The apocryphal Chinese curse ‘may you live in interesting times’ could well apply to the current situation within the oil and gas sector.
Indeed, many would agree there has never been a more turbulent or ‘interesting’ time facing the UK industry. Even before the onset of Covid-19, the sector was grappling with a significant plunge in commodity prices where a barrel of Brent Crude fell by more than 55% in value in the early part of this year. This resulted in a sharp reduction in both activity and investment from many exploration and production companies and continues to impact the wider supply chain.
The global lockdown and plunge in energy demand due to the coronavirus pandemic which followed has now created major challenges for the oil and gas industry, not least in how it will manage employment issues going forward.
Many businesses find themselves in an unsustainable financial position and will need to take some difficult decisions about their workforce. The more immediate challenges are likely to centre on managing employees’ return to work which will need to adhere to health and safety obligations. There is significant scope for disputes over how promptly people should return to the workplace and the measures required to ensure it is safe to do so. This could prove to be a minefield for many companies, giving rise to potential legal claims over unlawful detriment, automatic unfair dismissal and whistleblowing. Additionally, some companies could face the prospect of equality law challenges from employees with childcare responsibilities as well as from disabled or vulnerable workers who may feel they are being placed in difficult positions in returning to the workplace.
The collective experience of lockdown and being furloughed may also strengthen the appeal of collective action and resistance from trade unions. Employers will need to prepare for a new culture where staff may be more inclined to assert rights to agile and flexible working, or challenge management decisions if they are not seen to properly take into account employee interests.
Beyond these initial return to work challenges, Oil and Gas UK has identified a three-stage approach to how the industry can navigate through this current crisis: ‘Protect, Stimulate Recovery, and Accelerate Transition to Net Zero Future.’
The first stage ‘Protect’ refers to the current emergency measures to safeguard health and safety as well as and jobs. The ‘Stimulate Recovery’ stage will then focus on co-ordinated action to promote greater economic activity within the sector. Meanwhile the final stage, ‘Accelerate Transition to Net Zero Future’ concentrates on the industry’s ambition to transition to greener economic activity, including further decarbonisation measures and more investment into renewable energy, through the application of the latest technology and greater government support.
While this strategy is not yet fully articulated, it represents the likely focus of the industry going forward and will impact on a number of employment issues.
The third stage will require major economic and cultural shifts which will irrevocably alter the nature of the industry. Transforming the UK’s energy sector will mean significant changes for the workforce. While we are likely to see a sharp rise in redundancies in the short term, we can also expect to see a longer term reshaping of the skills and talents which are required by employers in future. Many lower skilled workers who have been in the industry for a long time may find themselves left behind but demand will also rise for those who have the appropriate skills and talents required for modernisation.
The big question for employers will be whether they will be able to attract workers with these new skills into an industry that has long been susceptible to boom and bust. This could crucially affect the ability of many organisations to successfully transition into a sustainable long term future. It will therefore be essential to begin implementing skills planning and retraining strategies at the earliest possible opportunity and, perhaps, by actively embracing new diversity and inclusion strategies, to look beyond existing talent pools within the UK workforce,
There’s little doubt the UK oil and gas sector is living in ‘interesting times’, some might even think the industry is engulfed within its darkest hour. The ultimate challenge for any industry afflicted by this apparent Chinese curse is whether it has the ability to focus on its people and embrace creative and innovative means in order to secure a brighter destiny.
Eric Gilligan is an Of Counsel and energy sector employment specialist at law firm CMS