More than a million jobs in the oilfield service industry (OFS) are likely to be cut in 2020 due to low project volumes brought upon by the Covid-19 epidemic and the continuing oil price war, says the research company Rystad Energy.
More than a million jobs in the oilfield service industry (OFS) are likely to be cut in 2020 due to low project volumes brought upon by the Covid-19 epidemic and the continuing oil price war, says the research company Rystad Energy.
More than 5 million people are employed in the OFS sector globally at present and Rystad Energy’s estimates show that this year alone, contractors will scale down their workforce by at least 21%. Some 13 percentage points 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.
‘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,’ says Audun Martinsen, Rystad Energy’s Head of Oilfield Service Research.
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 has to face the additional effect of a big decline in demand, caused largely by the Covid-19 outbreak around the world.
Offshore workforce is likely to be reduced by a total of 19% in 2020 as the low oil prices will halt most of the exploration work as well as maintenance, modifications and operations projects. The fear of a Covid-19 outbreak on offshore platforms and yards will force the E&P companies and contractors to suspend several activities.
The largest reductions in 2020 are expected to be within shale, just like during the 2014 downturn. As much as $65 billion of the $100 billion spending reduction expected globally will be in the shale industry, said Rystad. A 32% cut in workforce is likely to be realized in this sector by December 2020.
‘In the US shale industry as many as 5800 horizontal wells could be cut in 2020, which would more than halve the number of wells from the 10,900 planned for 2020,’ said Audun Martinsen, Rystad Energy’s head of oilfield service research.
Meanwhile, the well stimulation market is estimated to come down by $25 billion in 2020, said Rystad.
