Scotlands biggest Economic Disaster - Oil crash 1986

1986 saw the biggest economic crash in Scottish history when Oil prices plunged from $34 per barrel to under $8. 70% of businesses in Aberdeen went bankrupt and the Oil Industry lost nearly 100,000 jobs. through the eyes of Aberdeen company Woodgroup. This is that story.

Exatracted from the amazing new book - Sir Ian Wood - Aberdeens Billionaire. Oil Titan

35.  1986 Goodbye Papa John

On a cold frosty weekend of the 12th of January 1986, Ian stood alone looking down at his father's coffin, eyes full of tears and a head full of incredible memories scarcely able to believe the father he loved and adored was gone. Ian’s sister and the rest of the family had just left the chapel, and Ian wanted a little time on his own with his father to say goodbye for the last time. His father John had passed away peacefully a few days before. Ian had a lot of time to reflect on what his father meant to him. John was 75 at the time of his passing and Ian felt he had been taken too soon, he didn’t want it, and he simply wasn’t ready emotionally for it. Ian’s at times monotone exterior, was the opposite of his emotionally charged interior and he simply could not comprehend the loss.  No more stories of the past and of better times with his dad. Ian Wood was temporarily absent as a person and he returned for the last time in his life, to being a child once again, vulnerable, lonely, lost, and merely left with a deep appreciation at that moment of the only things that are really important in life:- family. As his hand lay on the mahogany coffin, he stood remembering his childhood days with his dad in the boat yard, his memories of the chat in the car as they drove there, hearing these wonderful grand stories about the fishing industry from the past, which seemed so much grander than it was today. However what Ian remembered and loved more than anything, was his time with his dad, undiluted and uninterrupted, he felt part of something in the yard, getting sweets from the old fisherman, while he tried to unhear the colourful language he hoped he would not repeat in front of his mum Margaret. He remembered the days where his dad would come to the Rugby games (When he could), and how proud he was of his son while he watched him from the touchline. He remembered the Christmases as a family, and remembered the amazing summers on the island of Harris with his dad and his uncle, the cold winters, warm in the house in Gordondale by the fire getting told these amazing stories about his Grandfather William, which made him seem a much bigger and grander man. He thought of the sacrifices his mother and father had made to ensure he and Lorna got the best education the family could possibly afford, even when times were tough and the money wasn’t always on the table, but most of all this day he just missed his dad. There would be the funeral to come, which would be a get together of the fishing communities of Aberdeen, Peterhead and Fraserburgh and Montrose. Ian was dreading the funeral, he hated being on display, and wasn’t one for any self-pity, and he was grieving hard the loss. 

In September 86 one of Ian’s most loyal, trusted managers and friends retired after 40 years in the Industry. Charlie “Charles” Small had been instrumental in the drive to change the fishing Industry and had joined John Wood & Sons in 1965, the same year as Ian. Charlie alongside Ian was the driving force behind the success of the JW Holdings fishing business. At the time of his retirement the trawlers may have been fewer, but JW Holdings fishing company was still the largest privately owned fishing services company operating in Scotland, much of which Charlie Small had overseen. He hadn’t been without some controversy. In September of 1980, he was fined £4000 for what was described in court as an Indecent act with a 16-year-old. Charlie was arrested and lived under a hanging cloud for 2 years before his case came to trial. In order to avoid a lengthy court case Charlie pleaded guilty. Many other charges involving the same 16-year-old were later dropped. The judge in summing up stated “Charles Small is a man of exemplary Character and has led an otherwise blameless life”, unfortunately this is a court of law, and not a court of Morals”. What made things more difficult for Charlie personally was that he was married with 2 grown up children. However, Ian never judged Charlie, and never openly discussed the subject with him.

In the early months of 1986, the Oil industry was still recording high profits, the Industry was still precariously volatile but oil prices for a time were above $32 per barrel. Oil majors were reporting huge profits with Shell globally reporting a record revenue of $23.6 billion, while Exxon, the world's largest oil company, boasted revenues surpassing a staggering $88.7 billion. The industry's growing confidence was evident as over 1300 new wells were drilled in the North Sea that year alone. To put this into perspective, only 51 new oil wells were drilled in 2021, highlighting the industry's robust activity during that era. Ian's Wood Group played a significant role in this thriving environment, providing offshore labour, fabrication facilities, and engineering staff all around the country. Marking a departure from the trend where many Oil companies traditionally handled the engineering of their Oil rigs in-house and redesigned these themselves, their grip was gradually loosening, and external contractors were increasingly being entrusted with the engineering and design. Wood Group had recently clinched major contracts with industry giants like Texaco, Shell, and BP. Wood Group now boasted a workforce of over 1000 maintenance staff employed on offshore Oil & Gas installations in the North Sea. Combining this success with Ian's fishing business, JW Holdings, the collective revenue of the two companies exceeded £130 million (£375m Inflation adjusted to 2025).

Aberdeen was changing rapidly. On Tuesdays, the Aberdeen Petroleum Club at Kippie Lodge, Aberdeen's equivalent of the Dallas Oil Barons Club, played host to a new wave of Aberdonian Oil Baron. Arriving in an impressive array of brand-new Range Rovers, BMWs, Mercedes, and Rolls Royces, these individuals stood out in an era when only a select few could afford such luxury. Tables were adorned with Moet, and the air was filled with the drawl of Texan accents, marking the influence of those who dominated many of the oil companies in Aberdeen during that period. The Dukes Den in Altens was a bustling hub every lunchtime, teeming with hundreds of oil workers indulging in drinks and revelry before returning to the office at 3:00 pm, followed by the homeward journey at 4:30 pm, where the lunchtime pint was not a treat, but a necessity. In the west end of Aberdeen, a new kind of bar was emerging, "Cafe Society," embodying the free-market spirit of upmarket 1980s Britain. Cafe Society stood out with its unique conservatory layout, offering a view of the car park through floor-to-ceiling glass windows from the bar and restaurant area conservatory. This allowed everyone inside to easily identify the owner of each supercar parked outside, as its owner walked in full view of all those in the bar. It became the go-to place for those who wanted to see and be seen. Ian seldom visited Cafe Society, it wasn't his type of venue, but it reflected a new kind of glamour Aberdeen had never seen before. It drew in the city's wealth and glamour, becoming a magnet for the beautiful, the rich and the gold diggers, each one concealed in a glamorous cocktail dress and heels, their aim to ensnare unsuspecting "rich" Oil Barons who were just as eager to be lured away by the glamorous temptresses of Aberdeen high society. Aberdeen was the most glamorous city in Scotland and at the heart of it was “Cafe Society”. 

As 1986 unfolded, peculiar developments shook the oil markets. The price of crude oil gradually dropped, swiftly dropping from $32 to $24 a barrel in the space of 3 weeks. Most Oil & Gas ventures remained profitable at around $15-$18 per barrel. However, caution prevailed as bets were hedged, wallets tightened, and investment decisions deferred. Over the preceding decade, international waters had witnessed an unprecedented number of oil discoveries, with many coming online saturating the market with an excess of oil. Although existing oil platforms still maintained record production volumes, the introduction of new fields contributed to a surplus of oil. The world was awash with oil. The romance between Wall Street and the financial market oil traders evaporated, leading to a cessation of oil cargo contract purchases as a speculative endeavour. This triggered massive Oil sell-offs, and by June of 1986, the price of oil had plummeted to $8 a barrel. Sluggish and inefficient Oil operators, accustomed to the affluence of high oil prices, found themselves burdened with excesses, substantial layers of management, poor inventory management, and a lack of preparation for the rainy day they thought would never arrive. This marked the first serious oil crisis ever experienced by Aberdeen and it sent shockwaves through the city. The five major Oil operators—Texaco, Marathon, Conoco, BP and Shell, were laying off thousands of workers. Facing financial uncertainty and ruin, the oil companies opted for the seemingly easy solution: cutting wages and employee numbers. Simultaneously slashing wages across companies prevented workers from seeking higher-paying employment elsewhere. The repercussions were severe, with one-fifth of Aberdeen's 200,000 workforce losing their jobs. Overnight offshore drilling rig contracts were cancelled, halting ongoing drilling activities midway through well drilling. Surplus rigs were transported to the Cromarty Firth and stacked (A term for mothballed). Approximately 25% of all ships in the Oil & Gas sector were taken out of service, and 800 companies supporting the industry went into administration. Sedco Forex, one of the major drilling contractors had thrived in more prosperous times, but was unfortunately among the first to suffer in the downturn. Tom Bates, Sedco's General Manager, had arrived from Houston in 1985, and witnessed the drastic change in little over a year. The company operated 11 drilling rigs on behalf of paying clients at the end of 1985, each charging a rate approaching $100,000 a day; by October 1986, they were left with two paying rigs and had reduced their workforce of 1200 by 500 with charge-out rates for drilling rigs plummeting to $35,000 a day by August, down to $10,000 a day by November.

EXTRACTED FROM THE BIOGRAPHY - SIR IAN WOOD ABERDEENS BILLIONAIRE

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Billionaire industrialist Sir Ian Wood stands as the wealthiest homegrown founder of a company in Scotland. When he stepped down from the helm in 2013, his creation—Wood Group plc—had grown into a global powerhouse valued at $12 billion, operating in more than 60 countries, employing 60,000 people, and elevating his personal fortune to over £2 billion.

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Beginning with his family’s modest fishing-boat repair business in 1967, he boldly steered the company into the emerging world of oil and gas just as the industry reached Britain’s shores in the 1970s. From there, he built a sprawling empire that touched shipping, energy, fishing, technology, travel, electronics, power generation, offshore drilling, and property development. His leadership oversaw the most dramatic industrial transformation Aberdeen had ever seen.

Now, for the first time, the story long hidden behind closed doors is revealed. This is an explosive, deeply revealing journey into the sometimes shadowy, often ruthless, yet undeniably electrifying world of the Aberdeen oil and gas sector—its power brokers, its high-stakes decisions, and the man whose influence shaped an era.

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His achievements stand shoulder-to-shoulder with the greatest entrepreneurs in any industry, at any point in history.

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