Have COVID-19 and oil prices contributed to why Saudi Aramco is undergoing layoffs?
Reports emerged that Saudi Aramco is undergoing major layoffs as a result of several factors including oil prices and COvid-19 hampering demand for oil.
Foreigners getting cut
Reuters reported that Aramco started laying off hundreds of employees this month as global energy companies reduce their workforces in response to the coronavirus crisis.
It said oil majors have cut workforces by 10% to 15% to cuts costs and as part of restructuring plans.
“Most of those who lost jobs at Aramco were foreigners,” Reuters sources said. One source estimated that 500 people had been laid off.
Aramco has more than 70,000 (closer to 80k) employees.
“Aramco is adapting to the highly complex and rapidly changing business environment caused by the COVID-19 pandemic. We constantly review and revisit our operating expenditures where necessary to continue driving operational excellence and profitability,” Aramco said in a statement.
Qatar Petroleum, one of the world’s biggest energy companies, has also laid off foreigners and cut its spending plans, industry sources have told Reuters.
Kuwait, a key Gulf oil producer, plans to stop hiring foreigners for its oil sector for a year, the Kuwaiti oil minister said this month.
Bloomberg meanwhile said Saudi Aramco, the world’s biggest oil exporter, was not providing information regarding the details of any action at this time, but that actions are designed to provide the company more agility, resilience and competitiveness, with a focus on long-term growth, according to a statement.
Aramco’s first-quarter profit slumped 25% year-on-year to 62.5 billion riyals ($16.6 billion) as coronavirus shutdowns caused demand for oil to collapse. Brent crude has more than doubled since late April as more economies re-open. But at around $41 a barrel, it’s still down 37% this year, putting huge pressure on producers globally.
Aramco has already slashed capital expenditure for this year to between $25 billion and $30 billion from an initial target of $40 billion and put 2021 spending under review, according to Bloomberg.
Aramco completed a $69.1 billion acquisition of 70% of chemicals maker Saudi Basic Industries Corp. this week. While it stretched out the payments to the seller, the Saudi sovereign wealth fund, over the next eight years, it still needs to pay $7 billion on Aug. 2.
It also committed to giving shareholders a $75 billion dividend this year, although it has said it could cut the amount allocated to the Saudi government, which owns around 98% of the stock.
The shares of Aramco, which listed in Riyadh in December, have fallen 14% since their peak to 32.80 riyals. Its market valuation of almost $1.75 trillion is still the world’s biggest.