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The energy industry is feeling the sting of slumping oil
30/07/2015
Saipem, Shell & Centrica shed over 20k jobs
All looking to cut costs as oil price falls
Richard Jansen-Parkes
MORE than 20,000 workers are to lose their jobs at Shell, Saipem and Centrica as all three companies look to cut costs in the wake of the falling oil price.
Saipem – partially owned by the Italian government – is to make the most cuts, with 8,800 jobs set to go over the next two years. Most of these will come as large projects come to an end and as the company reorganises its business to save money. It says that this will include cutting its presence in several countries, including Brazil and Canada.
The announcement came as the company predicted that it will lose almost €800m (US$875m) over the first half of 2015. Much of this loss was attributed to asset writedowns and the cancellation of the South Stream pipeline project, but it is also feeling the impacts of weak international oil prices, which have roughly halved over the past year.
“In the context of a declining oil-price trend which shows no sign of reversing, the outlook for the oil services industry continues to deteriorate,” Saipem explained in its results statement.
“Clients are focussed on cost reduction, which results in a more rigid approach to negotiations, constant pressure on supply-chain margins, delays in new contract awards, and in some cases in the cancellation of already approved projects.”
Between the job cuts and other cost-cutting measures, Saipem estimates that it will save €1.3bn over the next two years.
Shell says that is also looking to cut jobs in order to weather the effects of the oil downturn, which it expects to last for several years. It is looking to cut 6,500 staff and contractor jobs this year as part of plans to reduce its operating costs by US$4bn, a drop of roughly 10%.
It also expects to reduce its capital spending for the year by around US$7bn compared to 2014 and is selling off its 33% stake in Japanese business Showa to petrochemical group Idemitsu for about US$1.4bn.
Shell CEO Ben van Beurden says that he will “re-shape” the company once its plan to buy BG Group is completed later this year. He plans to cut down on exploration spending and concentrate Shell’s efforts into fewer, higher value positions “where we can apply our know-how with better economy of scale.”
“We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery,” he adds.
At the same time British Gas owner Centrica, is to cut 6,000 jobs as a result of a six-month strategic review. It aims to have made most of the cuts within the next two years. Half of the losses will come through natural turnover, with the rest coming through redundancies.
Though the company did not indicate where the losses will come from it has declared that it is looking to make major reductions in the size of its struggling oil and gas unit. Once it has finished its reorganisation, Centrica says it wants to be producing roughly half as much oil as it is today, with a similar reduction in operating costs.
CEO Iain Conn says that Centrica will look to focus on its energy supply, services, marketing and trading businesses while cutting back on both power generation and oil and gas production.
