It cuts 300 jobs in Singapore, but observers say Republic's competitive scene pushes players to be more efficient; global demand also set to improve
Link: https://www.businesstimes.com.sg/energy ... s-recovery
[Business Times] Singapore
OIL prices may be rebounding, but oil majors are still under pressure to restructure - as ExxonMobil's latest layoffs announcement shows. Structural shifts, including a growing emphasis on sustainability, require these companies to make changes to their operations. Nevertheless, some industry watchers are optimistic that the worst of the job cuts are over.
On Wednesday, ExxonMobil announced it would cut some 300 jobs at its Singapore affiliate, translating to about 7 per cent of its local workforce of more than 4,000. The Business Times understands that affected employees will be informed from March 8.
ExxonMobil's announcement comes in the wake of several other layoff announcements by oil majors in Singapore. Shell Singapore announced plans in November last year to cut 500 jobs over three years at its Pulau Bukom refinery. Meanwhile, Chevron has said it will reduce jobs in Singapore by at least 10 per cent.
Low oil prices and a reduction in demand due to the pandemic have forced companies in the sector to rethink their global workforce strengths. Chevron is cutting about 6,000 jobs globally. Royal Dutch Shell, the parent company of Shell Singapore, expects to cut up to 9,000 jobs. ExxonMobil is slashing its global employee count by 15 per cent.
Another trigger has been pressures from activists and investors on oil companies to cut emissions.
Peter Lee, senior oil and gas analyst at Fitch Solutions, said the Covid-19 pandemic is "forcing firms to cut costs, adapt to softer demand, and reduce the size of non-core operations".
Additionally, refining operations in Singapore are particularly "vulnerable" to short-term headwinds including a high cost structure, modest domestic demand and an increasingly crowded exports space.
But as the global economy heads for a recovery, these headwinds are expected to subside.
Jeffrey Halley, senior market analyst at Oanda, suggested ExxonMobil's job cuts are "more of an efficiency drive at the fringes".
"Low prices have been the obvious issue big oil has been grappling with as the pandemic sent consumption plunging," said Mr Halley.
Refining margins in Singapore remain under pressure as a drastic drop in air travel means jet fuel demand still remains at "very subdued levels", he said.
But he added: "I am not expecting more widespread layoffs in the refining sector in Singapore, I believe that the worst has passed and the outlook will improve over the rest of 2021."
The downturn within the oil and petrochemical space has been felt keenly in the Singapore economy.
Singapore's total merchandise trade fell last year, due mainly to a 31 per cent contraction in oil trade amid lower oil prices. In 2019, oil trade contracted by 13.9 per cent.
Oil domestic exports contracted by 28.1 per cent in 2020, versus a 12.9 per cent decline in 2019. The decline was due to lower shipments of oil to Malaysia, Indonesia and Australia. Oil re-exports, too, fell 5 per cent.
Petrochemicals exports fell 8.1 per cent year on year in the fourth quarter of last year, and were among the top contributors to a decline in non-electronics exports.
An ExxonMobil spokesperson said the company will "provide support, including counselling and outplacement services, to all our colleagues who will be impacted by this difficult decision".
"The company has engaged with the Ministry of Manpower (MOM) and union leaders ahead of this announcement. Singapore continues to be a strategic location for ExxonMobil. Our company remains committed to providing energy and products that are essential for society, while managing operations safely and responsibly, including reducing the risks of climate change."
The Taskforce for Responsible Retrenchment and Employment Facilitation said it is aware of the company's organisational changes, and is working with the ExxonMobil Singapore Employees Union to extend assistance to the affected employees.
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ExxonMobil latest casualty in Big Oil layoffs as industry awaits recovery
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