State of industry
The sensational drop in oil prices -below US$40 per barrel at the end of 2015, down more than 60 percent from their high in the summer of 2014- re ects rampant supply and weak global demand amid concerns over slowing economic growth around the world, especially in China. This imbalance is only going to worsen this year. Saudi Arabia continues to pump at full tilt, less concerned about propping up oil prices and more intent on securing market share, hoping to drive out marginal producers, particularly in the United States. As early as the second quarter of 2016, the ow of Iranian oil is likely to increase, adding to the glut. Even Middle East instability, such as the tension that erupted between Russia and Turkey in Syria toward the end of 2015, has not budged crude prices. Consequently, we expect oil prices to remain low for the near future, although it would not surprise us if volatility returns.
The impact of this situation on O&G producers has been rapid and dramatic. In the third quarter of 2014, when oil prices were still above $100 per barrel, the super-majors posted aggregate net income of $22.9 billion, according to Bloomberg. Twelve months later, upstream profits had been wiped out. In response, companies are slashing outlays. They are expected to cut capital expenditures by 30 percent in 2016. Already, some $200 billion worth of projects have been cancelled or postponed.
Prior to June 2014, one of the common challenges facing the industry was talent. More than 200,000 employees have been or will be let go in the O&G industry, according to recent company announcements.
Would the industry find the skilled workforce needed to fulfill the potential of shale revolution as well as the growth in deepwater and related mainstream projects? In the wake of massive layoffs, these concerns seem very distant. However, the question for the industry is: Will the people come back to the industry when the recovery begins in force?
As the skilled professionals of oil and gas go grey, or move up the ranks, companies are looking for clever methods to recruiting and retaining the best skill sets and professionals for their companies. The tumultuous climate is making things difficult for some firms but we and our partners are adapting business strategies and using effective and inciting methods to recruit and train the best professionals without extra investment.
Between now and 2025, global oil demand is projected to rise over 1.7% – but the majority of this demand will come from developing countries like India and China, and throughout developing areas in Southeast Asia and Africa.
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