Coronavirus, consolidation taking toll on energy jobs

Coronavirus, consolidation taking toll on energy jobs

Reuters  | Oct 30, 2020 05:20

Coronavirus, consolidation taking toll on energy jobs

By Jennifer Hiller

HOUSTON (Reuters) - Oil and gas companies worldwide are taking an axe to their employment rolls, shedding workers to survive what is expected to be a prolonged stretch of weak demand.

Exxon Mobil Corp (N:XOM) said it will cut its workforce by 15%, or about 14,000 people, along with oil majors Chevron Corp (N:CVX) and Royal Dutch Shell Plc (L:RDSa).

All told, more than 400,000 oil and gas sector jobs have been cut this year, according to Rystad Energy, with about half of those in the United States, where several big exploration companies and most large oil service companies are headquartered.

Coronavirus has devastated swathes of the global economy, with energy, travel and hospitality among the industries hit hardest. Energy companies were already struggling with weak returns, particularly those operating in U.S. shale regions, but have had to double down on cost cuts as investors pressure companies to improve margins.

"The COVID-era reality across the oil industry is austerity on an epic scale. There is no escaping the fact that this means, among other things, job losses," said Pavel Molchanov, analyst at Raymond James.

In addition to Exxon, Chevron Corp, Australia's Woodside Petroleum Ltd (AX:WPL) and Canada's Cenovus Energy Inc (TO:CVE) all announced plans in recent weeks to cut staff.

Global fuel demand slumped by more than a third in the spring. While consumption has recovered somewhat, it remains lower than a year ago with major economies resuming lockdowns to contain the pandemic.

The downturn has been particularly harsh in the United States, the world's largest crude oil producer. The nation has recorded the most deaths from coronavirus, and the damage from the pandemic has sent unemployment to about 8%.

U.S. Energy Secretary Dan Brouillette said it is unlikely to return to the peak, near 13 million barrels per day, reached in 2019, largely through the use of fracking technology used by shale companies. The shale industry has been hit hard by the pandemic because it is easy for oil firms to cut staff and spending in the sector.

Fracking has become a hot-button issue in the U.S. presidential campaign. Democratic challenger Joe Biden wants to limit fracking on federal lands, while incumbent President Donald Trump has pushed for more drilling, and argues Biden's position would destroy jobs.

Consolidation is helping drive job cuts. Chevron plans to eliminate roughly 25% of the staff acquired with Noble Energy, which it acquired this month. Shell said its oil output likely peaked last year, and it plans to cut roughly 10% of its workforce. Cenovus said it will cut 25% after it buys rival Husky Energy Inc (TO:HSE).

In Australia, more than 2,000 oil industry jobs have been cut since March, including at Exxon and Chevron. Top independent gas producer Woodside said earlier this month that it would cut around 8% of its workforce.

Mohammad Barkindo, secretary general of the Organization of the Petroleum Exporting Countries, recently expressed concern that the pace of oil demand is below expectations, potentially requiring major producers to maintain production cuts.

Not all companies are throttling back. PetroChina Co Ltd (SS:601857), Asia's largest oil and gas producer, reported a 350% surge in profit from a year earlier.

In an outlook released earlier this month, BP Plc laid out two scenarios that suggest world oil consumption, roughly 100 million barrels per day, peaked last year. BP Plc (L:BP) recently cut about 50% of its exploration team as it shifts operations towards renewable energy development.

Currently, futures markets suggest crude prices (LCOc1) (CLc1) may not advance beyond $40 a barrel for at least two more years due to weak demand, and that could limit hiring.

© Reuters. FILE PHOTO: A combination of file photos shows the logos of five of the largest publicly traded oil companies BP, Chevron, Exxon, Mobil Royal Dutch Shell,and Total

"The practical reality is when you have oil prices in the $30 to $40 range, I don't think many companies have the luxury to wait for a recovery," said Alex Pourbaix, chief executive at Cenovus.

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.

';