Workforce Report 2019

WORKFORCE REPORT 2019

WORKFORCE REPORT 2019

Contents

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1. 2. 3.

Foreword

5 6 8 9

Key Findings

Total Employment

3.1 Industry Overview 3.2 Employment Overview 10 3.3 Supporting Indirect Jobs in Other Sectors 12 3.4 Geographical Distribution of Employment 13

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4.

Offshore Workforce Profile

14 15 19 20 23 25 27 28 29

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4.1 Overview

4.2

Geographical Distribution

4.3 Workforce and Industry Activity 4.4 Residential Locations and Nationalities

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4.5 Gender

4.6 Age

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Future Considerations

5.1

Gender Pay Gap

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5.2 Ethnicity and Executive Pay Gap Reporting 5.3 Diversity and Inclusion

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5.4 Changes to IR35 Legislation in the Private Sector

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OGUK's vision is to ensure the UK Continental Shelf becomes the most attractive mature oil and gas province in the world with which to do business.

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Read all our industry reports at www.oilandgasuk.co.uk/publications

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WORKFORCE REPORT 2019

The UK Oil and Gas Industry Association Limited (trading as OGUK) 2019 OGUK uses reasonable efforts to ensure that the materials and information contained in the report are current and accurate. OGUK offers the materials and information in good faith and believes that the information is correct at the date of publication. The materials and information are supplied to you on the condition that you or any other person receiving them will make their own determination as to their suitability and appropriateness for any proposed purpose prior to their use. Neither OGUK nor any of its members assume liability for any use made thereof.

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1. Foreword OGUK’s 2019 Workforce Report shows a welcome stabilisation in employment figures. In 2018, the offshore oil and gas industry supported a total of 259,900 jobs when induced employment is taken into account. Although this is a reduction from the previous year, the 5 per cent drop compares favourably to the drop of 14 per cent between 2016 and 2017, and estimates for 2019 indicate an increase of approximately 10,000 jobs. Exploration and production companies remain focused on tight budgets given the commodity price outlook and ongoing volatility. However, confidence is gradually returning to the basin and 2018 saw 13 new developments or redevelopments sanctioned, more than the previous three years combined. Production on the UK Continental Shelf (UKCS) increased again in 2018, stimulated by new fields coming on stream, and it is anticipated that production will continue to grow in 2019 — a remarkable achievement for a basin of this maturity. It should be noted that parts of the supply chain continue to be under real pressure with tight margins limiting reinvestment. Figures for the offshore workforce have remained stable with only a very small reduction in the core workforce and the total traveling offshore, indicating that the fall of 5 per cent in overall figures is almost all from onshore roles. As in previous years the majority of those working offshore — 80 per cent —work in the supply chain. For the first time in five years, there was an increase in drilling personnel, up by 18 per cent, reflecting an increase in activity. The Skills Landscape report recently published by OPITO predicts that 25,000 new people will be required by 2025 to offset attrition. This means that the vast majority of those already in the workforce will still be there in 2025. As a result, employers need to consider how they will upskill existing staff to meet the challenges and opportunities arising fromthe anticipateddevelopment of newtechnology and increaseddigitalisation. In addition, the sectormust be ready to compete for new talent that will not be industry specific, such as data analytics, artificial intelligence, robotics, remote operations, cyber security, and other roles which will be transferable between sectors. In the immediate future, OGUK is conducting research with our members and other trade associations to ensure industry has the necessary skills and expertise to meet the projected increase in activity on the UKCS, especially in light of the additional people who will be required during the Forties Pipeline System shutdown in 2020, particularly in engineering construction and maintenance. However, looking ahead it is important to highlight that these shortages may not be just about supply and demand. Even though the industry has a bright future, the immediate reality is that some of the work on offer is short term and may not be enough to encourage experienced personnel back to the sector. The emphasis on attracting investment must continue to encourage employers, especially in the supply chain, to develop longer-term plans.

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We hope you find this report helpful and informative. Any queries should be directed to OGUK workforce engagement & skills manager Alix Thom on athom@oilandgasuk.co.uk.

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Dr Alix Thom, Workforce Engagement & Skills Manager, OGUK

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WORKFORCE REPORT 2019

2. Key Findings

A rise in drilling activity prompted an 18% increase in drilling personnel offshore

Total employment for the UK oil and gas industry in 2018 was 259,900 jobs

The industry supports jobs throughout the UK, with 56% of total industry employment located in England, 39% in Scotland, 4% in Wales and 1% in Northern Ireland

Increased production has seen the overall figure of barrels- per-worker rise by 5%, and is now 57% higher than in 2014

Forecasts for 2019 anticipate a rise of around 10,000 jobs to 269,100 1

Every £1 million spent by the UK oil and gas industry creates eight supply chain jobs and induces another eight jobs across the UK economy

Around 7% of those travelling offshore came from the EU

Almost 80% of workers travelling offshore in 2018 were employed by supply chain and contractor companies

Oil and gas supports more than 22,000 jobs in manufacturing alone

1 This is an estimate with the total supported employment expected to fall within the range of 253,800–284,400

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The central North Sea remains the area of greatest activity, with 49% of total offshore employment

Changes to the tax legislation known as IR35 on arrangements for the self- employed are likely to be the biggest challenge for mid- size and large companies in the coming year

The average age of both core and non-core workers increased marginally in 2018

Capital investment is expected to stabilise in 2019 at around £5–5.5 billion

OPITO forecasts suggest delivery of Vision 2035 and diversification of oil and gas companies into broader energy activities will support around 155,000 jobs in 2025.

15% of the workforce is aged below 30, a decrease on 2017

The industry’s average gender pay gap fell slightly to 24.3% but remains above the 2018 national average of 17.9%

Diversification in the energy sector will present new challenges and opportunities which must be met by up- and re-skilling the workforce, as well as supporting STEM skills development in schools

Women represented just over 3% of the offshore workforce in 2018

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WORKFORCE REPORT 2019

Workforce Report 2019 - Facts and Figures

3. Total Employment

In Summary T he latest data show that the oil and gas sector supported between 245,600 and 277,400 jobs across the UK in 2018, through direct employment, indirect employment, and employment induced as a result of the industry’s wider economic contribution. Although 2018 showed a continued reduction in the size of the industry workforce, estimates for 2019 anticipate a slight pickup of almost 10,000 in total employment to 269,100. Should such an increase materialise, it would represent the first year of workforce expansion since 2014.

The industry supported around

force Report 2019 d Figures

259,900 jobs

in 2018

Offshore employment stabilised Total employment is expected to increase in 2019

The industry supported around

259,900 jobs in 2018

for the first �me since 2014

Offshore employment stabilised Total employment is expected to inc ase in 2019

The industry supported around

Increasing focus on pay transparency 80% of offshore jobs are in supply chain 39% of jobs based in Scotland

£

259,900 jobs in 2018

for the first �me since 2014

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Offshore employment

80% of offshore jobs

3.1 Industry Overview While 2018 saw a recovery in Brent crude prices, which averaged $71.20 per barrel (bbl) throughout the year, it was also a year of continued uncertainty within commodity markets worldwide. Brent spot prices fell by more than 40 per cent within the last quarter, closing at just over $50/bbl and shedding the gains made in the preceding three quarters. While confidence is slowly returning to the basin, continued uncertainty in international market supply and demand fundamentals reinforce the caution with which operators are investing. Capital rationing, maintaining cost efficiencies and ensuring positive shareholder relations remain at the forefront of many companies’ minds. The UK Continental Shelf (UKCS) saw a slight increase in drilling activity in 2018 compared with 2017 (101 wells versus 96 the previous year). However, such levels remain among record lows in the basin’s history as only the most attractive work programmes are progressed. Despite this, there is building optimism around exploration activity, with two of the largest conventional UK discoveries for a decade made in late 2018: CNOOC’s Glengorm and Total’s Glendronach. The remaining potential of the basin is undoubted, with 10–20 billion barrels of oil equivalent (boe) still to be recovered and is reflected in the ambition of Vision 2035 to add a new generation of productive life to the basin. The UKCS saw 13 new fields and/or field redevelopments approved by operators in 2018, three more than the previous three years combined, unlocking more than £3.3 billion of capital investment. These projects are initially expected to produce more than 400 million boe throughout their operational lives, demonstrating the continued attractiveness of the UKCS to investors. Maintaining competitive investment conditions is key to the ongoing management of production levels. Total production from the UKCS increased by 4 per cent between 2017 and 2018, marking a cumulative increase of 20 per cent over the past five years. This performance has been underpinned by new field start-ups replacing lost production as mature fields cease to produce, improved production efficiency and late-life management of ageing assets. The basin continues to provide a secure supply of energy to the UK, meeting the equivalent of 44 per cent of total primary energy demand last year. It is anticipated there could be a further increase in both oil and gas production in 2019 with support from large start-ups such as BP’s Clair Ridge field, which came on stream last year, and the start-up of Total’s Culzean field, the largest gas project to be sanctioned in the UK for the last 25 years. As a relatively mature basin, decommissioning activity sits alongside exploration, development and production as a natural aspect of the UKCS lifecycle. Decommissioning expenditure reached £1.7 billion in 2018 and it is estimated that £15.3 billion will be spent on decommissioning UKCS infrastructure over the next decade. However, the focus remains on prolonging field life to reach the goals of industry’s Vision 2035, maximising economic recovery through brownfield investment, merger and acquisition (M&A) activity and bringing new fields onstream.

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WORKFORCE REPORT 2019

3.2 Employment Overview Based on the latest projections of industry expenditure in 2019, the UK upstream oil and gas sector is projected to support around 269,000 jobs in the UK.

The employment figures are a combination of direct employment 2 within the sector, indirect employment 3 through supply chain activity and jobs that are induced 4 by the industry’s wider economic contribution.

While some companies continue to make reductions in the size of their workforce, others are now actively adding to their numbers as activity begins to show signs of recovery. If such work materialises, 2019 would represent the first increase in total industry employment since 2014.

Total employment in 2018 was 259,900, significantly lower than previously estimated. This was driven by lower- than-expected capital expenditure last year.

Figure 1: Total Employment Supported by the Offshore Oil and Gas Industry 5

2014

2015

2016

2017

2018

2019 Estimate

Direct

41,300

37,300

35,600 155,100 136,200 326,900

31,400 124,300 118,100 273,000

30,400 116,100 113,400 259,900

30,600 121,000 117,500 269,100

Indirect Induced

206,100 169,500 216,500 180,200 463,900 387,000

Total

500,000

450,000

400,000

350,000

300,000

250,000

Industry

200,000

150,000

100,000

50,000

Employment Supported by the Offshore Oil and Gas 

0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E

Direct

Indirect

Induced Total

Source: Experian

2 Those employed by companies operating in the extraction of oil and gas and associated services. 3 Employment as a result of supply chain effects caused by oil and gas sector activity. 4 Employment supported by the expenditure of income from the oil and gas sector. 5 The 2017 and 2018 figures have been revised to reflect updates from the Office of National Statistics and changes to industry expenditure.

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The decline seen in 2018 reflects the impacts of the prolonged downturn, as well as continued cost discipline and a focus on efficiency from exploration and production (E&P) companies. The 2019 forecast is based on an expected increase in expenditure on the UKCS this year. Some confidence is returning to the basin as improved cash flows, competitive market prices and a competitive fiscal regime have encouraged investors to increase budgets carefully. OGUK expects total expenditure to increase this year as similarly high levels of new project approvals proceed, and operational expenditure increases as many of the new fields approved in recent years come onstream. However, market conditions will continue to impact on investment decisions and therefore could continue to negatively impact industry activity.

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Every £1 million spent by the UK oil and gas industry creates eight supply chain jobs and induces another eight jobs across the UK economy revealing the importance of stable and transparent market conditions. 6

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6 Source: Experian

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WORKFORCE REPORT 2019

3.3 Supporting Indirect Jobs in Other Sectors The UK offshore oil and gas sector continues to be supported by a world-leading and highly skilled supply chain. Estimates show approximately 116,000 jobs across different industries in the UK were supported by demand from the oil and gas sector in 2018. Figure 2 gives a breakdown of supported employment across the largest 15 components of the supply chain, based on the latest figures available.

Figure 2: Supply Chain Employment Impact by Industry (Top 15 by Percentage of Indirect Employees)

Utilities, 1% Construction of Buildings, 1%

Other Manufacturing, 1%

Accommodation & Food Services, 1%

Machinery and Equipment, 2%

Specialised Construction Activities, 2%

Professional Services, 15%

Wholesale, 3%

Rubber, Plastic and Non- Metallic Mineral Products, 4%

Computing & Information Services, 4%

Administrative & Supportive Service Activities, 11%

Finance, 4%

Retail, 5%

Metal Products, 10%

Land Transport, Storage & Post, 6%

Source: Experian

UK oil and gas operations supported more than 22,000 jobs in manufacturing alone in 2018, including the various sub-sectors of metal products, non-metallic mineral products and machinery and equipment. Nearly half of these jobs were in the metal products sector — which includes the production of key equipment for parts, containers, and infrastructure — equivalent to 10 per cent of the largest supply chain areas shown. Professional services and administrative and support services activity accounted for over 25 per cent of total indirect employment. The professional services industry covers a range of services including architectural and engineering activities, scientific research and development and legal services while the latter includes provision of administrative office support and security services. Another important element of the oil and gas supply chain, accounting for 5 per cent of total indirect employment, was the construction sector. While the number of construction jobs as a proportion of total jobs has fallen over time — in 2016 the sector accounted for 10 per cent of supply chain jobs — it still provides a vital role in the sector in the form of specialised construction activities, the construction of buildings and civil engineering.

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3.4 Geographical Distribution of Employment Figure 3 shows total employment (direct, indirect and induced) supported by industry geographically. Whilst the largest share of employment supported by industry is in Scotland, with a share of total employment reaching 39 per cent, the sector continues to provide employment across the whole of the UK. The Aberdeen region continues to support a large amount of direct jobs in the oil and gas sector. However, the most recently available statistical data (2017 data) show that total employment in the region has fallen from a peak of over 31,000 in 2014 to 26,000 in 2017. Moreover, unemployment rates in Aberdeen City, while historically low, remain above the Scottish and UK averages. While it is not possible to directly correlate levels of employment with the industry environment, it is likely that the recent oil and gas industry downturn will have contributed to the higher levels of unemployment in the Aberdeen area (relative to Scotland and the UK). Outside of Scotland, Greater London and the South East have the second and third largest number of jobs supported by the industry, together accounting for 20 per cent of total employment in 2018. This is largely due to the concentration of professional services and specialist engineering firms based in these areas.

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Figure 3: Regional Employment Supported by the Offshore Oil and Gas Industry, 2018

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West Midlands, 5% Yorkshire & Humber, 6%

East Midlands, 5%

Wales, 4%

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East of England, 5%

South West, 6%

Greater London, 11%

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North East, 3%

South East, 9%

Northern Ireland, 1%

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North West, 6%

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Scotland, 39%

Source: Experian

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WORKFORCE REPORT 2018 9

orce Report 2019 d Figures

259,900 jobs

4. Offshore Workforce Profile

Offshore employment stabilised Total employment is expected to increase in 2019

The industry supports around

In Summary T he figures for 2018 showawelcome stabilisation in the number of workers going offshore. This improvement reflects the more positive activity and investment outlook in the sector. As touched on in last year’s report, figures are back in line with the employment trend prior to the exceptional spike in investment and activity in 2014, which represented a period of peak employment. Almost 80 per cent of those travelling offshore work for supply chain companies as opposed to operating companies — a figure which is consistent with recent years, but which could change over time as new E&P entrants come into the basin if they rely on duty holders to operate assets. In a reversal of trends seen in recent years, the west of Shetland region has seen a drop of more than 2,000 people after several years of growth. This can be explained by the completion of several large developments in the area, such as Clair Ridge and Quad 204. On the other hand, an improvement in drilling activity has resulted in a significant increase of 18 per cent amongst drilling personnel. Buoyed by increased production from new developments, the overall barrels-per-worker metric has increased by 5 per cent. With production expected to remain strong in 2019, it is anticipated that the number of offshore workers will remain steady. The data show that the offshore workforce comes from throughout the UK and beyond, with impending Brexit appearing to have little, if any, effect to date on the number of EU workers travelling offshore (which actually increased by 5 per cent). A similar number of workers came from non-EU countries. Offshore employment stabilised The industry supports around 259,900 jobs

259,900 jobs

for the first time since 2014

Offshore employment stabilised Total employment is expected to incr ase in 2019

Increasing focus on pay transparency £ 80% of offshore jobs are in supply chain 39% of jobs based in Scotland

f r the first time since 2014

Increasing focus on pay tra spar ncy £ 80% of offshore jobs are in supply chain

Changes to the IR35 legislation will have significant impact 7%

of the offshore workforce from other EU countries

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Increasing focus on

Changes to the IR35

Industry’s

4.1. Overview In 2018, 49,079 people travelled offshore, a very slight decrease compared with 2017 (49,330). The figures indicate a stabilisation of the number of offshore workers, with 2017 and 2018 figures in line with those from 2006–10. Whilst the offshore workforce is now more than 20 per cent smaller than in 2014, that year represented a record year for investment and peak levels of industry employment.

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Figure 4: Total Number of Offshore Workers

70,000

3

65,000

60,000

4

55,000 lennosreP fo rebmuN

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50,000

45,000

6

40,000

7

35,000

0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

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Source: Vantage POB

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WORKFORCE REPORT 2019

As shown in Figure 5, the breakdown of the largest offshore roles in 2018 was broadly similar to that in 2010. As noted, the decline in workers seen across disciplines since 2014 is the result of the industry’s moving from a period of record investment to one of lower activity levels during the market downturn.

Figure 5: Offshore Employment by Top 10 Disciplines

9,000

2010 2014 2018

8,000

7,000

6,000

5,000

4,000

3,000

2,000

Total Number of Workers

1,000

0

Source: Vantage POB

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For the purposes of this report the offshore workforce is split into core and non-core workers, with core personnel designated as those who spend more than 100 nights offshore in a year.

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In 2018, the core workforce numbered 22,867, down from 2017 (23,113), whilst the non-core numbers remained static.

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Figure 6 shows that just under one-third of the non-core workforce (7,332 workers) spent less than ten nights offshore in 2018, as companies continue to limit the number of non-essential offshore visits. Just over two-thirds of non-core workers spent less than 50 nights offshore, in line with levels seen in 2012–17. The overall reductions in non-core workers travelling offshore since 2014 is a result of the reduced levels of project activity during the period.

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Figure 6: Number of Nights Spent Offshore by Non-Core Workforce

12,000

4

2012 2013 2014 2015 2016 2017 2018

10,000

5

8,000

6,000

6

4,000

Number of Personnel

7

2,000

8

0

0 - 10 11 - 20 21 - 30 31 - 40 41 - 50 51 - 60 61 - 70 71 - 80 81 - 90 91 - 99

Number of Nights Offshore

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Source: Vantage POB

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WORKFORCE REPORT 2019

In 2018, the majority of workers were employed by contractors (38,130), with those employed by operators representing just 22 per cent (10,949) of personnel travelling offshore. Despite changes in the overall level of employment, the ratio of operators to contractors has remained relatively consistent over the last decade.

Figure 7: Personnel Travelling Offshore for Operators and Contractors

60,000

Contractor

Operator

50,000

40,000

30,000

20,000 Number of Personnel

10,000

0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Vantage POB

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4.2 Geographical Distribution The geographical distribution of the offshore workforce on the UKCS has been relatively consistent over time. The central North Sea remains the area with the highest proportion of the workforce, as it has the largest offshore infrastructure network and was responsible for 51 per cent of total production in 2018. Between 2014–17, the west of Shetland area had seen significant increases in the number of offshore workers due to a high concentration of major development projects. However, there was a decline in the number of travellers to the area of 2,461 (60 per cent) in 2018 compared with 2017. This is likely to be due to major projects such as Clair Ridge and Quad 204 reaching the end of their development cycle.

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Nearly all other areas saw an increase in offshore workers last year, with the central North Sea seeing the largest increase, of 8 per cent (1,721).

Figure 8: Geographical Distribution of the Offshore Workforce on the UKCS

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West of Shetland Total

Northern North Sea Total

% of Total Workforce

% of Total Workforce

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2010 2014 2018

1,508 1,704 1,708

3% 3% 3%

2010 2014 2018

7,341 8,482 5,177

15% 13% 11%

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Morecambe Bay (incl. East Irish Sea) Total

Central North Sea Total

% of Total Workforce

% of Total Workforce

2010 2014 2018

23,142 31,408 24,082

46% 49% 49%

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2010 2014 2018

844

2% 2% 2%

1,261 1,078

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Multiple Sectors Total

Southern North Sea Total

% of Total Workforce

% of Total Workforce

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2010 2014 2018

12,122 15,235 12,502

24% 24% 25%

2010 2014 2018

4,919 6,023 4,532

10%

9% 9%

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WORKFORCE REPORT 2019

4.3 Workforce and Industry Activity

Drilling Activity Drilling activity increased for the first time in five years in 2018, with 101 wells (84 development wells, 8 exploration, 9 appraisal) spudded, compared with 91 wells in 2017. Momentum around exploration activity is increasing, with more opportunities being progressed and the largest discoveries of the last decade made in the last year: Glendronach and Glengorm. A number of E&P companies have also been reinstating drilling packages on platforms in anticipation of further increases in activity levels, and OGUK expects drilling levels to increase further in 2019. Furthermore, there has been an increase in the number of wells being decommissioned, reflecting the maturity of the basin and relatively lower rig rates.

This is reflected in the number of drillers working offshore — with an increase of 18 per cent in 2018 compared with 2017, or 3,568 compared with 3,032.

Figure 9: Number of Drilling Personnel Versus Drilling and Decommissioning Activity

Decommissioned

Development

Exploration

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

350

300

250

200

150

100

Number of Drilling Personnel

50

0 500

Number of Wells Drilled and Decommissioned

0

2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Vantage POB, OGUK

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Industry Expenditure Total industry expenditure was £15.4 billion in 2018 (£14.3 billion pre-tax), in line with levels seen in 2017 and prior to 2010. Expenditure levels are expected to remain relatively stable in 2019. The decline in capital expenditure in recent years has been driven by capital efficencies in development projects, cancelled or deferredwork scopes and fewer newproject approvals. OGUK expects that levels of capital investment will stabilise in 2019 and 2020, with the potential for marginal increases to £5–5.5 billion this year, driven by a wave of new project approvals in 2018. Thirteen new fields gained approval last year, with a steady stream of new projects being crucial to supporting the supply chain and employment levels. Operating expenditure has also been reduced by almost 30 per cent during the recent downturn, from £10 billion in 2014 to £7.1 billion in 2018. OGUK expects that operating expenditure will also stabilise around £7–7.5 billion through to 2020, as new fields come onstream.

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Figure 10: Number of Offshore Workers Versus Total Expenditure

Total Expenditure Core Workforce

30

35,000

5

30,000

25

6

25,000

20

20,000

7

15

15,000

Total Personnel

10

10,000

8

£ Billion (2018 Money)

5

5,000

9

0

0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Vantage POB, OGUK

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OGUK estimates that there is a £200 billion investment opportunity to develop and maintain the resources required to realise the potential outlined in Vision 2035. In order to achieve this, it is crucial that the UKCS remains as competitive as possible to ensure that new investment opportunities are progressed and that the potential remaining within existing assets is maximised.

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WORKFORCE REPORT 2019

Production The level of production (measured as boe per offshore worker) can be used as an indicator of overall productivity. Total production was 619 million boe in 2018 (27,107 boe per core worker and 12,629 boe per worker), 4 per cent higher than 2017, having increased by 20 per cent over the past five years. This performance has been underpinned by new field start-ups — peak output from fields which have commenced production over the last five years accounting for around half of expected 2019 output — as well as improved production efficiency, which is now at the highest level for a decade. Combined with the reduction in offshore workers, the number of barrels per offshore worker has increased by 5 per cent in 2018 and risen by 57 per cent since 2014. This trend is expected to remain steady through 2019, with production forecast to remain strong and the number of offshore workers likely to remain relatively stable. The levels do, however, remain lower than prior to 2011 when production was higher than current levels with a similar number of offshore workers.

Figure 11: Annual Production per Offshore Worker

70,000

Barrels Per Core Worker Barrels Per Worker

60,000

50,000

40,000

30,000

Production (boe)

20,000

10,000

0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Vantage POB, OGUK

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4.4 Residential Locations and Nationalities Figure 12 shows the spread and density of offshore workers according to their UK residence, reinforcing the UK- wide economic impact of the industry.

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The Aberdeen area is home to the largest proportion (30 per cent), while 17 per cent are from north-east England (Cleveland and Tyne) and 5 per cent from Norwich.

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Figure 12: Residential Locations of Offshore Workers

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6

7

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Source: Vantage POB, OGUK

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WORKFORCE REPORT 2019

Of the 49,079 workers who travelled offshore in 2018, over 85 per cent were British nationals. The number of British nationals working offshore has trended in line with the overall number of offshore workers.

Figure 13: Number of Total Workers Travelling Offshore with British Nationality

60,000

50,000

40,000

30,000

20,000 Total Personnel

10,000

0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Vantage POB

Over 7 per cent (3,651 workers) of the offshore workforce in 2018 were from other EU countries — a 5 per cent increase from 2017. A similar number of offshore workers came from non-EU countries (3,519 workers), although the total proportion of non-EU personnel has decreased by nearly 3 per cent since 2010. The importance of continuing to attract the right skills to the industry must remain a consideration amid the ongoing discussions around Brexit and immigration policy.

Figure 14: EU and Non-EU Nationalities in the Offshore Workforce

7,000

Total Non-EU Total EU Workers (excluding British nationalities)

6,000

5,000

4,000

3,000

Total Personnel

2,000

1,000

0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Vantage POB

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4.5 Gender In 2018, 1,693 women travelled offshore, representing just over 3 per cent of the total offshore workforce. Although 2018 showed a slight increase in comparison with 2017 — the first year-on-year increase since 2014 — there has been no significant change in the proportion of female workers over the last decade. Indeed, the number of female offshore workers has trended relatively closely to that of the overall workforce over the last ten years. One reason for this is the relatively low number of females applying for offshore roles. For example, the Oil and Gas Technical Apprentice Programme (OGTAP), which typically takes just over 100 apprentices per year, is well oversubscribed by applicants, indicating the quality and success of the scheme. In 2019 it received almost 1,400 applications, again suggesting that the industry is able to attract the next generation of talent. However, despite considerable efforts to increase female participants, the number of applications from girls was only 75 (5.5 per cent), though this was up from 54 (4.9 per cent) last year.

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Figure 15: Number of Male and Female Workers

Females Males Percentage of Female Workforce

70,000

5%

5

60,000

4%

6

50,000

3%

40,000

7

30,000

2%

Total Personnel

8

20,000

Female Proportion of Workforce

1%

10,000

9

0

0%

2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Vantage POB

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WORKFORCE REPORT 2019

As in previous years, a sizeable proportion of female workers offshore are in support functions, specifically catering and administration. The industry is working hard to promote more technical roles to women, both on and offshore, as structural changes to the labour pool are essential to increasing diversity and closing the gender pay gap in the industry (discussed in the following chapter) .

Figure 16: Breakdown of Female Personnel by Key Discipline

2,500

Other

Catering Maintenance Admin

2,000

1,500

1,000

Number of Personnel

500

0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Vantage POB

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4.6 Age The average age of offshore workers in 2018 was 42.5, compared with 42.2 in 2017 and 40.7 in 2014.

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Figure 17: Age Profile of the Offshore Workforce

2,500

2

2018 2017 2016 2014 2012 2010

2,000

3

1,500

1,000

4

Number of Personnel

500

5

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Source: Vantage POB

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The average age of the core workforce is 43.3, slightly older than that of the non-core workers at 41.8. Both averages have increased slightly since 2017 when they were 43 and 41.4, respectively. The proportion of the workforce under the age of 30 is 15 per cent, which is a slight decrease (2 per cent) from 2017.

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Figure 18: Age Profile of Core Workforce Versus Non-Core Workforce

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900

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Core Workforce

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300

Number of Personnel

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0

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Source: Vantage POB

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259,900 jobs

WORKFORCE REPORT 2019 WORKFORCE REPORT 2018

for the first time since 2014

5. Future Considerations

Offshore employment stabilised Total employment is expected to inc ase in 2019

The industry supports around

80% of offshore jobs are in supply chain Increasing focus on pay transparency £ 39% of jobs based in Scotland

In Summary T he past year has given a clear indication of the direction of travel for organisations when it comes to reporting employment data. As well as reporting gender pay gap figures for the second time, employers were consulted on how ethnicity pay gap reporting could be introduced. OGUK members support increased transparency in terms of reporting but acknowledge there will be challenges to ensure accurate measurement. Discussions around diversity and inclusion will continue to grow and broaden at an industry level. With new corporate governance reforms related to executive pay reporting and the requirement for companies to demonstrate how their employees’ voices are heard in the boardroom also on the statute books, the focus on transparency and raising workforce engagement will continue. As anticipated in last year’s report, HMRC has introduced reforms to the off-payroll working tax regime (known as IR35) which will take effect on 6 April 2020, and medium and large companies are preparing for implementation. OGUK is supporting members and has issued guidance to members to facilitate a smooth transition to the new regime. £ Offshore employment stabilised 259,900 jobs

for the first time since 2014

Increasing focus on pay transparency 80% of offshore jobs are in supply chain

Changes to the IR35 legislation will have significant impact 7%

of the offshore workforce from other EU countries

Increasing focus on pay transparency

Changes to the IR35 legislation will have significant impact

Industry’s gender pay gap in 2018 was 24.3%

£

£

compared to the national average of 17.9%

deals total nearly $6 billion combined over the first half of the year

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5.1 Gender Pay Gap 2019 was the second year in which companies with more than 250 employees have been required to collate and report statistics on their gender pay gap. As a reminder, companies in scope of the legislation are required to report the average and median pay gaps — as well as the mean and median bonus pay gap — the proportion of men and women receiving a bonus and the proportion of men and women in each pay quartile. Figures 19 and 20 show the average hourly gender pay gap for employees within our membership, arranged by company and by sector, respectively. The overall gender pay gap for the sector (based on average pay) showed a decline compared with last year’s figures to 24.3 per cent. The oil and gas industry’s figure is still higher than the 2018 national average of 17.9 per cent. If median earnings are used, the sector average is 25.7 per cent, compared with the national average of 8.5 per cent. Although higher than the national average, the oil and gas industry is in line with other STEM sectors, such as the high-tech sector, which has a pay gap of 25 per cent. 7 The gender pay gap reflects the lower number of women in senior managerial and technical roles in the industry and offshore, where women make up less than 4 per cent of the workforce. Furthermore, it reflects that women make up the majority of part-time workers, positions which tend to be lower paid. The gender pay gap in 2018 should not be interpreted as failure to act to improve the gap. Rather it reflects the reality that reducing the gap significantly will not be achieved in the short term as it inevitably takes time to recruit more women into traditionally male-dominated sectors and for them to progress in the industry. Indeed, some companies may find that success in bringing more women into the industry initially widens the gap as it takes time to progress through pay scales and the employing organisation.

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Figure 20, which shows the average hourly gender pay gap by sub sector, illustrates the considerable spread of pay gaps, from more than 50 per cent to −10 per cent, highlighting the more complex landscape for industry overall.

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7 www.uk.mercer.com/our-thinking/the-gender-pay-gap-in-uk-tech-sector.html

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WORKFORCE REPORT 2019

Figure 19: Average Hourly Gender Pay Gap of OGUK Member Companies

60

50

40

30

2017 Average: 24.4%

2018 Average: 24.3%

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10

0

1 11 21 31 41 51 61 71 81 91 101

-10

Difference Between Male and Female Mean Hourly Pay (%) Company

-20

Source: Gender Pay Gap Service

Figure 20: Average Hourly Gender Pay Gap by Sector

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50

40

Average = 24.2%

30

20

10

0

Safety

Air Transport Medical

Catering

Banking

Training

IT Consulting Defence

Clothing

Manufacturing Operator

Education

Financial Services Accounting

Construction

Legal Services

Professional Services Oilfield Services

Geo-Intelligence

Quality Assurance

Difference Between Male and Female Mean Hourly Pay (%)

Engineering Consultants

Management Consultancy

Environmental Consulting

Source: Gender Pay Gap Service

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However, there is no doubt that the processing of data to produce these figures in organisations has shone a new spotlight on gender diversity in the workplace, ensuring companies consider the reasons for underrepresentation and how to address them. Good employers are publishing narratives and action plans as well as involving their own workforce in helping to attract and retain more women. It should be acknowledged that underrepresentation of women in STEM-related roles is not unique to the oil and gas industry; it is a problem for UK plc as a whole and one which employers have been wrestling with for many years. The country continues to face the challenge of girls not choosing STEM careers when they perform just as well as boys in STEM subjects. Technical apprenticeships often struggle to attract young women over more conventional career choices. Efforts to reverse this continue and, in our industry, interventions include classroom sessions, working with schools, colleges and universities, mentoring and internal networks as well as reviewing language in job adverts and job descriptions. Oil and gas skills requirements are changing at a rapid pace. Digitalisation, internationalisation and the transition to a lower-carbon future require re-skilling opportunities to be created and new roles to be defined. The recently published report UKCS Workforce Dynamics: The Skills Landscape 2019–2025 , commissioned by OPITO and produced by The Robert Gordon University (RGU) Oil and Gas Institute, outlines a number of actions that are needed to prepare the workforce for the future. The new skills and roles identified in that report could prove to be a positive influence on gender balance in the industry, particularly given they are in relatively new disciplines with higher numbers of women than traditional STEM areas.

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5.2 Ethnicity and Executive Pay Gap Reporting Since the 2018 Workforce Report , the government has carried out a consultation with employers into ethnicity pay gap reporting. While this makes sense as a next step, in practice this could be fraught with difficulties as employers look to balance compliance and the desire for quality data with the challenge of not alienating those with an ethnic heritage. Members expressed concern that asking people to declare their ethnicity ran counter to the inclusive culture they are working to promote in their organisations because it labels people and could send the wrong message to employees. There is also concern that focussing on one particular characteristic detracts from their internal Diversity and Inclusion (D&I) agenda. When it comes to executive pay, the forthcoming requirements for organisations to publish and justify the difference between chief executive remuneration and average annual pay for employees reinforces the focus on increased transparency around executive reward. The regulations make it a statutory requirement for companies listed on the London Stock Exchange with more than 250 staff to disclose the ratio of chief executives’ remuneration to the median pay of UK employees every year; the first submissions will be for 2019, reported in 2020. Companies in scope of the legislation will also have to report how directors take staff and other stakeholder interests into account when they decide on salaries and bonuses. 5.3 Diversity and Inclusion OGUK has developed a comprehensive D&I strategy which highlights the great work being undertaken by industry. This will also help to identify any gaps that exist and enable the further development of an industry-wide culture of behaviours that embraces all aspects of diversity and inclusion at every opportunity. A key objective is for the industry to be viewed as a great place to work, one where everyone feels able to bring their whole selves to work, that has a future and is positively addressing the challenging political, environmental and societal changes and demands. This year OGUK will be building a network of D&I champions to promote this agenda and to consider any gaps at an industry level, assessing the challenge of getting more people involved in STEM at an early stage and promoting our members’ work with schools throughout the UK.

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5.4 Changes to IR35 Legislation in the Private Sector Changes to taxation arrangements for those who are self-employed will, arguably, be the biggest challenge for mid-size and large companies in the coming year. Last year’s report highlighted that changes to IR35 tax legislation, already applied in the public sector, were highly likely to be extended to the private sector. This proved to be the case and changes will apply to the private sector from 6 April 2020. IR35 regulations have been in place for those who are self-employed and working through personal service companies (PSCs) since 2000. These rules say that if, were it not for the existence of the PSC, the individual would be an employee, then the worker should pay tax and national insurance contributions as if they were an employee. Until now, the self-employed person has largely determined whether their working arrangements fall within scope of the IR35 rules and HM Revenue & Customs (HMRC) would investigate the individual PSC if a breach was suspected. Under the coming changes, the responsibility for determining whether an individual is truly self- employed or falls within scope of IR35 will sit with the end user, i.e. the organisation that uses the services of the individual. The contractual arrangements in place will not prevent a PSC coming within scope; HMRC has been clear that the actual working arrangements will determine status. HMRC has an online test (the Confirmation of Employment Status for Tax [CEST] Test) which end users can use to help determine whether or not IR35 applies, but this cannot be relied on entirely and is under review as a result of feedback from the public sector and the consultation with the private sector carried out by HMRC last year. End users need to take into account criteria like right of substitution (provided this is real), mutuality of obligation and the level of direction and control the end user has. OGUK has worked with a number of member companies to produce guidance for members, which will be updated when the final legislation is passed in summer 2019. However, companies using PSCs, whether through an intermediary (e.g. a recruitment agency) or not, should be in action now to prepare for these changes, identifying risks and making policy decisions. The guidance can be found online at oilandgasuk.co.uk/guidelines. According to the aforementioned Skills Landscape report, with successful progress towards delivering Vision 2035 and the diversification of oil and gas companies into broader energy activities, the oil and gas workforce is anticipated to number around 155,000 in 2025. As well as managing the challenges and grasping the opportunities arising from upskilling, reskilling and the creation of new roles, the sector must do so against a background of social and legislative change.

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