OnlineSee all articles
Job losses pose 'bottleneck risk'
Signs of revived activity set to turn tide of redundancies but looming worker shortage could fuel cost inflation: report
The number of job losses in the global oil and gas industry has reached nearly half-a-million due to a damaging slump, risking a potential labour bottleneck in the event of a market recovery, according to a report.
The latest lay-offs tally of 440,131 issued by industry consultancy Graves, up more than 25% from a previous estimate of 350,000 given by the firm in May last year, follows a raft of redundancies due to oil company and contractor cutbacks amid low oil prices, Bloomberg reported.
The figure covers the two-and-a-half year period to the end of 2016.
About three-quarters of the job losses came from oilfield service providers such as Schlumberger and Halliburton, as well as drilling contractors and equipment suppliers, with around a third of the overall cuts occurring in the US oil patch, the Houston-based firm stated.
The world’s four biggest service companies are estimated to have racked up severance costs of a whopping $3.12 billion over the past two years.
US rig count up in DecemberRead more
However, the tide of lay-offs may now be turning, with US shale operators hiring back staff as the rig count increases on firmer oil prices and an expected positive market impact from a recently agreed output cut between Opec and non-Opec producers to reduce a crude oversupply.
The number of US workers employed in the oil and gas extraction industry has increased slightly after hitting a five-year low last July, according to the Bureau of Labor Statistics.
Research firm Wood Mackenzie said in an outlook report issued on Wednesday that efficiency gains in the US shale are set to fuel increased industry expenditure this year.
Barclays analyst David Anderson was quoted as saying that explorers are set to boost capital expenditure by 7% this year, but the labour purge could lead to a shortfall of workers to cope with renewed activity, posing a threat of cost inflation.
“Aggressive cost’cutting this downturn has reversed much of the ‘boom town’ employee-related inflation,” he stated in a note.
“Attrition of qualified labour into less cyclical industries with greater job security, more stable income and better work/life balance could create cost inflation and bottleneck in a sharp recovery.”