Workforce cuts on the rise: Oil & gas giants’ cost-saving quests fuel layoffs’ wave

While price volatility and rise in costs make the financial side of things harder for energy players, the interplay of other factors such as climate change, energy transition agendas, rising power demand, and emerging technologies and innovations, including market evolution, automation, and progress in unleashing the benefits of artificial intelligence (AI), have also played their part in shrinking the job market. The spike in headcount cuts that are expected to be made by the U.S. and European oil and gas majors like BP, Shell, Chevron, and ExxonMobil serves to illustrate this.

Key highlights:

• Cash is king: Financial doldrums water down shift to ‘greener’ pastures
• BP targeting multimillion-dollar savings by downsizing its human capital
• Shell’s layoffs to bring up to $3 billion
• Chevron’s $3 billion cost-saving hints at potential layoffs
• ExxonMobil eyes close to 400 headcount reductions
• TotalEnergies takes a different route: Employees given tailored solutions
• Big Oil’s battle to come to grips with energy transition demands
• Bracing for rough layoff-filled and climate litigation-imbued seas

As global corporations and companies embrace cost reductions to ensure profitability, downsizing moves across the labor market have become a frequent feature of measures undertaken to combat inflation and keep companies afloat.

These workforce curbs indicate a slowdown in job market openings, creating the perfect storm for an uptick in unemployment rates across many sectors and industries, including the energy arena, despite the surge in demand for energy sources.

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The growing consolidation trend is another factor that serves as a double-edged sword, as it assists companies in streamlining their operations in response to shifts in policies, consumer dynamics, climate action, and economic pressures, but job overlaps usually lead to workforce reductions.

On the other hand, job consolidations are a boon for tight budgets, however, workers may find it challenging to pick up the slack, emphasizing the need to strike a balance between operational needs with budget cuts and employee retention and layoffs.

With no industry appearing immune, the recent upturn in employment reductions raises concerns about the global state of the economy which seems to be in the early stages of recession, as slower economic growth, rising costs, and supply shortages expose even the most profitable industries and companies to job losses.

AI growth often gets the blame as another factor that places even some of the high-paying jobs in multibillion-dollar industries, like the oil and gas sector, at risk, with automation and remote operations making certain positions and roles redundant while also improving the workers’ overall safety. These trends, along with a few others, are likely to continue to shape the employment landscape over the coming years.

As the global energy machinery navigates the complexities of declining oil prices, gas market volatility, geopolitical woes, energy market evolution, the transformation of the energy mix, rise in alternative fuels and sources of supply, decarbonization goals, climate change pressures, and associated net-zero aspirations and policies, which are among the key trends that are affecting the offshore energy industry.

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These trends seem to be hitting workers in the offshore energy industry, especially its oil and gas branch, hard as they seem to have drawn the short straw while headcount keeps slimming down even in the Big Oil camp, whose members are still raking in millions and billions in profits.

While the offshore wind industry has gained momentum over the years and is considered one of the key ingredients of a net zero energy future, it has come across many bumps in its growth journey, even hitting a profitability snag recently. This prompted Jerome Guillet, Managing Director of SNOW, to write a piece on ‘How utilities and big oil broke the economic model of offshore wind,’ which he considers ‘self-explicit.’

While discussing the so-called ‘heads I win, tails I whine’ business model and its consequences, he provides his take on the offshore wind industry, deeming it to be “broken” as big energy names like BP, Equinor, Shell, Vattenfall, Total, Ørsted, Corio or Bluefloat, take steps to downsize their exposure to the sector amid rising concerns about cost hikes and ‘degraded’ economics.

He puts the blame for the woes the offshore wind industry is going through on the large utilities and energy firms, which pushed away competition, creating a fertile ground for current issues to spring up through a combination of “hubris, ignorance, and reliance on lobbying rather than good business acumen.”

Despite issues that have cropped up, Guillet ends his piece on a positive note, emphasizing: “Offshore wind will not happen everywhere, as it is not always cost competitive against onshore wind and solar, but it is a competitive source of electricity and does not deserve its current doldrums. Now is the time to invest – but you have to stop listening to the often clueless public statements of utilities on the sector.”

With financial strain being felt across many sectors, including the entire energy industry, companies are increasingly pondering whether they are getting a bang for their buck, as they work on revising strategies and adjusting their set course to remain in business.

While the oil and gas industry continues to enjoy a profit bonanza, many companies in this line of business, including supermajors, have been making plays to widen their energy horizons, especially in light of growing climate litigation, which often puts them in environmental activists’ crosshairs, forcing them to navigate stormy legal seas.

When the first baby steps were made in rebranding, the oil and gas industry was enthusiastic about its foray into emerging low-carbon and renewable technologies, embracing strategic diversification with gusto to come to grips with the energy trilemma and reach its decarbonization and net zero goals. However, time has chipped away at the initial fervor as these new energies and green solutions did not magically bring pots of gold.

These types of projects, especially the more innovative ones that combine multiple clean energy sources, require a lot of spending to get off the ground but have not been able to rake in substantial profits, or even be profitable in some cases. This process takes time, and as one of our interlocutors said, the industry is just not there yet.

In line with this, Stratkraft cited money problems as the main issue for abandoning some of the projects, as explained by Birgitte Ringstad Vartdal, the firm’s President and CEO, who underscored: “The market conditions for the entire renewable energy industry have become more challenging. We are therefore sharpening our strategy to allocate the capital to the most value-creating opportunities with the best strategic fit.”

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With the payday from renewable projects being slow in coming, the rising interest rates and costs are increasingly putting the financial stability of such projects at risk, especially since they take years to develop and put into operation before any money starts to trickle in.

The cards offshore energy firms have been dealt now are different not only for those fossil fuel giants that are dipping their toes into renewables and other low-carbon and green pursuits but also for their pure-play brethren in the hydrocarbon arena, depending on the global areas in which they operate.

Those that did make a profit were not able to reach the same or even similar level that the energy industry’s fossil fuel darlings, black gold and the ‘bridge fuel’ or ‘transition fuel’ as gas is often called, have been making.

The lack of substantial profit, rising costs, regulatory delays, and grid bottlenecks, combined with other specific sets of challenges such projects need to overcome, have made things difficult for developers with investors’ confidence taking a hit.

In light of such woes, some energy players are putting their renewable and clean energy projects on ice until circumstances change to make pursuing such developments more financially rewarding for investors.

Shareholders of big companies, especially those in the fossil energy sector, that took significant steps to diversify their operations and portfolios through bold steps to blaze new trails in emerging energy markets are increasingly expressing concerns about green policies eating into their profits.

Nearly all the oil majors appear to have been hit with the cost-cutting fever, which is currently buffeting and adversely affecting the job market by spurring a headcount decrease.

The overall unfavorable investment climate for hydrocarbons and a drop in oil prices, driven by geopolitical tensions and global market fluctuations, have left their mark on many markets, especially fossil fuels, spearheading the companies’ downward revision in financial performance.

The complexities were recently hammered home by the speculation which continues to run rampant over BP‘s alleged plans to implement a hiring freeze, downsize its spending on renewables, primarily offshore wind, which was among the key pillars of its energy transition growth drivers but is among projects analysts expect to be put on hold.

This would enable the UK oil major to turn its attention to oil and gas once again in the wake of its shareholders’ growing opposition to its net zero strategy since these green projects are not likely to bring returns anytime soon due to the amount of time it takes to bring them online and the financial hardships developers are facing.

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As the latest energy giant to disclose job cuts, BP intends to downsize its workforce by 5%, resulting in 4,700 internal job removals and the loss of over 3,000 contractor positions. As a result, the oil major’s global headcount is expected to decrease by 7,700 jobs.

With this move, the company is targeting a cost reduction of around $500 million this year, leading to total savings of at least $2 billion before 2026-end, which is the goal its CEO previously set. This employment reduction is driven by the efforts Murray Auchincloss, BP’s Chief Executive Officer, is undertaking to curb costs and increase the revenue streams after the company suffered the biggest profit hits compared to other oil majors.

Auchincloss has confirmed that additional cost-cutting measures are on the agenda for this year and even beyond, after the firm hit the pause button on many projects or headed for the exit, primarily in the renewables, clean energy, and low-carbon domains, to focus on more profitable ventures, mostly in the oil and gas arena.

Energy experts and analysts expect the firm to shift its primary business focus back to oil and gas, as the UK-headquartered player’s fall from grace is largely being attributed to a costly miscalculation in the diversification strategy, which Auchincloss’ predecessor, Bernard Looney, embraced with the pivot to low-carbon and green energy on the prediction that global oil consumption had hit its peak, bringing the industry to a phased decline and spelling the gradual end of the fossil fuels era.

Yet, the forays made in offshore wind, hydrogen, solar, and other less emission-intensive sources have not curbed the demand for coal, oil, and gas, as demonstrated by the lion’s share of the global energy mix, which is powered by fossil fuels.

Analysts argue that Looney may have been ahead of his time, underlining that his expensive excursions into emerging energies and cuts in hydrocarbon investments and oil and gas production may have come far too soon for a company whose profits stemmed from the fossil fuels industry.

Market connoisseurs point out that it would have been wiser to earmark funds to bankroll the diversification into new energy plays on a smaller scale and wait for these new energy industries to start making a profit before introducing more significant additions to the company’s policy and changing the course of its investment strategies.

Seemingly in agreement with these views, BP has taken multiple steps to readjust its sails by tweaking its policies to temper down the previously announced cuts in oil and gas production, hit the brakes on some projects from new energies and low-carbon pile, and even halt other projects from the same group of greener ventures, including hydrogen and wind businesses.

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A few weeks ago, BP revealed the spin-off of its entire offshore wind business portfolio, as reported by Adrijana Buljan, Senior Editor at Offshore Energy’s sibling site: offshoreWIND.biz. Auchincloss, emphasized last year that BP was determined to drive focus across the business and reduce costs while scaling back plans for new biofuels projects, as a way to deliver “a simpler, more focused and higher value company.”

BP’s compatriot, Shell, is also said to be contemplating job cuts and pulling further away from the green energy playground to go back to its oil and gas roots, in response to the ongoing global economic challenges and investors’ discontent.

This return to basics and the loss of confidence in renewable and clean energy projects among some investors is the consequence of the divide between the record-high profits the oil and gas industry generated in 2022 and the abysmal returns renewables managed to secure on rather much higher investment costs, turning the energy transition into a far more expensive financial burden for those in the private sector that are developing such projects.

Some argue that renewables are now cheaper than fossil fuels. Nevertheless, Shell’s restructuring endeavor is anticipated to end in a 20% headcount decrease, with its oil and gas exploration and development branches in Houston, Texas, and the Netherlands expected to be hit the hardest by the layoffs, which are part of the firm’s cost-management.

Predictions of high gas demand in the future keep growing against the backdrop of uncertainty that continues to shroud the transition journey to renewables. The UK-headquartered player made certain reductions in its renewable and low-carbon business ventures as a way to come to grips with rising costs and unfavorable energy market dynamics.

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The firm’s layoffs across the exploration, development, and subsurface divisions are expected to enable cost-savings of $2-$3 billion by the year-end. The British oil major has set its cap on unlocking “more value with less emissions” as Wael Sawan, Shell’s CEO, confidently pursues a boost in profitability with structural operating cost reductions. Sawan underlined in August 2024 that he oversaw cost savings of $1.7 billion.

The achievement is perceived to be the result of simplifying the business with moves that spanned curtailments in renewables and low-carbon alternatives, encapsulating solar, offshore wind, and hydrogen, together with the sale of its retail power businesses, refineries, and some hydrocarbon production.

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Shell’s restructuring plan is composed of a cost-saving goal of $2-$3 billion by the end of 2025; asset divestments such as the Deer Park Refinery, which was sold to Pemex in 2022, and the Mobile refinery, which was purchased by Vertex Energy in 2022; and a weakened outlook on further investments in the renewables, even though the pressure on markets to slash emissions in line with the Paris Agreement continues to ratchet up.

Several legal experts have pointed out that at least some people affected by the announced downsizing will probably seek legal aid and turn to lawsuits to thwart the oil majors’ layoffs. Depending on local laws and contracts the employees have signed, many workers will likely be entitled to full severance packages, if they have not been given such a package, due to job loss, regardless of the reason behind it.

Canada is one of the countries that has put a lot of thought into protecting workers from sudden job losses, as non-unionized employees are entitled to a severance pay that could cover as many as 24 months.

Regardless of the strict laws certain countries have put in place to protect the workforce, a flurry of layoffs has market 2024, with giant corporations, such as Amazon, Netflix, Goldman Sachs, Wells Fargo, spearheading the job cuts.

After taking over the helm from Ben van Beurden as CEO in January 2023, Sawan has worked tirelessly on upping the firm’s profits by abandoning oil production cuts and embarking on a penny-pinching mission to economize different aspects.

This includes plans to shrink the firm’s employment pool through hundreds of job cuts from its low-carbon solutions division, which sparked climate campaigners’ ire, even prompting a couple of employees to write an open letter to urge its CEO to give up plans related to curtailment in funding for renewable energy projects.

Shell is investing not only $10-15 billion in low-carbon energy solutions between 2023 and the end of 2025 but also about $13 billion a year for oil and gas developments with a focus on LNG, adding up to potentially over $100 billion in total by 2030.

The firm is adamant that LNG helps provide secure energy, offering a lower-carbon alternative to coal for power and industry and delivering stability to electricity grids alongside wind and solar, thus, the company plans to grow its LNG business by an expected 20-30% by 2030.

Like its European peers, BP and Shell, Chevron has also embraced a new cost-cutting plan, which is anticipated to bring hundreds of potential job reductions in the United States. The firm’s CEO has explained that the anticipated cost savings will arise from asset sales, new technology, and workflow changes.

Mike Wirth, Chevron’s CEO, recently disclosed that the company would amend its mode of operations, after setting up a $1 billion innovation hub in Bengaluru, India, which is hiring workers for engineering and digital services amid increasing shifts in the energy ecosystem.

The U.S.-headquartered player highlights the challenges facing the energy sector, such as the industry shifts toward sustainable practices, as the reason behind the “tough decisions” it was forced to make to remain competitive, streamline its operations, and invest in future energy solutions.

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The firm’s decision to downsize its workforce is perceived to be in line with other factors affecting the local and global energy landscape, such as the growing global push for cleaner energy, which is making inroads in decarbonizing the oil and gas ecosystem to slash carbon emissions and prioritize renewable energy sources. Chevron has committed to becoming more sustainable, which often involves restructuring traditional oil and gas operations and reinvesting in green energy projects.

Faced with market volatility, oil prices have fluctuated far more over the past few years against the backdrop of geopolitical tensions, economic shifts, and the aftershocks caused by the COVID-19 pandemic. As a result, the U.S. energy giant has felt the impact of these factors on its profit, which forced its hand to prioritize cost management and efficiency.

Chevron, which is embarking on a strategic repositioning, underlines that its resources are being relocated toward emerging energy technologies, as layoffs allow the company to reallocate talent and resources to areas such as carbon capture, biofuels, and hydrogen production, which are becoming increasingly central to the firm’s growth strategy.

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The U.S. giant claims to be providing support, including severance packages, career counseling, and job placement assistance, to help employees transition into new roles, as local economies may feel the effects of the firm’s workforce adjustment, this illustrates the benefit of economic diversification in regions that are heavily dependent on oil and gas to lessen the effects of layoffs.

Chevron is working on curbing its environmental footprint and supporting the global transition to cleaner energy by investing in technologies that will lend a helping hand in cutting carbon emissions, such as renewable natural gas, carbon capture, and hydrogen. The company believes that such a shift requires companies to reimagine their workforce, placing more emphasis on hiring professionals skilled in alternative energy and environmental sciences while restructuring traditional roles that may no longer align with these goals.

As the U.S. oil major works to come to grips with the changing energy landscape, this indicates a rising trend in the oil and gas workforce, as many players are experiencing similar pressures, leading to layoffs, restructuring, and a reimagining of roles in energy production and distribution. Embracing the pivot toward renewables is seen as a way to open up new opportunities for workers in emerging fields.

Employees who were displaced by layoffs in traditional oil roles could get jobs in green energy sectors later on. As a result, this transition is described as an opportunity to change their course toward careers in sustainable energy, thanks to emerging programs aimed at reskilling workers in the oil and gas industry for clean energy roles that may offer new pathways for those affected by layoffs.

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While there is more than one reason for these layoffs, as oil and gas companies recalibrate to prepare for a new energy world, which is upping its sustainability ante, players are navigating many changes as they seek to future-proof their investments and picking sectors that promise longevity in a carbon-conscious economy, enabling shifts that will create a new wave of green energy jobs.

In the aftermath of its $64.5 billion merger with Pioneer Natural Resources, ExxonMobil has identified the need to remove nearly 400 positions in Texas, based on a filing with the Texas Workforce Commission, which clarifies that the job cuts will encompass 376 employees in Irving and an additional 18 in Midland, while a majority of the approximately 1,900 Pioneer employees have accepted offered positions with the U.S. oil major as part of the merger.

The company intends to phase the layoffs over the next three years, downsizing 110 employees by the end of this year, followed by 178 job cuts in 2025, with the remaining 100 positions scheduled to be released in 2026.

This merger has entrenched ExxonMobil’s status as a powerhouse in the Permian Basin, the top oil-producing region in the U.S. unlocking growth and boosting production efficiency.

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Despite these merger benefits, workforce restructuring is usually a consequence of large-scale integrations, as companies want things to run smoothly, so they remove double roles.

TotalEnergies, which sees its employees as the energy that drives it forward, decided to go down a different path to respond to the twofold challenge of providing more energy with fewer emissions by pursuing a socially responsible approach, which hinges on cooperation and keeping all employees in jobs that match their individual skills.

Since European refining was feeling the effects of a long-term, structural decline in the consumption of oil products, this situation led the firm to take the necessary step of ceasing refining activities in 2010 and repurposing its site in Dunkirk, France.

In line with this, the firm invested €160 million to restore the Carling-Saint-Avold petrochemical platform, which has become its European center for hydrocarbon resins, and Europe’s reportedly premier polymer site. While explaining that employees and partners had full support throughout the transition, TotalEnergies underlined that the project did not result in any layoffs or forced mobility.

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The firm accomplished this by offering each employee what it describes as a tailored solution to make the most of its teams’ skills to help maintain a strong and lasting industrial presence in its host regions.

The Flanders site houses three new facilities, including a strategic oil depot for the surrounding region; one of the company’s two Oléum training centers, which provides training for technicians and operators in real-life conditions; and the ATCO technical assistance center, providing on-site assistance to other refineries.

In November 2023, Patrick Pouyanné, CEO of TotalEnergies, shed more light on an agreement that allows the firm to support its 35,000 employees’ energy transition in France with an individual ‘energy efficiency and transition’ allowance of €2,000 enabling 80% of their purchases or services relating to housing and mobility to be reimbursed to make their energy consumption or mobility in their daily lives more sustainable.

The transition to a low-carbon and zero-emission future is reaching all corners of the world, forcing oil and gas players to produce more crude with fewer emissions. As a result, firms are turning to automation and AI-incorporated modes of operation to downsize employees and slash costs.

With this at the forefront, many small and big participants in the oil and gas game are doing their utmost to curtail capital expenditures and redirect profits toward generating more shareholder value to ensure they get a bang for their buck. However, the efforts to align oil and gas operations with the change in industry standards due to the greater zest toward cleaner production also play its part in this.

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While energy experts are convinced that the energy transition undertaking is here to stay and will gain prominence as time goes by, Big Oil is currently on the rocks about the amount it needs to pour into projects in the fossil fuels ecosystem given the forecasts of declining oil demand.

The green and low-emission bets, which oil and gas players pursued without getting a profit from them, have also made the firms skeptical about the spending they should set aside for their transformation journey and still manage to hand out payouts to their shareholders.

Given the trend toward curbing fossil fuel investments, S&P Global warned that such reductions in oil exploration spending could lead to a gap between supply and demand in the future.

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Despite the anticipated drop in oil demand, fossil fuels are poised to remain in the global energy picture for decades to come, which means that Big Oil and smaller peers need to employ a balancing act to ensure spending covers demand as they work to acclimate to changing market conditions.

The ongoing flood of layoffs, which affects companies from all walks of life such as Amazon, Google, Meta, and Microsoft, which also trimmed their workforce last year, may continue in the future not only due to climate change but also automation, geopolitical tensions, and other concerns.

Many things are at play on the global scene and directly impact oil and gas workers’ jobs and financial settings, thus, keeping an eye on economic indicators and job market trends may lend a hand in navigating the challenges that lie ahead as firms hurtle to embrace the AI era, automation, transition to low-carbon and zero-emission operations.

The changing technological landscape will inevitably keep influencing the job market, forcing workers to embrace new skills and technologies if they wish to remain competitive in their line of work.

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While there is no way to steer the energy market course back in time to keep it on the shores of the pre-AI and energy transition age, the changes can bring better work opportunities as long as workers get a timely introduction to the new energy market requirements and adequate training to learn all they need to know to tackle the needs of emerging technologies.

Lately, there has been a greater emphasis on energy security rather than the transition to net zero in certain regions, such as the United States, which is going after more oil and gas with a vengeance under the new administration spearheaded by President Donald Trump.

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While these moves are bound to spur further litigation from climate groups that will attempt to force countries and companies to stay true to their greenhouse gas (GHG) emission reduction targets and net zero pledges, renewable energy players are also backpedaling and joining the exodus from some projects they were previously keen on developing in reaction to the ongoing financial constraints.

Those opposed to any further investment in fossil fuels claim that oil majors are still making billions and millions of dollars in profit, so they do not understand what the whole cost-cutting fuss is about, but energy experts argue that investors need to get a bang for their buck to keep pouring money into well-established and new technologies and sources of supply.

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All companies are in the money-making business, so profit margins need to add up, otherwise, the investors will abandon the sinking ship and move to more profitable ventures, according to several analysts of energy market dynamics and stock exchange movements.

Some industry sources, who wanted to remain anonymous, were even more blunt in their criticism of such views, with one saying that the porn industry is estimated to be worth anywhere between $65 billion and $100 billion a year, with much higher growth predicted across the globe and actual worldwide revenue figures believed to be much higher than reported, given the rise in what one of the analysts has called “amateur online content with questionable origins and blurred content lines such as the deepfake kind.”

Yet one rarely, if ever, sees a semblance of the criticism and zest to tax profits in any other arena as is applied to the oil and gas sector, as far as this interlocutor is aware. The financial troubles most energy players are facing around the globe are one of the main stumbling blocks for accelerating the energy transition journey to net zero.

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The sheer magnitude of the speed that fuelled the hurricanes in the U.S. a few months ago as they hurtled forward was deemed by many experts as unprecedented. Climate campaigners wasted no time in laying the blame at Big Oil’s doorstep, calling for a swift end to new offshore drilling, oil, and gas projects, and the establishment of fossil fuel phase-out dates.

How likely are such moves to be made when the energy industry seems to be in such dire straits financially? Navigating the new normal buffeted by tectonic shifts in energy and regulatory policies, economic challenges, geopolitical tensions, supply constraints, and growing energy demand will require closer collaboration bonds across all sectors, along with support from governments.

Based on the latest state of play, the energy club does not seem capable of rising to the challenge of delivering a fresh wave of clean energy developments until the financial difficulties ease up a bit. Al or no AI, all industries, including renewable and clean energy sectors, require a workforce for projects to be completed and operated, which will, as many analysts suggest, open up a plethora of new job opportunities.

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The catch, however, lies in the fact that investments are needed in such projects to unlock the expected benefits. Simply put: Without further investments, there will be no jobs to speak of, only further workforce cuts across the board.

This, and the duty of ensuring energy security, is why many energy experts push forward an ‘all-of-the-above’ energy strategy, urging politicians, decision-makers, companies, and the general public to strive towards striking a balance between the need to keep the lights on and cut emissions. Others warn that such an approach would derail climate targets.

These global energy market connoisseurs call for a just and equitable energy transition, stressing the need for an actual transition period during the process of upping the intake from cleaner power sources to cut down fossil fuel usage, and cautioning against rash decisions that could have severe impacts on global energy security, people, and the economy.

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For these analysts, the best recipe for coming to grips with the current headwinds, intricacies, and conundrums is by keeping all energy sources in play, with oil, gas, and LNG being actively developed alongside renewables and other clean energy sources.

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