Job losses in the oil and gas industry have accumulated with more incoming losses expected, as the combination of extremely low prices merged with slumping demand have led to a cut in spending for operation and services. The layoffs have been done in stages, with many layoff announced but not completed yet, and many unpaid leave or layoff is at risk of becoming permanent job losses. In the upstream oil and gas industries, large integrated companies might have reduced as much as 100,000 jobs according to IHS Markit’s vice-president for the upstream energy group, Bob Fryklund.
Fryklund has tracked a set of production and exploration operators, international and service companies and counted about 89,250 job reductions has been announced in 66 companies until August 3rd, and the real number is estimated around 100,000 in the segments of industry. Capital spending cuts is considered the main reason for the job cuts, as IHS Markit saw capital spending slide by 50% in many U.S oil and gas companies this year, and around 30% globally. The continued low spending was also expected by the group in 2021, and only a moderate revival in 2022, not yet reaching the level of 2019, as people now starting to think about next year's budget.
Most easy targets for the cuts are located at exploration work, pointing out that while production work maintains the basic business operations, the exploration work can be delayed. This situation leads to fewer service contracts for well drilling, well completion and hydraulic fracturing. The service industry is the one that took the biggest hit, Fryklund describing many of them as on life support.
The world's largest service provider of oil fields, Schlumberger Ltd. announced the company would cut 21,000 jobs, while Noble Corp, offshore drilling contractor filed for bankruptcy recognition by the end of last month.
North Dakota, the state where oil producing region Williston basin located, measuring the timing of the upstream job cuts peaked in April. The initial unemployment claims by workers in the categories of mining, quarrying, and oil and gas extraction hiked from 232 in February to 1,947 in March then spiked to 4,934 in April, then gradually lowered to 1,944 in May, 1,202 in June and around 600-700 in July, The North Dakota Department of Mineral Resources report stated. The state has filed for an emergency economic stimulus of $66 million from the federal government, to put oil field workers back in managing “orphan” wells, the abandoned wells without proper plugging many years and still leaking natural gas. A public information officer for the Department of Mineral Resources said that currently they are looking at 1,000 workers being put back to work through this system.
Not only the middle-lower worker affected hard, but executive officers such as CEOs and VPs at oil and gas have been taking 10-30% compensation cuts this year, a serious number that has never been seen in 40 years.
Refinery and marketing operations fundamentally less prone to the cuts in reason of the integrated nature in refinery operations, as it needs all of the different units to operate and under normal operations, refiners are running on minimal crews, explained Mike Smith, chair of the National Oil Bargaining Program at the United Steelworkers, union with large percentage of members are workers at refineries and petrochemical plants.
Moreover, the drop of gasoline and jet fuel demand has been exceptionally severe this year, and although refinery individual units cannot be separately idled, whole refineries can be out of production. Marathon Petroleum Corp, the largest U.S refiner announced that it had idled two of its refineries in April and announced again on August 3 that the two refineries would be closed, the 161,000 barrel/day refinery in Martinez, California and another one in Gallup, New Mexico with 27,000 barrel/day production capacity, each employed 740 and 250 workers respectively. The contract workers which needed periodically at the refineries, took a bigger hit. Marathon’s spokeswoman said there could be as many as 2,500 contract workers needed at Martinez refinery, and since the refinery will be reduced to a storage terminal, the staff need will be relatively little.
Union-negotiated benefits and protections for United Steelworkers will soften the economic blows for many affected workers, but the Steelworkers only have modest numbers of workers in the upstream, mainly in Alaska and California.
