Lord Browne, the former chief executive of BP, has warned that North Sea oil operatorsí expenses are ìout of control.î
He argued that in order for North Sea companies to compete on a global scale again, they would have to become significantly more streamlined and that many would still be at risk of folding. This comes alongside recent claims by many experts reporting that this area of the oil industry was in crisis.
Lord Browne, head of BP for 12 years, is representative of a growing worry- a worry based on the fact that a barrel of Brent crude has plummeted from $115 in the summer of last year to a measly $57 on Tuesday this week.
He also stated: ìIn the North Sea itself thereís a lot of oil and gas left but itís more expensive than some other oil and gas left and itís very reliant on companies working together very well.î
He went on to advise the industry that ìefficiency has to go up. We have a less than efficient workforce in the North Sea at the moment. We have too much non-standardisation, as a result costs have gotten out of control.î
This comes at a time when BPís current chief executive, Bob Dudley, has declared the intention to cut £4 billion of the corporationís capital spending this year. It was alongside an acknowledgement of the enormous difficulties the company and industry have been facing due to plummet in the price of oil worldwide.
His statements spoke to a ìnew realityî in which the industry would have to amend their behaviour according to an oil price decline that is predicted to remain for a number of years. This tone of cynicism is further reflected by the fact that BP published a $969 million loss in the fourth quarter of last year subsequent to receiving a $3.6 billion charge.
In a specific reference to the North Sea, Mr Dudley conceded that it would continue to be tremendously hard to make money in that region but did say whether it would be necessary to streamline the business further and implement more severances. BP oversaw hundreds of redundancies last year and this included 300 North Sea employees.
The political sector has been forced to respond to these worrying admissions with Chancellor George Osborne stating that he would explore the ways the government could support the industry in his next budget, due in March.
Unions have brought up concerns over safety due to the number of job cuts in companies working in the North Sea. Further to this, many leaders in the oil industry and the Scottish government have come together in order to get taxes cut further to help the disproportionate costs of working in that region.