Wood Group PSN announced today that they will cut UK-based contractors pay rates by 10% as of 31st of January 2015.

This is in addition to a 10% contractor pay reduction which came into effect on the 1st of June 2014.

Wood Group PSN announced earlier in the year that an internal review showed contractor rates had risen three times more than staff rates in the last five years and the company needed to control costs for clients.

BP confirmed yesterday that contractors’ rates were to be reduced by 15% which follows the announcement by Shell cutting rates for direct hire contractors by 15% and for agency contractors by 10% in November.

Only last week Wood Group PSN (WGPSN) confirmed a £477 million contract award from BP. The five year deal is expected to create 150 new jobs and secure 700 existing positions from January 2015.

The BP contract will provide engineering and construction services to six offshore platforms and the Forties pipeline system.

Dave Stewart, UK managing director of WGPSN explained: “These measures have not been taken lightly, but we believe they are required in light of the cost and efficiency challenges affecting the UK North Sea oil and gas sector, exacerbated by the fall in oil prices. We understand the need to contribute to creating a sustainable industry and are committed to playing our part to the long-term changes needed.

“Safety and assurance is our top priority and integral to how we do business. Our focus is on assuring the safety of our people and everything we design, construct, operate and maintain, while taking measures to improve efficiency and reduce cost for our customers and safeguarding the future of our industry.

“We are committed to undertaking proactive reviews of our contractor rates on a regular basis to ensure competitiveness within the marketplace.

“Our customers are focused on prioritising their spend and according to Oil & Gas UK’s latest activity survey, production in the sector dipped eight per cent last year to an average of 1.43 Million Barrels of Oil Equivalent (MMboe) per day. Escalating costs at any level has a domino effect on any mature sector and we want to help the long-term health of the industry.”

WGPSN is keen to retain people and increase its staff ratio in the UK, so there will be opportunities for contractors to transfer to WGPSN staff positions.

Wood Group employs approximately 12,000 people onshore and offshore in the UK.

Oil and Gas People has received further information not confirmed by WGPSN that contractors on the BP contract will have their rates cut by 5% in addition to the 10% cut in June to bring them into line with BP’s own rate cuts.

Brent crude has fallen to its lowest price since May 2009 falling below $60 a barrel yesterday. Oil prices have now nearly halved since June 2014.

Further rate cuts and redundancies are expected industry wide as companies struggle as a result of waning demand and increased supplies.

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