Oil prices have continued to fall, and this macro incident is driving a number of unpleasant outcomes, but this is no longer news! What could be news, however, is the new impact this is having on the oil sectors in multiple countries, particularly those that are heavily oil-dependent.
Oilfield Services company Schlumberger has recently announced that it will cut 9,000 jobs in response to lower commodity pricing and anticipated lower exploration and production spending in 2015. This translates into an 8 percent shedding of its total workforce.
Over the past 6 months of the oil price decline, shares of the $100 billion company have declined by more than 30 percent according to Business Insider. In a bid to remain afloat, the oil and gas equipment and services vendor has raised its dividend by 25 percent and repurchased $1.1 billion worth of its own stock. This is expected to reward shareholders that have remained with the company despite the unfavourable exogenous shocks.
Two weeks ago, more than 10,000 people working for Mexican oil services companies were relieved of their duties thus sending the local economy into shock. Experts believe job cuts in the area could rise to 50,000 if oil prices slide lower than present levels. Also, BP Plc (formerly known as British Petroleum) announced a $1bn worth of cuts globally in response to falling crude prices.
Commenting on the development, Fadel Gheit, an analyst with New York brokerage Oppenheimer & Co, said; “An oil company that stops drilling is like a human who stops breathing. You cannot survive for very long. If oil prices do not exceed $70 by the summer then you will see an awful lot of pressure on small producers followed by a wave of mergers and acquisitions. There will be a massive focus on getting rid of anything that can be scrapped or shelved. Headcount is always a key consideration as will be postponing projects that no longer make commercial sense or deferring maintenance where possible.”
The situation in Nigeria has been rather lackluster. Share prices of International Oil Companies (IOCs) like Mobil and Total as well as Indigenous players like Seplat are also seeing significant drops, and the government has outlined drastic austerity measures to keep the economy in check through the oil crises.
But the oil phenomenon is a macro incident that transcends Nigeria and its ability to contain the threat. With the effects of falling oil prices spreading from region to region, the country might just be gearing up for a slash in oil jobs as well.
By Emmanuel Iruobe
