Oil & gas layoffs have been grabbing the headlines in recent months following the slump in oil price. Shocking numbers have been bandied about by journalists billing this issue  as one of the most damaging outcomes of the sector’s current market position. A recent Bloomberg  report suggested over 100,000 job losses have flowed from the crisis globally, with key oil & gas  hubs around the world being hit hardest with high profile announcements being made in almost every  region.

hilst these staff cuts are being attributed to the falling oil price, the headlines mask a more difficult underlying issue which has been slowly building across  the industry over recent years and was likely to have led to a proportion of the job cuts we are  now seeing. Producers have long been looking at the rising cost of production and acknowledging  that operations need to be restructured to counteract a real risk to profitability. Restructuring was therefore already in the pipeline across the sector  and, along with the natural conclusion of major projects and the scaling back  of new ones,  accounts for a proportion of the cuts this year. However, it is fair to say that the worst is  likely not over yet as we see the impact of the oil price slump trickling down into oilfield services companies which continue to announce job cuts across the globe.

The numbers also do not take into account the effect of redeployment within businesses which are  not picked up by the headlines. Businesses are looking at ways to avoid redundancies including adjusting rotas and shift patterns, although these proposals have encountered staunch opposition from unions. Other measures include  the re-examination of the role of consultants in the sector as well as the use of mobile employees,  considering reduced hours and down-manning offshore as well as contract days reductions. These  measures will undoubtedly impact the overall number of job cuts in real terms, which are likely to  be rather less than the numbers caught by the headlines.

Operators within the industry are in the medium to long term, likely to focus increasingly on  growth of operations in the Far East and the Asia Pacific regions as Japan looks to alternative  energy sources to its discredited nuclear programme and with consumption in India and China  expected to double. New roles will become increasingly available in these regions which will go  some way to  limit the impact of job losses in other regions for the internationally mobile workforce.

The danger, as always, is balancing the benefits of realizing short term savings against losing key skills which will be difficult to get back into the business  once markets recover. Prior to this current cycle of falling prices, the industry faced a skills  shortage with a lack of young entrants and a retiring professional base. Mercer’s Global Talent  Forecast (released in 2014), found that the industry currently has a global shortage of petroleum  engineers with a world-wide shortage of roughly 22,000 forecasted for 2017. Mercer research  indicates time-to-proficiency for a petroleum engineer can take between 20 and 30 years. Whilst  there are a number of initiatives across the sector to attract and retain new talent, filling this  skills gap remains a challenge.

In some regions this is compounded by local issues. By way of example, the focus within many Middle  Eastern countries on developing and promoting the local workforce could also mean that it is much harder or impossible to get key staff back in country when demand  increases, with Middle Eastern states imposing rules around the hire of local staff over ex-pats.

We can expect the headlines to continue to present a picture of large scale job losses across the sector well into 2015. However, the industry will  ultimately be looking to create an efficient business model which will ensure it is able, and has  the manpower skills in place, to respond to demand when the oil price inevitably recovers.  Businesses will be looking hard at whether restructuring can provide this solution, and care will  be needed when planning  such projects particularly where the restructuring crosses borders, to  ensure local legal requirements are complied with during the process. Planning is the key here to ensure that a consistent and joined up message  is agreed before announcements are made to staff. This means engaging with advisers at an early  stage so that regional variation  in process can be factored into the planning. In terms of ensuring key skills are retained, finding innovative ways to avoid redundancies, such as  sabbaticals, reduced hours and adjusting shift patterns, is in everyone’s best interests. There is  a bumpy road head but no doubt all within the sector will be hoping that the right balance has been  struck to weather this storm and come out fighting on the other side.