Regions

Falling world oil prices result in job cuts

August 3
6:58 AM 2015

Collapsing oil prices are prompting energy firms to lay off workers. Royal Dutch Shell and Centrica -- two of Britain's leading energy firms -- are cutting more than 12,000 jobs this year.

Shell says it will shed a total of 6,500 jobs worldwide, while Centrica is letting go of 6,000 exploration and production jobs.

Cutbacks in Shell, which has a global workforce of 94,000, will affect staff and contractors in the United States, the United Kingdom, Canada, Norway, and Nigeria.

Centrica's job cuts, mostly in the UK, represent 10% of the company's workforce, although the British Gas owner said it would be creating new jobs, for a net loss of some 4,000 jobs.

While oil prices stabilized through much of the first half, they have been on a downward trend this past few months, amid a supply glut in world markets.

The surge in output of the Organization of Petroleum Exporting Countries or OPEC as well as the prospect of Iran exporting more oil with the lifting of Western sanctions are contributing to the price collapse.

Currently, oil trades around $50 a barrel, down more than 50% from a year ago.

"Today's oil price downturn could last for several years," said Shell CEO Ben van Beurden.

In the second quarter, the global giant's earnings fell 35% from a year ago to $3.36 billion.

In light of these developments, Shell is cutting costs this year by 10%. It also intends to trim capital investment this year by 20% or $7 billion. That's more than double the investment reduction forecast in April.

The move was welcomed by investors, pushing shares up 2.5% in London trading.

It was a different story for Centrica, whose shares dropped 2.2%.

This comes after the company, under a new management, said it was reducing oil exploration and production. Instead, the company will focus on its British Gas business.

Centrica has also recorded a drop in profits of 3% in the first half, reflecting the impact of lower oil prices.

The latest job cuts come on the heels of announcements by London-based BP and California-based Chevron that they were laying off more workers amid the oil price downturn.

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