BY OKEY ONYENWEAKU
It is said that it is when the wind blows that you get to see a lot of what had hitherto been hidden. This seems to be what is panning out now in Nigeria’s oil sector following the recent economy-wide dislocations.
News at the weekend indicated that the oil and gas industry is boiling once again as jitters grip staffers who had hitherto been some of the most secure in the economy. This time around, the nation’s current, single, biggest oil explorer, Exxon Mobil has announced plans to disengage 14,000 of its workforceto enable it survive.
The earth-shaking move, which is coming on the heels of the recent massive sackings by Chevron Nigeria Limited in which over a thousand staff were shown the way out in order to survive the pressures of cost and other associated challenges is understandably piling even more pressure on the national economy.
But even more holistically, the behaviour of these companies underscores the turmoil that has hit the industry since the price of crude nose-dived and has continued to remain low, hovering between $38 and $43 per barrel. The plunging of the price of crude has barely spared the oil and gas industry in recent times.
Unfortunately, the sector’s problems have been compounded by the sudden and devastating effect of the Covid-19 pandemic; which has infected over 45 million persons, led to 1.1m deaths, and is indeed still raging.
The combined effect of low price of crude and the ravaging effect of Covid-19 which forced lock downs that stalled economic activities for over five weeks and stopped operations and supply chains almost all over the world dealt a big blow to the world economy.
Not even the even the stronger economies have had good stories to tell since this year began.
Companies have groaned under the pressures emanating from the twin challenges low oil price and Covid-19.
An international news agency, Bloomberg notes that the projected cuts will include 1,900 U.S. jobs, mostly in Houston, as well as layoffs previously announced in Europe and Australia and reductions the number of contractors, some of which have already taken place.
‘’ Personnel reductions are Chief Executive Officer Darren Woods’s latest effort to curtail spending and halt the worst string of quarterly losses since Exxon assumed its modern form with the 1999 takeover of Mobil Corp.
“These actions will improve the company’s long-term cost competitiveness and ensure the company manages through the current unprecedented market conditions,” the company said in a statement on Thursday.’’ Said Bloomberg
Reports show that Exxon rose 3.7% to $32.73 at 1:47 p.m. in New York and was the day’s best-performing exploration stock in the S&P 500 Index.
‘’Exxon’s total reduction means the company will reduce its workforce by about 14,000 people, split between employees and contractors, from year-end 2019 levels, spokesman Casey Norton said by email. The cuts will come through attrition, targeted redundancy programs in 2021, and scaled-back hiring in some countries.
‘’Exxon’s Big Oil rivals are also cutting thousands of jobs in response to the pandemic-induced demand slump. BP Plc plans to slash 10,000 jobs, Royal Dutch Shell Plc will cut as many as 9,000 roles and Chevron Corp. has announced around 6,000 reductions.’’ It said.
Anxiety continued to dominate discussions of the development as the International oil prices fell on Friday and posted a second consecutive monthly drop, given the rising COVID-19 cases in Europe and the United States.
Experts noticed that Brent crude dropped 19 cents to settle at $37.46 a barrel, after touching a five-month low of $36.64 in the previous session while the
U.S. West Texas Intermediate (WTI) crude fell by 38 cents to settle at $35.79 a barrel, after dipping to its lowest since June on Thursday at $34.92. WTI fell 11% for the month, as Brent dropped 10%.
Recently, the IMF had projected that global growth to rise from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent for 2021—a downward revision of 0.1 percentage point for 2019 and 2020 and 0.2 for 2021 compared to those in the October World Economic Outlook (WEO).
The African regional economy is also projected to contract by 3.2 percent in 2020, which is 1.6 percentage points deeper than projected in April while in 2021, regional growth is projected at 3.4 percent in 2021, which is 0.6 percentage points below the April 2020 projection.
However, industry analysts fear that the growth projections for the both the world economy and African region may be revised further given the second wave of the pandemic which is already strong in UK and USA. Already the UK has forced another lockdown which last till December 2, 2020.
All these challenges have conspired to deal a fatal blow on productive activities and firms, the oil and sector not excluded are struggling for survival.
Many other oil companies are also seen analysts say to be right sizing and also cutting thousands of jobs in response to the pandemic-induced demand slump.
While BP Plc plans to slash 10,000 jobs according to report, Royal Dutch Shell Plc will cut as many as 9,000 roles and Chevron Corp. has announced around 6,000 reductions.
Exxon Mobil’s in-house workforce is estimated to stand at 74,900 people, as of Dec. 31. But weak financial positions have forced the company to prioritize stream lining its work force.
Reportedly, Exxon Mobil’s stock has plunged 54% this year while dividend yield is now more than 10%, indicating that investors are anticipating a cut
Before now, Chevron Nigeria had in a statement, said it was “reviewing its manpower requirements in the light of the changing business environment”.
It stressed that in line with its commitment to best practices, it will not stop in evaluating opportunities to improve capital efficiency and reduce operating costs.
“In this process, the company will be streamlining its workforce and improving service delivery and overall performance at all levels.”
In a statement signed by Esimaje Brikinn, General Manager, Policy, Government and Public Affairs, the company emphasised that it was striving to have a business that is competitive and an appropriately sized organisation with improved processes.
“This will increase efficiency and effectiveness, retain value, reduce cost, and generate more revenue for the Federal Government of Nigeria,” he said.
The icing in the cake came when the statement noted that the new organisational structures will, unfortunately, require approximately 25 per cent reduction in the work force across the various levels of our organisation.
“It is important to note that all our employees will retain their employment until the re-organisation process is completed,” he noted.
It is not yet determined exactly how many Nigerian jobs would specifically be affected in the planned shaving. However, analysts say that given the parlous state of the economy at the moment, which indeed was a major contributory factor in the tension that has gripped the nation recently, even one job loss would indeed be a lot.