Schlumberger is laying off 21,000 of its 85,000 employees in 120 countries. Halliburton has already separated 4,500 out of 55,000 employees.
Falling oil prices and demand have forced producers to decrease the pace of their extractions. As in every crisis, service companies are the first to take the shock, which will eventually spread to the entire industry.
Schlumberger has a net loss of $ 3.43 billion in the second quarter of 2020 and will forecast $ 2.7 billion in restructuring and write-down charges for the end of the year.
For its part, Halliburton, the American oil firm close to the president, posted a loss of $ 1.68 billion. Even with government aid, it’s expensive for the quarter.
Schlumberger CEO Olivier Le Peuch thinks “In the short term, oil demand is slowly starting to normalize and is expected to improve thanks to measures taken by governments to support consumption. But, even if demand is picking up slightly, the oil majors are still in economy mode».
The Norwegian oil agency, Rystad Energy, believes that the oil services sector, such as Schlumberger, Halliburton, Baker Hughes, TechnipFMC or Vallourec, will cut one in five jobs worldwide in 2020. One in five this translates to 1 million d ‘jobs! Although this figure may not be reached, we can imagine the scale of the earthquake.
The USA would have lost 100,000 jobs and 38 bankruptcies stunned the shale sector which is in free fall.
Towards an oil shortage?
The trend followed by service companies shows the probabilities of a transition from surplus production to shortage. This will all depend on the speed of the economic recovery.
As global demand for oil and gas recovers, the challenge will be to meet it on time. The level of discoveries of new deposits is at its lowest for 60 years and the shale bubble seems to have deflated to reach its peak by 2025 in the USA.
The current oil shock has severely shaken the architecture of the oil and gas industry in terms of the majors, refining, human resources, exploration, production and financing. Logically, several banks and agencies believe that prices should rise sharply during the years 2021-2022 as long as the world economy supports it.
Rystad Energy even predicts a peak in production by 2027. We can without hesitation qualify the word peak oil in the mouth of the Norwegian agency as a surprise.
Three trends to watch very closely
The penetration of electric cars in the market. This trend will be further accentuated by the increase of Chinese electric supremacy over the world economy. The first post-covid figures show a drop in demand for combustion vehicles.
In addition, after Germany, South Korea, Japan and China, Russia has just announced major investments in hydrogen mobility, just to get out of the Chinese clutches of rare earths and electric batteries.
Eventually, the curve of the global economy and the needs for the use of sea, air or land transport will come full circle.
Thus, it is not unlikely that the world will begin to deal with the climate for lack of oil!