Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )
 January 25, 2016 - 6:20 PM EST
Print Email Article Font Down Font Up
Massive Sack Looms in the Oil Sector...

There seems to be panic in the oil industry both in

and globally, as oil companies are expected to start disclosing their annual reports soon.

Those who have declared their 2015 results and forecast for 2016 have already indicated plans to reduce workforce in 2016 a priority.

Royal Dutch Shell last Wednesday said in its fourth quarter and full-year update it would, in 2016, sack employees globally, including those in their services in


The oil giant said it would cut 10,000 jobs in an effort to further reduce costs amid a severe slump in oil prices.

The United States
multinational energy corporation, Chevron, had stated in October last year that it might eliminate up to 7,000 jobs, though the firm, which is the third-largest oil producer in
, did not say when or where in its global operations the jobs will be reduced.

The Manager, Public and Government Affairs, ExxonMobil Nigeria, Akin Fatunke, precisely disclosed that ExxonMobil laid off workers some time ago.

"The same thing is most likely going to happen. As I speak with you, about 104 workers had been laid off in the upstream. I won't use the word sack, as they are smiling and very happy because they were paid handsomely and they are still our friends," Fatunke said in a chat with reporters at an energy workshop.

Oil unions are already expressing concerns over the impending global sack in Chevron and Shell, among others, and had called on the federal government to stop companies from extending the planned sack to


The workers, under their umbrella union - the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), in a statement on Friday by the president, Igwe Achese, described the planned sack as alarming. NUPENG warned that it may be forced to embark on industrial action if the federal government fails to stop the companies from sending oil workers in

to the unemployment market.

Elsewhere, the slump in oil prices has battered energy giants such as BP and Petrobras. Last week,

oil firm, BP, reportedly said it would cut 4,000 jobs globally, 600 of which will be from its North Sea operations.

The news came as profits continue to suffer, leading to a big cutback in investment across the oil industry. BP said all the job losses would occur in its oil exploration and drilling business.

oil giant, Petrobras, recently announced a massive scaleback of its investment plans. Petrobras will reduce investment by $32bn, or 25 per cent, over the next four years, its third cut in six months.

Companies providing services for the oil industry have not been spared of the downturn. Oilfield services giant, Schlumberger, recently announced it slashed 10,000 jobs in the fourth quarter of last year as a response to tumbling energy prices.

The world's largest oil service company, which has 105,000 employees in 85 countries, including

, announced the job cuts on Thursday in a statement announcing its 2015 financial performance.

The results, however, did not spell out where in its global operations the jobs had been lost. But according to industry publications, the 10,000 lost jobs came on top of the more than 250,000 jobs the industry slashed in 2015 as crude prices fell from $100 to below $30 per barrel.

A professor of Petroleum Economics and Director of the Emerald Energy Institute, University of Port Harcourt, Prof. Wumi Iledare, said it is not surprising to see companies slash jobs because the workforce is always the first to experience the collateral damage from low oil prices.

"In fact, more than 100,000 jobs have been lost in the energy sector since the current downturn. So, unless we see a turnaround in the price dynamics, job cut will continue to be inevitable.

"However, I think

can do something to avert the disaster. One is to review the tax and fiscal regime to reflect the reality on ground.
did it in the late 1980s with a notional profit margin policy. You will be shocked that was when we grew reserves in onshore," he said.

Prof. Iledare, who is a former President of the International Association for Energy Economics (IAEE) said, "Low oil price is not necessarily a negative thing from the economic growth and development angle. Yes, for a petroleum-dependent economy it is a disaster, but not necessarily a permanent disaster. "This is a call for diversification and domestic market expansion for its oil consumption. Of course, an unstable monetary policy can even be worse than a low oil price regime. The issue is really complex and the government needs to wake up."

A professor of Energy and Business Law, Emeka Duruigbo, said the situation could linger further until something "phenomenal" happens.

"It may take serious, perhaps cataclysmic, events to push oil prices to the high numbers we enjoyed till 2014. Even if OPEC decides to reduce production quotas to bring supply and demand closer to an equilibrium and, thereby, raising prices, fracking firms in the US are likely to be enticed back fully, leading to higher supplies again. "Also, it seems that the oil-importing governments and the consuming public and manufacturers enjoying low energy prices may not want the bonanza to end soon, if at all. Oil-exporting countries and oil workers are left to bear the brunt of this sea change," Duruigbo, who teaches at the Thurgood Marshall School of Law, Texas Southern University,

United States

Despite these, French oil and gas giant Total said last Tuesday that the company would not cut jobs as its peers had done, notwithstanding an expected hit to its 2015 results.

Ahead of the company's full-year presentation, which is scheduled for Feb. 11, Total's Chief Executive Officer, Patrick Pouyanne, told

1 radio station that all the company's job cuts had come from allowing workers to retire without recruiting new employees to fill their positions.

According to Reuters, Pouyanne told the radio station that last year as oil prices fell, the company scaled back its hiring, bringing in just 700 new employees, as against the 1,200 that had been planned.

He said the company would not treat employment as an "adjustment variable" during the downturn in oil prices, and that the company would need its workers "when the price goes up."

Total's decision reignites the debate whether companies should put employees to some other good use rather than disengage them. The Director, Centre for Petroleum, Energy Economics and Law, University of Ibadan, Prof. Adeola Adenikinju, said although such position was valid from a nationalistic view, it would be difficult because the companies are out to make profit.

"They are multinationals; the investment decisions are taken at their headquarters in various countries. The companies in

cannot take that decision. To diversify into downstream, for instance, if they want to build a refinery they won't be willing to take the associated risks because that is not their core business in
. It may be their core business in other parts of the world but they are just here for upstream activities alone, except government gives them incentives," he said.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:

Source: News (January 25, 2016 - 6:20 PM EST)

News by QuoteMedia