More layoffs on the horizon for Malaysian oil & gas sector

More layoffs on the horizon for Malaysian oil & gas sector

SINGAPORE - More retrenchment is taking place in Malaysia's beleaguered oil and gas sector with 10 industry players reportedly having outlined plans to slash at least 2,700 more jobs.

According to a report issued by i-Research making rounds on social media, Linkedin, 11 oil and oilfield services companies are undertaking staff cost restructuring.

Petronas Carigali, the upstream unit of Petronas, stands as the exception to have opted for salary cuts rather than layoffs, the report said.

Ten out of the 11, comprising Shell Malaysia, ExxonMobil Malaysia, Murphy Oil, SBM Malaysia, TH Heavy Engineering, Petrofac-RNZ, Malaysia Marine Heavy Engineering, Bumi Armada, Technip Malaysia and Ranhill WorleyParsons, have spelt plans to reduce headcounts in Malaysia.

Shell Malaysia tops the list with a projected 1,300 job cuts in two years. Seven of the remaining nine plan to cut between 80 and 600 jobs each, the report said, while no specific numbers were indicated for two others said to be undertaking voluntary separation schemes, according to the report.

The job cuts reported by i-Research - which also tied in with numbers supplied by Malaysian sources to The Business Times - were unveiled as low oil prices forced reviews of staffing costs as part of capex and opex restructuring undertaken by oil companies.

Petronas maintained in an e-mail to BT that the "cost optimisation exercise" that it has undertaken has yet to reach a point where it will affect its "current permanent workforce".

The Malaysian leading oil company, however, made no mention of the contract staff on its payroll, some of whom, as industry sources indicated, have been asked to take pay cut of up to 10 per cent.

Among the supermajors active in Malaysia, Shell has already made known last September its massive in-country retrenchment impacting 1,300 out of 6,500 jobs, which is concurrently taking place with an asset rationalisation exercise. Shell has reportedly already shed more than 7,000 of its global workforce as at December 2015. A company spokesperson stressed that the "transformation programme" in Malaysia will impact only the upstream division. The spokesperson confirmed that Shell is looking to divest its interest in the North Sabah enhanced oil recovery production sharing contract after concluding, following the completion of a study, that "the asset is not competitive in (the company's) global portfolio".

North Sabah PSC is home to the St Joseph field, which was considered for a chemical EOR project that was reported as viable only if oil price was at least US$90 per barrel.

While pledging to keep its staff numbers outside the upstream division intact, Shell has also been rationalising its mid- and down-stream assets.

The spokesperson confirmed that the sale of its Port Dickson-based refining company is on the table, but he also clarified Shell is also evaluating other options including conversion of operations to a storage terminal.

Shell had also relinquished its interest in the PSC for the MLNG Dua plant, although the supermajor will maintain its interest in MLNG Tiga, also in the Bintulu LNG complex, the spokesperson said.

The cost-cutting measures taken on board by oil companies have trickled down to the oilfield services sector with Technip topping the job cuts among contractors identified by i-Research.

Along with their budgetary revisions, oil companies have delayed sanctioning new projects, which translates to reduced order backlogs for contractors. In December, Petronas called off the tender for the only billion-dollar contract on offer in Malaysia for the year, on the turnkey delivery of a central processing platform for the Kasawari field development, which was widely deemed a blow to Malaysia's oilfield services sector.

Technip, which ranks among the largest employers in Malaysia's oil and gas sector, was in turn reported to be planning to axe hundreds of jobs, although the oilfield services group would only confirm that it is proceeding as announced last July to cut global workforce by 6,000. Malaysia ,as a major regional headquarters for Technip, accounts for 2,000-3,000 of its total workforce.

Yards relying on contracts tied to fabrication of oil and gas infrastructure for new field developments are not spared the pain. The largest yard operator in Malaysia, MMHE Holdings Bhd (MHB), confirmed to BT that an employee mutual separation scheme (MSS) was initiated in 2014. "MHB, like most businesses, is operating in a very competitive industry and under tough economic conditions (and) this often has an unavoidable impact on staff," a spokesperson said.

ExxonMobil declined comment, stating: "We are unable to comment on the accuracy or authenticity of the information published in the report..."

Bumi Armada, SBM Offshore and Ranhill WorleyParsons did not respond to request for comments by press time.

Murphy Oil, Petrofac-RNZ and THHE could not be reached for comments.

This article was first published on Jan 8, 2016.
Get The Business Times for more stories.

More about

Purchase this article for republication.
Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.