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UK industry flags Brexit rig shutdown threat

North Sea activity is unlikely to halt when the UK leaves the EU, but the uncertainty isn’t helping the planning process

As negotiations over the United Kingdom's departure from the EU trudged on without resolution during the autumn, trade body Oil & Gas UK (OGUK) sought to focus minds by raising potentially uncomfortable scenarios that could result from a so-called "hard Brexit".

In its annual Economic Report, OGUK warned that any shortage of European workers caused by the UK leaving the EU without a deal in place with Brussels could lead to shutdowns for some rigs. EU workers represent about 5% of the UK's oil and gas workforce-about 15,000—and a slightly higher proportion, 7%, of offshore workers.

Specifically, OGUK set out the risk that emergency response-and-rescue vessel owners could face difficulties recruiting skilled engineers if access to European workers were cut off. In such an event, production would need to be stopped until the safety vessel, which is required to be on standby, found adequate crew.

The trade body also pointed to a risk that project management could move out of the UK if firms struggled to bring in workers with sufficient skills to lead projects. Also, the supply chain could face delays due to border and customs issues.

The hypothetical shut-in scenario may be designed more to pique the interest of policy makers involved in Brexit talks than seriously scare the industry. UK-EU talks are coming to a head as next year's 29 March, the date on which the UK is scheduled to leave the bloc, looms.

"Around 10% of the workforce are from overseas with about half [of that figure] from other EU countries," says Matt Abraham, OGUK's supply chain and health, safety and environment director. "Our focus is on ensuring the government understands the industry need for an efficient and smooth process for moving people in and out of the country post-Brexit so that we continue to have access to the best talent to enable the success of the industry."

Little to go on

In the meantime, oil and gas sector employers are still scratching their heads over what a post-Brexit North Sea may look like.

OGUK's consultation of its members on the government's "Future Relationship Between the United Kingdom and the European Union " white paper -more commonly known as the "Chequers plan"—has been under way for months; but the process of gathering meaningful feedback had still to be completed at the time of writing. It was also considered by many insiders to be pointless, given the lack of clarity emanating from negotiations between the UK and EU.

In response to OGUK's warnings, the Department for Business, Energy and Industrial Strategy (BEIS) reiterated its stance that the oil and gas industry was "crucial to the UK's economy and energy security".

It added: "EU citizens make a huge contribution to the oil and gas industry and we've provided certainty to the industry that employers will be free to continue recruiting from Europe up until 2020."

Prime minister Theresa May has also flagged the possibilities of a post-Brexit immigration policy that favours higher-skilled workers from anywhere in the world—a measure that might suit the needs of the industry, although its nature is still vague.

In the absence of solid answers, firms are being urged to be prepared and take stock of the number of workers from the EU on their books.

What's happening? 

Euan Smith, partner and employment law specialist at Pinsent Masons, says: "The key advice I am discussing with clients right now is, know the extent of your exposure. How much of the workforce rely on EU freedom of movement rights to be here in the first place. Then understanding where the pinch points might be and trying to help them secure their status before March 2019."

A spokesman for Balmoral Group, which recently announced a £20m investment in a hydrostatic test centre in Aberdeen, adopted a more fatalistic view about the ramifications of Brexit.

"On our international travels, people ask us: what on earth is happening in Great Britain? First of all, with the idea of Scotland breaking away from the UK and, now, the Brexit scenario. They may well believe we have the shotgun trained firmly on our own two feet but are always too polite to say so," he said.

"We will continue to focus on developing our business effectively and hope the politicians will catch up one day."

He's not alone in adopting this view. In the absence of a concrete post-Brexit framework, getting on with business and hoping for the best from politicians is what many in the North Sea industry are doing.

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