OSLO, Norway – More than one million jobs in the oilfield service market (OFS) are likely to be cut in 2020 due to low project volumes brought on by the Covid-19 epidemic and the ongoing oil price war, according to Rystad Energy. Shale services are expected to bear most of the reductions.
More than five million people are employed in the OFS sector globally at present and Rystad’s estimates show that this year alone, contractors will scale down their workforce by at least 21%. About 13% are attributed to oil-price-driven cuts and the remaining 8% reductions will be layoffs caused by measures taken by contractors who are forced to slow down project developments fearing the spread of Covid-19 on their worksites.
Audun Martinsen, Rystad Energy’s Head of Oilfield Service Research, said: “Low oil prices are likely to persist in 2021 and could lead to further workforce reductions. But as we move into the second half of 2021, with better market fundamentals and a fading Covid-19, recruitment is likely to pick up in the shale sector and from 2022 will also kick-off in the offshore sector.”
Unlike the downturn of 2015 and 2016, when the total OFS workforce was reduced by nearly 30% from its 2014 levels as a result of another supply war, the industry now must face the additional effect of a big decline in demand, caused largely by the global Covid-19 outbreak. Global supply will exceed demand by more than 10 MMb/d from April, when OPEC+ countries start increasing their production, the analyst said.
“E&P operators and contractors want to minimize the potential spread of Covid-19 by reducing the workforce to an absolute minimal level. This is happening across the world but Europe, currently, is the most impacted market,“ Martinsen said.
According to the analyst, the offshore workforce is likely to be reduced by 19% in 2020 as the low oil prices will halt most of the exploration work and MMO projects in the second half of the year and the fear of a Covid-19 outbreak on offshore platforms and yards will force the E&P companies and contractors to suspend several activities.