More than one million jobs in the oilfield service industry are likely to be cut in 2020 due to coronavirus pressures, says researcher Rystad Energy.
This comes as a result of low project volumes because of the Covid-19 pandemic. The ongoing oil price war between major producers has also contributed to economic hardships for companies.
Across the world, the oilfield services industry employs more than five million people. Rystad analysts estimate contractors will scale down their workforce by at least 21%.
Of this, around 13% will be attributed to cuts. The other 8% will be due to production slowdowns to contain the spread of Covid-19 on contractors’ worksites.
It compares the coronavirus layoffs to the 30% of jobs lost during the 2014 oil price war.
The analysis says services to shale fields are expected to bear most of the reductions. The statement said “Here the oil price risk is higher as a major drop is expected in drilling and completion activity, with operators canceling their drilling plans to secure cash.”
These cuts are expected to persist until mid-2021, when shale fields will start re-employing. Rystad expects offshore services to start re-employing from 2022.
Head of oilfield service research Audun Martinsen 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.”
From April, Rystad expects global supply to outstrip demand by 10 million barrels per day.
Martinsen added: “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.”
In January this year, Rystad reported that 2019 saw 26 discoveries of more than 100 million boe, with offshore regions dominating the list of new oil and gas deposits.