Oil services companies in Aberdeen are set to follow the lead of Wood Group PSN, which announced plans to slash rates it pays to contractors 10% in an effort to cut spiralling costs.
Amec confirmed it was reviewing pay rates of on and offshore contract personnel based in Aberdeen from June 1, 2014 – the same day WGPSN’s cuts are due to come into effect.
A spokesman for Petrofac failed to rule out a rates cut, saying that the group reviews the “competitiveness of our remuneration, compensation and benefits packages” on a regular basis.
On Friday, Wood Group PSN chief executive Robin Watson sent a letter to its 1,750 onshore and offshore contractors warning them of the cut in pay.
He said that WGPSN was “committed to seeking options” to retain affected contractors by offering them a permanent job with the Aberdeen firm.
He added that any contractor who did not wish to accept the rate cut would have their contract terminated by 6 June.
WGPSN said the move came after an internal review which found that contractors’ rates have risen three times more than staff rates in the past five years.
“We need to control costs for our clients and focus on increasing our staff ratio,” the firm said.
But critics warned that the move would only serve to drive out sorely needed skills in the industry.
Ian Bell, a director of independent engineering contractor Optimus, said: “There is a definite need to reduce costs in the UK oil and gas sector, but cutting contractor rates only stands to drive more people out of the industry.
“The age of the contractor labour force is getting toward retirement age anyway and lower rates are likely to see many people bring their retirement plans forward. Exactly what the industry does not need is a drain of experience.
“The good guys will walk, the less experienced guys will stay, and costs will go up as the less experienced guys take longer to do the work.
“The industry would be better to look at how they manage projects and ask why it takes about 30% more man hours to do work now than it did 10 years ago,” he added.
A spokeswoman for WGPSN insisted that the cuts would be cost neutral for the firm, as any savings would be passed on to its North Sea clients.
Dr Alix Thom, Oil & Gas UK’s employment and skills issues manager, said: “Like a number of other sectors, our industry faces competition for people with the right skills and experience to overcome the challenges of production in the UKCS but we must pull out all the stops to ensure that this doesn’t make operating here too expensive.”