severe margin squeeze as producers typically use debt to part-fund investments and have been enjoying net tax rebates.
Office for Budget Responsibility data published last month revealed that last year companies operating in the North Sea had received in aggregate £100m more in tax rebates than they paid in tax on profits. This deficit could rise to £1.2bn per year between 2016 and 2021, it added.
The international Brent crude oil price declined from around $50 a barrel to a low of around $36 over the period, but fell even more sharply earlier this year and hit a near 13-year low of $27 a barrel in February. It has since recovered and was around $40 a barrel this morning, in the wake of some positive inventory data in the US.
As many as 200 jobs a day are being lost in the wider North Sea region, with the latest cuts being reported of 90 jobs by Aberdeen-based oil services group EnerMech
As for the wider Scottish economy, official estimates published yesterday suggest it grew by just 0.2 per cent in the final three months of 2015, well below the 0.6 per cent revised figure for the UK as a whole. The figure was 1.9 per cent for full-year 2015, The Herald notes, below the 2.3 per cent registered by the wider UK.
This comes after recent figures revealed Scotland’s budget deficit is well in excess of twice the proportional size of the UK as a whole…
