Hailed for decades as the Oil and Gas Capital of Europe, the city of Aberdeen faces an existential crisis. Iona MacDonald asks why so little is being done to prevent it.
How do you solve a problem like Aberdeen? First, you need to define the problem properly. Take a glance at the vast quantities of policy and opinion documents produced by both the UK and Scottish governments, and you would be forgiven for thinking that only those who work in the offshore sector of the oil and gas industry deserve a Just Transition. OEUK claim that oil and gas production supports over 200,000 jobs in the UK. An estimated 30,000 of those jobs are offshore. Well over five times as many jobs are potentially at risk onshore.
The disproportionate focus on the offshore workforce undoubtedly reflects the level to which the onshore and offshore workforces are unionised. Data on union density (the percentage of unionised workers) is unclear, but offshore estimates vary from around 25% to 40%: far from a majority, but quite substantial. On the contrary, it is extremely rare to find significant unionisation in the onshore workforce. This is unsurprising when you consider the differences in work environments. Personal risks associated with working offshore are exponentially higher than those of an office environment. It is inherently advantageous to bargain collectively when negotiating on your health, safety and wellbeing, and unionisation is the most effective way to do this. Add to this the fact that onshore oil and gas workers were historically discouraged from joining either unions or political parties and the divide becomes clearer. As effective as unions can be in influencing policy, they are only duty bound to represent the needs of their members. In this industry their members are by and large offshore. This could explain policymakers’ apparent inability to define the entire problem. Solving a problem starts by acknowledging that it exists. And their failure to acknowledge it isn’t the fault of the unions.
There are of course many who propose a simple solution to the problem: to increase exploration and production across the UKCS (UK Continental Shelf). “Drill baby, drill”. Well documented climate-related arguments oppose this type of policy, but not everybody is willing to hear them. One thing that nobody disputes, however, is that we are talking about a finite resource. Oil and gas reserves are not regenerating at the same rate we extract them; they took millions of years to form. Yet we rush to use up as much as possible, as fast as we can. Despite the trigger-point distractions around what kind of car and cooker we will be allowed to have, the fact remains that hydrocarbons are a very important resource for us, not only because we can burn them for fuel. Hydrocarbons are a raw material that goes into the production of an overwhelming number of everyday items. From plastics and solvents, through to cosmetics and pharmaceuticals, almost everything we touch these days has also been touched by hydrocarbons and, by proxy, the oil and gas industry. In many cases, we do not yet have effective alternatives. To be without some of them could, in the case of pharmaceuticals, be life-threatening. Burning them for energy and risking using them all up makes very little sense.
Exiting the Pipeline
After studying chemistry at the University of Aberdeen, I slid inevitably into the oil and gas industry and stayed for 25 years. In my early days, senior colleagues whispered that I should not join a union or political party. The suggestion was that it would affect my employability. I believe this culture, and the manufactured mistrust of unions over decades, led to the lack of onshore unionisation.
In onshore and offshore roles, for both operators and service companies, I built experience managing the ‘production chemistry’ of oil and gas from reservoir to pipeline, delivering technical training, and ensuring environmental compliance in production operations. These technical roles also involved managing multi-million-pound budgets and exposure to issues around client accounts. I saw Aberdeen decline from its affluent heyday into a city struggling to deal with the realities of the industry it relies on.
Now a former oil worker, I have relocated from Aberdeen to the Central Belt to move out of the industry. It is not an easy transition. I have also been involved with workers’ advisory boards for the last two years. I attended a roundtable in Westminster with MPs, and spoke on a panel organised by Uplift at the recent SNP conference in Aberdeen. When I first got involved, it immediately became apparent that only offshore workers were being discussed in relation to the Just Transition question, as if the entire onshore workforce didn’t exist. Over these two years I have seen little change in this perspective. Some groups have recently admitted this shortcoming, but Aberdeen’s vulnerability and the need to diversify its economy have been clear since 2008. For 18 years I have been perplexed as to why there have been no significant steps to acknowledge and address the problem. I believed that the endeavour toward a Just Transition would naturally tackle the problem. I have been largely disappointed and left with a great fear for the population of the northeast of Scotland.
A Long Stagnation
The granite city of Aberdeen has always been at risk. Since the 1970s there has been only one show in town, and the longevity, stability and prosperity of that show is directly influenced by the oil price. This was proven in the aftermath of the swift decline in the Brent Crude price in 2008 and again in 2014. In 2008, during the global financial crisis, Brent Crude dropped from approximately $150 to $30 per barrel. BP announced plans to cut their UK workforce by 1,500 employees in February 2008, following a decline in their annual profits. The industry began to focus on their lift costs: the number of dollars spent to lift one barrel out of the reservoir. Once that cost was suddenly higher than what they were being paid per barrel, they had to find ways to cut costs or inevitably face huge losses. Despite such a crushing plummet in the price of Brent Crude in 2008, the real squeeze took effect following the price crash in 2014. By the end of 2016, industry body Oil & Gas UK estimated that 120,000 jobs supported by the industry had been lost as a result of price drops over just two years.
Some argue that Aberdeen’s crisis is a direct result of the windfall tax levied in 2022 on the massive profits of oil and gas companies, or energy companies (as they now prefer to call themselves). Since the tax was applied, some energy giants (BP, Shell, etc.) pulled out of their North Sea operations and have focused on extracting hydrocarbons in other parts of the world, such as West Africa. Despite this, many venture capitalist groups are still happy to take over the operations and pay the tax.
Industry positioning would lead us to believe that the crushing stagnation in cash flow throughout the industry is a direct result of that tax. They argue that larger companies, instead of paying bills on time, choose to hold onto their financial assets for as long as possible, maximising their returns. Routinely, this means that smaller service companies find themselves in financial crisis, with their clients paying 30, 60 or more days behind their terms and conditions. This choking of cash flow has a ripple effect, or a trickle-down effect, placing small businesses at the end of the queue in crisis. Yet this stagnation started happening before the tax was introduced in 2022. It has been increasingly common since the 2014 downturn, when oil and gas companies started running their operations on a financial basis, as opposed to a technical basis. Where contracts were once decided on the word of those holding technical authority, they began in many cases to be based on purely financial terms, with competency, capacity and value falling down the list of requirements. Stagnant cash flow may be more prevalent following the application of the tax, but it was not a rare occurrence prior to that.
Fear Won’t Fix It
We should have prepared for the Aberdeen problem long ago, but the realisation that the issue is bigger than offshore is starting to permeate the many brilliant organisations working toward a Just Transition. Engaging the onshore workforce and wider community is essential, but extremely difficult. Many have tried, but the onshore workforce is resistant to accepting that the glory days are over or soon will be. People want to be sure that they have a job for the rest of their working lives, and fear anything that might increase the speed at which redundancy approaches. Not unlike summoning the monster in the film Beetlejuice – if you say his name three times in a mirror, he will appear – many workers and other Aberdonians worry that merely expressing the reality of the industrial decline will magically accelerate their sorrow.
On some level, it is perfectly reasonable to argue that the more we talk about the reality of the climate crisis and our finite hydrocarbon reserves, the sooner we will come to realise that something needs to be done. That is entirely the point, to make government realise what it must do to serve those who are fearful of their prospects. Government policy will not change in a vacuum. It will change when affected communities and the wider public recognise what is at stake and demand real solutions that address the magnitude of what we face. As is often the case, it seems our elected representatives believe that the market will solve the problem. The same market has not generated a solution to the Aberdeen problem, despite the longstanding need, and opportunity, to find one. The market has no focus on morality. It only has eyes for maximising shareholder value.
An entire region of Scotland is at risk of economic and social collapse. It will affect everybody in those communities, not just those employed by the industry. Without accepting this, the magnitude of the problem is simply left to grow. Unions cannot fix this alone; they can only stem the bleeding a little. Politicians need to start doing what their electorate expect of them and should demand of them – to ensure a Just Transition. For everyone.
Iona MacDonald is a former oil and gas worker with 25 years’ experience in both onshore and offshore operations. She has also toured extensively as a member of acclaimed folk due Doghouse Roses for 20 years.