Americans Losing Jobs in Scotland as Petroleum Slump Reaches North Sea Firms

The Texas twang is heard less often these days in Aberdeen, a center for North Sea oil companies, as plunging oil prices force exploration cutbacks and layoffs. Expensive foreign workers are often the first to go.

“It’s very disappointing because we were getting to enjoy Aberdeen, and we were expecting to be overseas 10 years,” said a Texas woman whose husband lost a job servicing new oil wells.

“Now we’re going back to the United States after just one year. We don’t know what we’re going back to--no job and no home. It’s like starting all over, and it’s not easy when you’re over 40,” said the woman who spoke on condition of anonymity.

She said her family wasn’t the only one in the position: “I’ve been surprised at the number of people going home without jobs.”

Slumping Prices, Fewer Jobs

The U.S. oil industry, for which her husband had worked before coming to Scotland, is in an even bigger slump than the North Sea field, and job prospects are dim in the United States.

Local journalists estimate that there are about 5,000 Americans, including oil workers and their families, in the region, and that several hundred of them have left or are planning to go. Official figures were not available.

The effects of the layoffs are felt everywhere. The American School had 294 students in kindergarten through 12th grade in June, but expects only 250 to start again in September.

Principal Dee Gilley, a Texan who worked with oil industry schools in Libya and Indonesia before taking charge of the Aberdeen school, said she was saving money by replacing staff hired in the United States with local teachers who don’t need expensive items like home leave payments or transatlantic flights.

‘Digging in Heels’

“I think we’re going to make it. We’re digging in our heels,” Gilley said. “Oil people don’t tend to panic much. They have a lot of faith in the business, and they’re a pretty tough breed, the kind of people who go into jungles and set up industries.”

She said scores of Americans in Aberdeen have suffered severe financial jolts. Two years ago, some people were encouraged to retire at age 50 with pensions at 75% of their salaries, while now some were getting just a month’s severance pay, she said.

Analysts, however, say plunging oil prices--from $28 a barrel late last year to well below $10 a barrel currently--have had a less crippling effect on North Sea oil production than on onshore exploration in the United States and elsewhere.

“The shock is not as sharp and sudden as it has been in Texas and Oklahoma,” said Grant Baird, chief economist of the Royal Bank of Scotland, which keeps a close watch on the oil industry.

Drop in Production

“There’s a long lead time in the North Sea. You can’t just close offshore wells and platforms the way they have done in parts of Texas and Oklahoma,” he said.

As a result, production has remained fairly stable. In April, Britain’s North Sea production averaged 2.59 million barrels a day, down 5% from the previous month. The drop was due to maintenance and the effects of a strike in a contiguous Norwegian field, according to officials at the Royal Bank of Scotland.

Government officials say oil companies spend about $9 million a day--$3.3 billion a year--to supply and maintain offshore operations.

If prices remain low, Scotland could lose from 5,000 to 6,000 of its 60,000 oil industry jobs, Baird said.

A Boon for Scotland

North Sea oil, shared by Britain and Norway, started coming ashore in June, 1975. Combined with increased production in Mexico and Alaska, North Sea oil helped create the oil glut that broke the Organization of Petroleum Exporting Countries’ grip on prices.

It has been a bonanza for Scotland and especially for Aberdeen, an old seafaring town whose fishing industry was faltering when the oil industry took off. The harbors that once were crowded with trawlers now bustle with low-decked North Sea service vessels that carry supplies to offshore platforms 450 miles away.

During the oil boom, the area’s average wage has risen from 80% of the British average to 120%, said John Condliffe, regional director of the Scottish Development Agency.

“Oil is a good thing. It jerked us out of competing on the basis of low wages,” he said. Many engineering companies that once made meager livings by servicing the fishing fleet have grown rich and technologically advanced by supplying the offshore industry.

Bright Future Predicted

Condliffe said he was confident that Aberdeen had a bright future in oil, but predicted “a rough couple of years,” especially for companies specializing in exploration drilling.

He said, however, that even if oil prices were to plummet to $5 a barrel, it would still be profitable to keep the production of North Sea oil at 80% of the current level.

Analysts believe North Sea oil will continue to be pumped for 50 years, he said. In addition, local industry has the expertise to make Aberdeen a base for finding and pumping oil out of seabeds all over the world.

Condliffe said that during a recent trip to Texas, he had seen oil executives “panicking to the point of saying they should get out of the business.

“No one is saying that here. This is our first downturn,” he said.

‘The shock is not as sharp and sudden as it has been in Texas and Oklahoma.’

--Grant Baird, chief economist, Royal Bank of Scotland