"It's A Huge Crisis" - The UK Oil Industry Is "Close To Collapse"

Tyler Durden's picture

It seems like only yesterday when back on October 11, we first explained - and previewed - the collapse of oil courtesy of the secret deal between the US and Saudi Arabia. However, it seems like only this morning when we subsequently wrote that "If The Oil Plunge Continues, "Now May Be A Time To Panic" For US Shale Companies." In retrospect, it was, and with the price of crude far below mid-October levels, the pain for both Russia and shale is now quite unbearable (even as Saudi Arabia explained earlier today that the reason for collapsing oil has nothing to do with supply and everything to do with plunging demand, and after seeing this chart we believe it).

All of this was perfectly obvious months ago to anyone who cared. To wit:

... while we understand if Saudi Arabia is employing a dumping strategy to punish the Kremlin as per the "deal" with Obama's White House, very soon there will be a very vocal, very insolvent and very domestic shale community demanding answers from the Obama administration, as once again the "costs" meant to punish Russia end up crippling the only truly viable industry under the current presidency.

So with great delight we present the latest blowback from Obama's "brilliant" strategy to cripple Putin: in addition to the default wave about to crush America's own shale industry, America's biggest foreign ally and military partner when it comes to "ideologically pure missions of liberation" - the UK, and specifically its North Sea oil industry which according to the BBC is in a "crisis" and according to Robin Allan, chairman of the independent explorers' association Brindex, the industry was "close to collapse". 

The story is the same as in the shale patch, only in the far colder and stormier North Sea: "Almost no new projects in the North Sea are profitable with oil below $60 a barrel, he claims. 'Everyone is retreating'"

"It's almost impossible to make money at these oil prices", Mr Allan, who is a director of Premier Oil in addition to chairing Brindex, told the BBC. "It's a huge crisis. This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country."

"It's close to collapse. In terms of new investments - there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks. Budgets for 2015 are being cut by everyone."

And to think it was just yesterday that the WSJ telling anyone who believes propaganda that "Christmas has come early for British consumers.

Tumbling oil prices, rising wages and declining borrowing costs are lifting households’ spending power, sending a powerful signal that consumers are set to keep Britain’s economy growing in the New Year.


BOE officials in December concluded the decline in the oil price in particular should act as a mini-stimulus for the U.K. and its major trading partners, even as Russia and other energy producers reel from crude’s recent slide. The BOE estimates the oil price has fallen 35% in sterling terms since June.

Which once again shows that when it comes to being utterly clueless about the real world, central bankers truly have no peers. Well, side from their media cheerleaders of course.

But hold on: wasn't only Putin supposed to be getting crushed as a result of the oil collapse? Suddenly the "secret" Saudi agreement isn't looking all that hot.

As for the truly "best" news: the collapse in the oil field will remain hidden from official government data. Mr Allan said many of the job cuts across the industry would not have been publicly announced. Oil workers are often employed as contractors, which are easier for employers to cut.

His remarks echo comments made by the veteran oil man and government adviser Sir Ian Wood, who last week predicted a wave of job losses in the North Sea over the next 18 months.

BOE bullshit aside, this is what is really going to happen:

The US-based oil giant ConocoPhillips is cutting 230 out of 1,650 jobs in the UK. This month it announced a 20% reduction in its worldwide capital expenditure budget, in response to falling oil prices.


Other big oil firms are expected to make similar cuts to their drilling and exploration budgets. Research from the investment bank Goldman Sachs predicted that they would need to cut capital expenditure by 30% to restore their profitability at current prices.


Service providers to the industry have also been hit. Texas-based oilfield services company Schlumberger cut back its UK-based fleet of geological survey ships in December, taking an $800m loss and cutting an unspecified number of jobs.


On Wednesday Aberdeen-based Wood Group announced a pay freeze for staff, and cut rates for its contractors.


Apache, one of the North Sea's biggest producers, has followed suit and will impose a 10 percent reduction on its contractors' wages from January 1st.

So what happens to the UK oil and energy industry? "The industry was hoping to see continued high levels of investment, stemming the inevitable decline of production as North Sea's resources are used up. But falling oil prices have put that in doubt."

However, the Department of Energy and Climate Change said: "The recent sharp reductions in oil prices are very challenging for companies active in the North Sea. We have seen very little evidence of new projects being cancelled or deferred in reaction to lower oil prices."

Which means the real pain is only just starting, first in the UK and soon everywhere else.

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Al Huxley's picture

If they just invest everything into US index funds they'll be fine.

WTFMOFO's picture

Without even the common courtesy of a reach around.


sunaJ's picture

"we laid off some blokes..."

Jeff the Terrible's picture
Jeff the Terrible (not verified) sunaJ Dec 18, 2014 6:37 PM

lawyers guns money printing machines


McMolotov's picture

I was expecting Warren Z, not vegan recipes! What the hell, man?!? Here's Warren:


Greenskeeper_Carl's picture

Once all these companies go bankrupt, I'm sure the. 'Werewolves of London' will be happy to scoop them up at pennies on the dollar....

Ness.'s picture

RIP Warren.  Thanks for the link.  I always appreciate a little 'Black Friday' from Steely Dan after a crazy Thursday.





Latina Lover's picture

This is just part of the price the brits pay for sucking american dick.  At least oil is now cheap enough to substitute for mouthwash.

kliguy38's picture

You can keep your oil

new game's picture

from the front line- 9 rigs stacked haliburton, 4 from companyman(concoco).

no new drillg permit whatsoever at ND reg. shutdown underway...

fucking fucked by fuckers fucking over fuckers...

new game's picture

lumps of coal for all dos oily rufneks.

fuckin fucked up mon...

Save_America1st's picture

"UK" oil industry?  well...they mean the Scottish Oil Industry.  What Scotland shoulda done was...and I gotta laugh/cry at this..."voted" for their "independence"...and they could control their own oil industry without having to subsidize the scumbag Brit leeches.



BaBaBouy's picture

Eh Well, We Have A Slight Problem Folks...

Keyser's picture

North Sea crude is some of the most expensive on the planet due to produciton costs, mainly because of UK regulations... Not to mention that the North Sea is just about played out... The UK oil industry was fucked before, now it's dead... 

winchester's picture
winchester (not verified) Keyser Dec 19, 2014 6:08 AM

welcome to the reel world, a world where you do not work to " make money " you work to eat.


"elites" gonna have serious aclimating issue within years :)



Sirius Wonderblast's picture

Hard to know where to start with so much material on offer, but, basically, Braveheart was bollocks and please shut up as you plainly haven't a clue.

css1971's picture

Scots are sheep. Just like everyone else.

James_Cole's picture

 "The recent sharp reductions in oil prices are very challenging for companies active in the North Sea."

Lol let me get out of the world’s smallest violin…

Transformer's picture

Yeah, it's a sad story.

Seems that if they wanted the price to be $100, then if a couple of big players sold only for $100, then that is pretty much what it would be.  Russia, Saudi, and the USA produce 38% of the world's oil.  They know what their costs are.  They could just set a minimum price, and buyers pay it or not, like GM or Toyota sets the price of their cars.  Maybe other producers would charge $95, but the rest of the producers don't produce enough, so the world would have to pay the price.

At 14%, 13%, and 12% any one of the big three could set the price.  Maybe others would undercut them, but demand is such that all three are needed to meet world demand. 

So, of course, it's manipulated.  It's all BS.

Hmmm, Russia and USA/UK are getting really hurt.  Saudi doesn't seem to care.

Same with gold and silver.  Big producers could set the price, "pay the price or don't buy".  And don't say it's price fixing.  the Comex is price fixing.  Any business can set a price for their product.  At some point demand would pay the price.


Marco's picture

Gold demand is inherently flexible ... silver has alternatives which can be brought online a lot faster than alternatives to fossil oil, trying to force the price higher can have unintended consequences.

Sirius Wonderblast's picture

Saudi doesn't have all the social welfare and big government that UK and US do.

Keyser's picture

You really are an ass... I mean, really... 

GeezerGeek's picture

From Obama's viewpoint, this must be win-win. Not only does he put the screws to Putin and Russia, but he also gets to screw the US shale industry and American energy independence in general. He never did seem to like the idea that shale oil could greatly help the US economy. This looks like just another successful effort on his part to do exactly the wrong thing for the country he's leading (into a ditch).

Sooner or later, someone's going to push back.

BringOnTheAsteroid's picture

Not to worry, the Republicans will turn this ship around.

Are there really so many people in the US who still think there is even a remote difference between these two parties?

That Obama is any worse than that dick head before him and will have been worse than the dick head after him. 

Ness.'s picture

Moar songy goodness :)  This one seems to fit.  The The - Armegeddon Days Are here Again.


Ness.'s picture

If it keeps on rainin' ($$$), Levee is gonna to break
If it keeps on rainin' ($$$), Levee is gonna to break

When the Levee breaks, I'll have no place to stay :)

The Blank Stare's picture

Harry Stamper kept it short and sweet.....

FORE !!!!!!

No golf balls though. More like a huge septic tank blowing up in the sky.

I don't predict very often but this Obama oil/ gas checkers game is gonna backfire. I'll be holding my umbrella smiling.

Ness.'s picture

Last of the music but again it applies.

Morphine - Scratch.

I was once sitting on top of the world
I really had things in my hand
But something went wrong I'm not sure what
And now I'm sitting here at home alone
People they want to give you free advice
Well that's something that I always try
But you get what you pay for that's what I say
And now I'm paying and paying and paying
I lost everything I had
I'm starting over from scratch


Fuck the machine.

nmewn's picture

Indeed, fuck the machine, it is worldwide now, despite what everyone wants to believe:

"Finally, this bailout fails to answer the question it was supposed to address. Investors do not know whether the Rosneft bailout is a one-off deal and, if it is not, which companies can hope to receive similar treatment from the Central Bank. Thus they do not understand how (and whether) Russian corporate debt will be repaid or refinanced — or how much trust they can place in the ruble."


Welcome, to the machine ;-)



boattrash's picture

Music! How about world history set to music?

Roger Waters, Amused to Death (full CD)


Sirius Wonderblast's picture

Try "Black Christmas" by Venom.

The_Dude's picture

Eve of Destruction....60's be coming back in style!! (More like the 30's but the music wasn't as good)


RichardParker's picture

Evolution, revolution, gun control, sound of soul.
Shooting rockets to the moon, kids growing up too soon.
Politicians say more taxes will solve everything.

Ball of Confusion


Tall Tom's picture

What is being sold is just a perpetual motion machine after all...


Here is some Klattu...



McCormick No. 9's picture

"You didn't destroy that."

RaceToTheBottom's picture

Anyone thinking that the UK did not see this result in advance?

That the UK could not do even a cursory calc to determine how long the Putin would last????


The game must be lots larger than just oil revenues for individual countries.

It is the viability of the petrodollar at stake.  The west has to kill the Putin's gold game and will be willing to risk and pay anything to do so.

Eternal Complainer's picture

Ding ding ding...

Putin's gold accumulation is the target imo

RaceToTheBottom's picture

Not only the amount, but its role.  It is Saddam and Gaddafi all over again.  I am the guy who needles all the Putin mancrush people here, but there is something to this story.


Winston Churchill's picture

Wonder what Uncle Scam offered as spoils ?

Or is it the other way round with the Rothchilds controlling both central banks.

A distinction without a difference.