According to ameinfo.com, the recent sag in oil prices at the beginning of 2016 has not only sent global stock markets spinning, but has also seen a more ominous warning from global oil and gas giants: large layoffs.
Oil giant Royal Dutch Shell announced earlier that it would be cutting 6,500 jobs this year as a part of a $4 billion reduction plan in operating costs, and Chevron said it would eliminate 7,000 jobs.
British oil and gas giant BP said on Tuesday that it would cut 5 per cent of its 80,000-strong global workforce, which would be about 4,000. This would come primarily from “upstream” businesses, at the oil wells. “Globally, we expect the headcount in upstream to be below 20,000 by the end of the year,” a company spokesman was quoted as saying in various media reports.
In the United Arab Emerites, the CEO of Dana Gas, Patrick Allman-Ward, told reporters at the Gulf Intelligence UAE Energy Forum conference that the company was aiming to slash the workforce at its headquarters by 40 per cent “and cut general and administrative costs by half between 2015 and early 2016”, states Reuters.
However, a spokesperson from recruitment firm Hays Oil & Gas said to The National that while tens of thousands of new hires were not being sought, the industry in the Gulf Corporation Council was not in as bad a shape as other parts of the world in terms of job losses.
“We’re not looking at increases in regional salaries, but we’re not looking at decreases either,” Gary Ward, the regional head of Hays Oil and Gas, told the paper.
Overall, the oil industry is expected to have cut more than 250,000 jobs in the past 18 months alone, globally, per Bloomberg estimates, as companies defer expansion plans to cope with the drop in prices. Most major European oil and gas companies are able to balance their books only at $60 per barrel for oil.
Petrobas, the rough-and-tumble Brazilian oil giant, stated this week that it was slashing its five-year investment plan by 25 per cent or $32 billion as it battles the double hit of the depreciating Brazilian real and sliding oil prices that have hit 12 year lows.
In fact, global oil and gas investments in 2016 are expected to fall from $595 billion to $522 billion, their lowest levels in six years, which in itself represented a 22 per cent fall.
“This will be the first time since the 1986 oil price downturn that we see two consecutive years of decline in investments,” Bjoernar Tonhaugen, vice-president of oil and gas markets at Rystad Energy, told Reuters.
Moreover, the sell-off in the oil markets has also led to a revelation from Saudi Arabia’s Deputy Crown Prince Muhammad bin Salman that the kingdom could be looking at offloading a stake in its crowning jewel Saudi Aramco through an IPO, as it sees its revenues decline at a rapid pace.
The Economist magazine called that the “sale of the century”.
Oil prices have today climbed back from the 12-year lows they hit on January 12th with Brent crude oil hovering around the $31 mark. But most analysts from Barclays, Macquarie and Bank of America Merrill Lynch have further downward revised their forecasts.