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Oil price decline leads to massive global lay-offs, investment cuts

UAE’s Dana Gas to cut workforce by 40 per cent

The rout in oil prices two weeks into 2016 has not only sent global stock markets into a tailspin, but has also seen more ominous warnings pouring in from global oil and gas giants on mass-scale layoffs.

After oil giant Royal Dutch Shell announced earlier that it would be culling 6,500 jobs this year, as a part of its $4 billion reduction plan in operating costs, and Chevron said it would eliminate 7,000, British oil and gas major BP said on Tuesday that it would cut 5 per cent of its 80,000-strong global workforce, primarily from its upstream business.

“Globally, we expect the headcount in upstream to be below 20,000 by the end of the year,” a company spokesman was quoted as saying in various media reports.

Regional blues

In the UAE, meanwhile, the CEO of Abu Dhabi-listed Dana Gas, Patrick Allman-Ward, told reporters at the Gulf Intelligence UAE Energy Forum conference that the company was aiming to slash its head office workforce by 40 per cent “and cut general and administrative costs by half between 2015 and early 2016”, according to Reuters.

Speaking to The National, however, a spokesperson from recruitment firm Hays Oil & Gas insisted that while tens of thousands of new hires were not being sought, the industry in the GCC was not in as bad a shape as it is in other parts of the world in terms of job losses.

“We’re not looking at increases in regional salaries, but we’re not looking at decreases either,” Gary Ward, the regional head of Hays Oil and Gas, told the paper.

Overall, the oil industry is expected to have cut more than 250,000 jobs in the past 18 months alone, globally, as per Bloomberg estimates, as companies defer expansion plans to cope with the freefall in prices. Most European oil and gas majors are able to balance their books only with oil at $60 per barrel.

Investments deferred

Petrobas, the beleaguered Brazilian oil giant, confirmed this week that it was slashing its five-year investment plan by 25 per cent or $32bn as it battles a double whammy of a depreciating Brazilian real and sliding oil prices that have hit 12 year lows.

In fact, global oil and gas investments in 2016 are expected to fall from $595bn to $522bn, their lowest levels in six years, which in itself represented a 22 per cent fall.

“This will be the first time since the 1986 oil price downturn that we see two consecutive years of decline in investments,” Bjoernar Tonhaugen, vice-president of oil and gas markets at Rystad Energy, told Reuters.

Moreover, the sell-off in the oil markets has also led to a revelation from Saudi Arabia’s Deputy Crown Prince Muhammad bin Salman that the kingdom could be looking at offloading a stake in its crowning jewel Saudi Aramco through an IPO, as it sees its coffers empty at a rapid pace.

The Economist magazine called this the “sale of the century”.

Oil prices have today climbed back from the 12-year lows they hit yesterday with Brent hovering around the $31 mark. But most analysts from Barclays, Macquarie and Bank of America Merrill Lynch have further downward revised their forecasts with Standard Chartered sounding a very bearish note saying it expects prices to hit as low as $10/barrel.