Crude gloom sets in

Updated 11 Oct 2020

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An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France. — Reuters/File
An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France. — Reuters/File

OIL majors are on a job cutting spree. When seen through the prism of the cuts announced in recent weeks, the overall crude scenario appears bleak and gloomy.

IHS Markit has reported a capital spending drop of 50 per cent by several US oil and gas companies this year, while internationally the drop has been around 30pc. This has contributed to the job cuts.

As part of its efforts to rein in costs, oil and gas supermajor ExxonMobil is all set to cut 1,600 jobs in Europe, the company announced last week. “The impact of Covid-19 on the demand for ExxonMobil’s products has increased the urgency of the ongoing efficiency work,” it added.

ExxonMobil swung into a loss in the first quarter of the year and then booked another loss for the second quarter. It now expects to post a negative net result for the third quarter as well.

As part of its efforts, the supermajor has been seriously reducing its presence in Europe’s oil and gas sector, Irina Slav wrote in a piece in Oilprice.com. After exiting Norway, Exxon has put up for sale its North Sea assets that last year were estimated to be worth up to $2 billion but now, with the oil price collapse and the pandemic, may have become cheaper. The company last year also sold its Norwegian operations to local Var Energi for $4.5bn.

As per media reports, Exxon would be selling stakes in 15 fields. Two exploration blocks and Exxon’s stakes in pipeline networks in the region are also on the table.

The week before, another oil major Royal Dutch Shell said it was planning to cut between 7,000 to 9,000 jobs worldwide by the end of 2022, adding, around 1,500 employees have already agreed to take voluntary redundancy this year. In June, BP also announced cutting around 10,000 jobs from its workforce to cope with the dimming crude demand.

Job losses in Canada’s natural resources sector have also hit an all-time high in the second quarter of 2020. It stood currently at 43,000. Pipeline giant TC Energy eliminated an unspecified number of jobs in its Canadian gas operations a couple of weeks back. This was followed by last weekend’s grim news that Suncor Energy was set to cut up to 15pc of its workforce – almost 2,000 positions across the country – over the next 18 months. Citing Statistics Canada, CBC is reporting that employment in the industry has fallen by 7.3pc during the second quarter of the year.

Almost three-quarters of the pandemic-driven jobs losses in the US petroleum and chemical sectors may not come back before the end of 2021, Bloomberg reported quoting a Deloitte LLP report.

The collapse in oil demand and prices spurred the fastest rate of oil and chemical industry layoffs in history, with about 107,000 jobs eliminated between March and August, Deloitte reported last week. The number is probably even higher when furloughs and other headcount measures are taken into account, Duane Dickson, vice chairman and US Oil, Gas and chemicals leader for Deloitte was quoted as saying.

The report added that oil explorers, gas drillers, frackers, refiners, and equipment makers have shrunk their workforce to cope with the plunge in demand for the products they sell. Schlumberger, Halliburton Co., and Marathon Petroleum Corp. – some of the biggest operators in their fields – are among the companies casting thousands of people out of work in response to the demand crash.

Oilfield services have been hit particularly hard, as capital expenditure on things like the drilling of new wells has been slashed, all around. The sector lost 2,600 jobs in August, estimates from the US Petroleum Equipment & Services Association (Pesa) said.

As per Pesa, total job losses reached 103,420 in August, with oilfield services employment down more than 121,000 jobs since August 2019 and at its lowest point since March 2017.

The US state of Texas has been the most affected, with 59,200 oilfield services jobs lost since the pandemic began.

Job reductions in oil and gas upstream and large integrated companies probably have reached the 100,000-mark, Bob Fryklund, vice-president for the upstream energy group at IHS Markit Ltd was quoted by Alan Kovski as saying. Fryklund told the Oil & Gas Journal he counted about 89,250 job reductions announced by about 66 companies as of August 3, and he estimated the real number likely was about 100,000 for those segments of the business.

For now, this is not business as usual.

Published in Dawn, October 11th, 2020