North Sea platform builders facing irreversible slump: Construction yards in Scotland are set to shed hundreds of jobs over the next few months, writes Francis Shennan

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The Independent Online
THE Scottish oil construction industry is facing hundreds of job losses and the possible closure of at least two yards over the next few months as the boom of the past three years turns into a slump.

Industry experts say they are entering the worst downturn since the oil price collapse of 1986, which slashed new orders for oil supply companies.

Highlands Fabricators will lay off 100 of its 2,000-strong workforce next month, but many more jobs may go in the spring when the company completes its existing contracts.

RGC Offshore, at Methil in Fife, is also facing 1,000 lay-offs when its existing contracts finish at the end of this year. UIE Scotland, at Clydebank, is fighting for an order for a large platform deck, which it needs to avoid laying off two-thirds of its 1,000 workforce by next year.

The process began last week when McDermott Scotland's yard at Ardersier announced 1,300 redundancies out of its 2,500 workforce. James Wildasin, the company's vice-president, warned that the business environment for oil construction had changed irrevocably for the worse.

The Department of Energy's Offshore Supplies Office, which monitors North Sea activity, last week released figures showing that steelwork needed for projects in the UK sector of the North Sea would total only 80,000 tonnes in 1993, half of this year's figure. In 1994, it will be 40,000 tonnes.

Experts believe that there may be no recovery from this downturn, unlike the 1986 slump. That price collapse merely delayed North Sea projects, and the construction yards had nearly three boom years when confidence returned.

This time, there is virtually no prospect of a return to those levels. The North Sea is now a mature production area, and the demand is for smaller structures to develop smaller oil reservoirs. Where possible, subsea satellite wells are used to pipe oil to existing platforms.

A severe bout of cost-cutting by oil companies, attempting to restore the health of their cash flow, has coincided with the slump, and licences for the UK sector can no longer be used to steer orders towards British yards. It was never officially acknowledged, but an oil company placing a platform order abroad justifiably feared losing out in the next licence round.

The boom of the past three years forced oil companies to place several orders in European yards, because the UK contractors were stretched to capacity, and these are now increasing the competition for what work is available.

The Scottish yards are in turn looking hard for work elsewhere. Highlands Fabricators is bidding for work in Norway and Canada.

McDermott Scotland, whose parent company has four US yards, may also look at construction techniques to slash costs by standardising platform designs.

Both companies are also bidding for the one large UK North Sea contract on offer at present - for Total's Dunbar field - with RGC Offshore.

(Photograph omitted)