by Chee Yew Cheang, APAC Editor
If you thought that only employees working for publicly listed oil and gas companies in the developed world were vulnerable to job losses in an industry downturn, just take a look at the signs that are now emerging in Asia, where national oil companies (NOC) are the dominant employers.
Last month, local media reports indicated that an oil and gas joint venture partially owned by a state-owned firm in Vietnam – one of Southeast Asia’s largest oil and gas producers after Indonesia and Malaysia – intends to trim its existing workforce by approximately 29 percent.
Vietsovpetro, the 51-49 joint venture between national oil company Vietnam Oil and Gas Group (PetroVietnam) and Russia’s OAO Zarubezhneft respectively, currently employs around 8,000 staff, according to its website.
The joint venture, established in 1981 to explore and produce Vietnam’s offshore petroleum resources, had already retrenched 600 employees over the past two years due to the downtrend in global oil prices that commenced in the second half of 2014.
Staff strength is expected to fall to less than 5,000 over the next five years if Vietsovpetro follows through on a proposal to reduce its manpower pool as mooted by Zabubezhneft as part of the joint venture’s ongoing restructuring efforts, company CEO Tuh Thanh Nghia told Nang Luong Moi, a newspaper of the Vietnam Petroleum Association, as quoted in Thanh Nien News Feb. 22.
The restructuring effort is particularly urgent as Vietsovpetro is facing a budget deficit of around $230 million, Nghia said in January, adding that the company’s financial situation has not improved despite numerous efforts to cut costs, including shutting down two of its subsidiaries and reducing 400 jobs.
According to Vietsovpetro’s CEO, the joint venture – which will be “running out of money” by the end of April – has suggested to its parent firms to shut down some of its oil fields, particularly those with high operating costs. However, the idea was rejected by PetroVietnam and Zarubezhneft.
Still, the state-owned company may have a change of heart about Vietsovpetro’s proposal to shut down production at some existing fields, especially if oil prices fall below $30 a barrel – a level that was breached on a few trading sessions in mid-January, PetroVietnam’s Vice President Do Chi Thanh said, as reported by Thanh Nien News Feb. 1.
Previously, Asian NOCs, such as Thailand’s PTT Exploration and Production Co. Pcl (PTTEP) and Malaysia’s Petroliam Nasional Berhad (PETRONAS) revealed a preference to retain permanent staff even as oil prices slipped lower.
However, after reporting a 56 percent annual decline in net profit for 2015, the Malaysian NOC announced the following day a “new business operating model for better business efficiency, resilience and sustainability amidst a challenging time for the oil and gas industry.”
“The new structure – designed for a flatter, leaner and more efficient business operating model – is a part of deliberate, sequential measures that PETRONAS is undertaking to better navigate the organization through tough external environments,” the firm said in a March 1 press release.
According to PETRONAS, the move will result in redundancies of under 1,000 positions.
“Exhaustive efforts are ongoing to redeploy affected employees. PETRONAS will further embark on a separation exercise for these employees as needed, which is expected to be completed over the next six months,” the company added.
Meanwhile, what’s happening in Asia on the job cuts is symptomatic of a bigger problem facing the global oil and gas industry. As low oil prices continue to cause a shrinkage in activities, companies are left in a quandary regarding their operational needs, especially manpower.