Scotland business

Wood Group PSN to cut contractor pay again

Wood group worker Image copyright other
Image caption Wood Group employs about 12,000 people onshore and offshore in the UK

Oil services firm Wood Group PSN has announced a wage cut for contractors - for the second time this year.

The Aberdeen-based company said it had taken the decision as a result of the falling oil price as well as high operating costs.

Contractors operating onshore and offshore in the UK will see a pay cut of up to 10% from January. It follows a 10% cut which was announced in May.

Some will be offered the opportunity to become staff.

The wage cuts will affect 60 UK offshore contractors and 1,250 onshore contractors.

Wood Group said about a third of its 12,000 UK staff will have their salaries frozen.


Analysis

By Douglas Fraser, BBC Scotland Business and Economy Editor

To avoid the oil investment boom turning into a bust by the dramatic fall in the price of Brent crude, firms in the industry are having to go for unusual measures.

While lower energy costs help drivers and most of the UK economy, it is a concern for north-east Scotland and beyond that investment plans are being shelved.

Goldman Sachs has suggested $930bn of projects, worldwide, could fail to get the go-ahead next year. And the North Sea is seen as one of the higher-cost, lower-return regions for investment.

In mature fields, there is the prospect of closure being brought forward.

And as a lot of production ceases to make money below $80 barrel (it's now below $60), North Sea producers and those in their supply chain now face pressure to cut costs sharply.

Those costs have been rising steeply in recent years. And measured per barrel of production, they've been rising at an alarming rate. The oil price fall has only intensified the pressure to get them under control.

The oil industry is more used than most to having to flex in this way. When the oil price is high and investment strong, the cost of assets such as drilling rigs goes up sharply.

And this is also an industry which relies heavily on individual contractor work, giving it flexibility on contracts and on pay, and often works best for those workers too.


Wood Group PSN managing director Dave Stewart said: "These measures have not been taken lightly, but we believe they are required in light of the cost and efficiency challenges affecting the UK North Sea oil and gas sector, exacerbated by the fall in oil prices.

"We understand the need to contribute to creating a sustainable industry and are committed to playing our part to the long-term changes needed."

He added: "Safety and assurance is our top priority and integral to how we do business.

"Our focus is on assuring the safety of our people and everything we design, construct, operate and maintain, while taking measures to improve efficiency and reduce cost for our customers and safeguarding the future of our industry.

"We are committed to undertaking proactive reviews of our contractor rates on a regular basis to ensure competitiveness within the marketplace."

Wood Group employs about 12,000 people onshore and offshore in the UK.

Last week the company announced it was creating a total of 150 jobs, after being awarded a five-year £477m ($750m) contract with BP.

The deal, which will come into effect next year, covers a number of offshore installations, the major Forties pipeline system, and onshore facilities in Grangemouth.

As well as creating the new jobs, the contract will also secure more than 700 existing positions.

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