Job losses have mounted rapidly in the oil and gas industry, with more expected, as a combination of low prices and reduced demand have led to spending cuts for operations and services, analysts say.
The layoffs have been coming in stages, with many announced but not yet completed, and many furloughs at risk of becoming permanent job losses.
Job reductions in oil and gas upstream and large integrated companies probably have reached 100,000, according to Bob Fryklund, vice-president for the upstream energy group at consulting company IHS Markit Ltd.
Fryklund has been tracking a set of exploration and production operators, international companies, and service companies.
He told Oil & Gas Journal he counted about 89,250 job reductions announced by about 66 companies as of Aug. 3, and he estimated the real number likely was about 100,000 for those segments of the business.
Cuts in capital spending set the stage for job cuts. IHS Markit has seen capital spending drop 50percent for many US oil and gas companies this year, while internationally the drop has been around 30percent, Fryklund said.
“We’re not too bullish for next year,” he said, saying his group was anticipating continued low spending in 2021 and only a moderate revival in 2022, still not back up to the level of 2019. He added, “People are just now starting to think about their budgets for next year.”
The cuts are most easily targeted at exploration work, Fryklund said, explaining that production work maintains the basic business operations while exploration plans can be delayed. That leads to fewer service contracts for well drilling, hydraulic fracturing, and well completion.
“It’s the service industry that’s really taken the biggest hit,” Fryklund said, describing many of them as “on life support.”
Schlumberger Ltd., the world’s largest provider of oil field services, announced in late July it would cut 21,000 jobs, Offshore drilling contractor Noble Corp. went a step farther, filing for bankruptcy reorganization at the end of July.
The analyst say refining and marketing operations are inherently less prone to job cuts because of the integrated nature of a refinery’s operations.
A refinery needs all of the different units to operate, said Mike Smith, chair of the National Oil Bargaining Program at the United Steelworkers.
“We don’t run fat,” Smith told Oil & Gas Journal, explaining why layoffs were fewer in number in the downstream. Under normal operations, refiners are “running on minimal crews,” he said.
But the drop in demand for gasoline and jet fuel has been especially severe, and while individual units in a refinery may not be separately idled, whole refineries can be shut down.