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Low oil prices forcing companies to lay off staff

Joan Namukasa, a Tullow Uganda drilling engineer, reviews technical reports with colleagues at a rig site (Photo: Tullow Oil Uganda)

Tullow Uganda’s drilling engineers at work. Such jobs are getting scarce as oil companies downsize amidst weak returns from low oil prices. (Photo: Tullow Oil Uganda)

2015 looks set to be the harshest year for the global oil and gas industry in recent times with hundreds of thousands of people expected to lose their jobs if oil prices continue their free fall or fail to recover significantly in the next few months.

Major industry players have been announcing plans to cut their losses by shedding employees as crude oil prices closed last week at less than $50 dollars a barrel.

Last year, Chevron and Shell laid off workers in what was widely interpreted as the first signs of a protracted price war between conventional and shale oil producers.

In the US alone, almost 250,000 jobs are at stake, the bulk of which are in the oil-rich state of Texas. Giant Houston-based oil and gas contractor, Schlumberger, has announced it will slash up to 9,000 jobs, joining fellow sector giants Halliburton and Suncor that have already laid off people.

Last week, BP and Conoco Phillips also announced plans to cut back on staff in an attempt to mitigate the shock. North Sea oil producer ConocoPhillips is laying off 230 workers in Britain, while BP is expected to let 300 people go, almost 10% of its workforce deployed in  the North Sea. It is estimated up to 15,000 jobs could be lost in the UK alone.

Expectedly, the smaller companies are feeling the strain much more, considering they do not have solid fall back options like the refining businesses their larger counterparts have.

On Thursday, Tullow Oil announced it was writing down $2.7 billion before tax across all its assets.  Tullow, whose shares have fallen about 14% since the beginning of 2015, is also cutting its 2015 exploration budget by 30% to $200 million.

The company is also expected to announce job cuts by the end of this quarter that could affect its workforce in Uganda. Tullow’s Ugandan subsidiary laid off 41 staff early last year on account of reduced workload in the oilfields.

With global investment firm Goldman Sachs predicting that oil prices will average just $50 per barrel in 2015 and possibly rise to  $70 per barrel in 2016, more industry players are expected to shed their weight in a bid to stay afloat.

Report by Musiime Chris