Bright prospects in Scottish oil country misted over by sag in prices, loss of crew
| Aberdeen, Scotland
The offshore oil industry here is made up of people of hearty stock, quick to shake off the bitter elements of sea and weather. But the recent double shock of a burst oil bubble and the loss of 45 men in a helicopter crash has cast a pall as dark and gloomy as the mists that hang low over this Scottish port. And with the forecasts indicating that 1987 is likely to be even worse for the industry, this could be, as one Aberdonian put it, ``the winter of our deepest discontent.''
An unlikely love affair since 1970 (when the first major strike was made in deep waters off Scotland's east coast), the match of North Sea oil and Britain's economy steadily blossomed in the following 15 years, with oil now accounting for more than 6 percent of Britain's gross national product.
In the early 1980s, Aberdeen (pop. 200,000) had 30 percent of its labor force in oil-related jobs and was the world's busiest heliport, transferring tens of thousands of workers to and from rigs in the North Sea. It was dubbed by many ``the Houston of Europe.'' A glut of used Porsches
But with oil prices at about $14 a barrel, ``the love affair,'' as one regional developer put it, ``is over and the marriage has begun.''
Gone are the days when the streets of Aberdeen were filled with BMWs and Porsches driven by wealthy oilmen living in luxurious new condominiums. Instead, there is a glut in used luxury cars and a 56 percent increase in the secondhand housing market in Aberdeen since last March.
Dozens of rigs, usually working in deep water several hundred miles from land, stand idle like giant skeletons in misty bays and inlets up and down Scotland's east coast. One rig, the Glomar Arctic II, was recently sold at auction in Edinburgh for 15.5 million ($22 million). Its cost of construction had been 200 million.
The problem, oil experts agree, is not lack of production, but rather the expenditure on exploration and appraisal wells. While the price of oil has plummeted 50 percent in the last year, the operating costs of such exploratory drilling have remained constant. These costs help to explain rig owners' decisions to idle 54 of 119 rigs in Northwest Europe, with only 20 rigs now working in the northern North Sea.
The current charter rate of $12,000 a day is a far cry from the $35,000 a day many owners used to command.
Apart from a recent Chevron Oil strike in the area, other companies in Britain are in literal retreat in Aberdeen and London, where most operations are headquartered.
Budget-tightening edicts in the last several months have forced companies such as Amoco and Phillips to lay off up to one-third of their London-based personnel. Phillips recently sold its London headquarters and moved to smaller facilities in the less expensive outskirts.
``We're in a real mess right now sorting out who and what goes where,'' said one frazzled Amoco executive who survived the cuts. A double blow to Aberdonians
Nonetheless, people were beginning to bear up to the new financial realities when news came of the Nov. 6 helicopter crash that killed 45 people - the worst helicopter disaster in British civil aviation history. Many on board were middle-aged and lived in and around Aberdeen with their wives and children.
Robert Watt, a placement manager with Aberdeen Services Company, which lost 12 men in the crash, said that ``perhaps we should feel lucky this doesn't happen more often with the [harsh weather] and all, but we don't. Right now, with all the other problems, this is the worst thing that could ever happen.''
Still, the long-term tragedy Aberdeen's planners must now deal with is their admitted shortsightedness in forecasting the recession in the oil industry. In the rush to ``black gold'' by local skilled workers, traditional industries such as fishing, papermaking, and whiskey, as well as resources such as granite, have fallen on hard times.
Fishing has been chased out of Aberdeen and has moved much of its operations farther north. Paper mills have declined in output. And whiskey is slowly being supplanted by vodka as the most popular liquor among drinkers. Once-plentiful granite quarries are nearly depleted; some of the best of the stone it used to build local headquarters for the oil companies.
``They've really let some of our very best smaller industries just slip away in this oil madness,'' said James Bothwell, a local travel agent. ``They'll not come back so easily.''
In addition, many who have worked in the oil industry and remember the initial euphoria think warnings of a recession went unheeded, from the executives down to entry-level employees.
``Some very good people have had to go out on the street,'' said Roger Hessing, administrative manager of Amoco in Aberdeen. In the highly specialized oil industry, he said, many had nowhere else to go if laid off, ``except back out into the street, waiting to get back in.''
As an example, he pointed to those who had been through the area's rigorous diving school to be certified for rig jobs paying upward of 40,000 a year. But with exploration down, the need for divers is also down.
``It's a little like getting an MBA or going into medicine,'' Mr. Hessing said. ``You put in your years and when someone tells you it's over, you've got very few options.'' Even the oil industry is cautious
For those seeking help in moving to non-oil jobs, a regional 10 million restart program offering counseling is available, while more than 60 job clubs - which pool information about available employment - have been formed in Aberdeen, according to David Ross, director of development at Northeast Scotland Development Authority.
But, he added, government is coming under increasing demands to restrain public expenditure, and because the area maintains a ``prosperous'' image, this has led to the loss of ``development area status'' necessary for receipt of British government and European Community regional financial assistance.
``It does not matter what policies we adopted in the past, we're in it now [recession],'' Mr. Ross said. Unemployment in Aberdeen stands at 8.3 percent, and Ross predicted a loss of 6,000 jobs in the area this year alone.
Total oil employment, according to his figures, would likely fall to about 47,000 in 1987 before rising to about 50,000 in 1991 - some 9,000 less than originally predicted.
Ross remains optimistic. ``Aberdeen's association with oil will remain significant well into the next century,'' he said.
There is far more caution on the part of the industry itself.