The Impacts Of Oil Industry Operation and Development Cost Reduction Strategies On The Human Resource Management Components Of The Oil And Gas Sector

It is important to focus on the impact study of cost reduction strategies in the oil and gas sector specifically on the human resources management component, after the end 2014 crisis. The management of production sites and development projects in the sector are directly influenced by cost reduction strategies following the vertiginous drop in oil prices at the end of 2014. The wave of dismissals and job cuts in the sector’s staff was felt in the following quarter, with the wave of unemployment not only affecting secondary or primary support processes but also the central “production” processes. Through this article we will try in the context of crisis and crisis management mainly, to understanding the possible impacts of such a difficult situation on the management of human resources of the sector will open the doors to include also the indirect impacts on the other components of the crisis business management and more primarily health management and work safety and ink more deeply on the management of operational risks in crisis.

1.         INTRODUCTION

In an environment of the oil crisis at the end of 2014, all development and exploitation projects were frozen for 2 years, the sudden drop in barrel prices directly influenced long and medium strategies. In terms of energy companies in the world, the new perspectives were the prospects of reducing costs and minimizing expenses of all kinds to limit the disastrous repercussions on the world economy,

The reductions hit the human resources of the sector, as a whole, it was a serious hemorrhage of know-how of an industry which has developed for years skills and considerable degrees of expertise, thus found itself in bankruptcy of resources.

A feeling of instability of internal balance in the sector gave way, productivity was also seriously affected, and this added to the problem or the impact on industrial health and safety of industrial chemical production sites. among the most dangerous. As a consequence of this, there are also the downstream impacts in terms of financial losses, loss of reputation that may arise in the event of an accident or a major catastrophic event.

The subject brings a remarkable theoretical innovation with the integration of crisis management mainly. The study, which affected the human resources component, also opens the opportunity to study the possible and indirect impacts on the other components of the management of the company, specifically the management of health and safety at work, and management of operational risks in crises.

From a practical point of view, this research approach made it possible to set up a decision model in a crisis then be tested later in another field. A strategic decision model that we can develop and which can be will focus on the proactive assessment of stakeholders’ expectations in the face of the crisis vis-à-vis the strategic actions to be taken, and even before implementing them, the model is mainly communicative, proactive and based on behavioral predictions of actors facing the crisis.

2.         OIL CRISIS 2015 BASED ON OIL PRICE COLLAPSE, AND THE MARKET SITUATION

At the end of 2014, the price of oil had been estimated at four. OPEC, therefore, decided to maintain production in 2011, a barrel was 110 US $ reduced to 28 US $ in January 2016. Saudi Arabia was the forerunner of the fall in prices, but not the sole responsible for the situation, its decisions were geopolitical and regional competition. By refusing any consensus, there was added the consequent drop in production by OPEC, then a slowdown in the Chinese economy, already at a very low level since 2008.

The abundance of supply resulting from competition from new American, Russian and Saudi productions; the context of geopolitical rivalry between Saudi Arabia and Iran, then the slowdown of the Chinese economy are the three main factors of the fall in prices.

Brent prices fell from $ 100 in April 2014 to $ 50 in January 2015. Until the price of the package of crude itself became more expensive than the price of the oil it contained.

These fluctuations in terms of prices are not an exceptional phenomenon in the energy sector led the world economy, sometimes provoked and/or administered as a geopolitical weapon in the hands of governments and regional coalitions for a redistribution of the cards of economic dominance in the world.

3.         COST REDUCTION STRATEGY AND IMPACT ON HUMAN RESOURCES OF THE OIL INDUSTRIAL SECTOR.

Strategies have been put forward by the big oil companies in order to mitigate the impacts of the crisis, mainly strategies for debt reduction, diversification and divestment strategies. Those adopted by the NOCs differed in detail from those adopted by the IOCs.

The activity of international companies in terms of mergers and acquisitions was generally weak between 2008-2015 when compared to other players (independents, service and equipment companies, etc.). IOCs represented less than 1% of the volume of transactions in 2014. In the short term, IOCs continued their divestments in non-strategic assets, but also in the end of the oil chain, and repositioning themselves in the most profitable segments with a downward trend in costs.

In other perspectives, IOCs have also continued their diversification and gradual migration to renewable energy sectors.

The strategic change in the petroleum sector was worrying, but also the situation of the specialized energy labor market was alarming.

Figure 1 : Largest Layoff Events In 2015 For US Energy Sector Companies Only. ^[1]

Over 441,371 jobs in the oil and gas industry globally were lost during the recession, as of February 10, 2017, the total number of oil and gas layoffs worldwide is 441,371 according to data compiled by the consulting firm based in Houston Graves & Co.

The risk of unemployment and the consequent feeling of insecurity increased the risks to workers’ health[2].

4.         CONCLUSION

The issue addressed in this subject revolves around the impact of the 2015 oil crisis and its effects on the economic development of the oil sector in terms of production and the overall development of the industry in question.

We have focused our efforts on highlighting changes in human resource management methodologies in the oil and gas industry.

In the first section, we tried to explain the oil crisis of 2015 – the end of 2014. We focused on the world oil price drop reasons, as well as the conflicts between the member countries of OPEC and non-OPEC producers on the one hand, and slower global economic growth due to slower economic growth in China. Also, the market situation following the crisis, the effects of political and economic management phenomena on the reactions of producers of the world market in terms of price volatility.

The second section was devoted to the strategies of price reduction and the impacts on the management of human resources in the oil industry; we dealt with the growth of feelings of professional insecurity after waves of layoffs, psychological anomalies with the dismissed staff, and work stress among active staff through the multiplication and accumulation of work tasks.

Thus, we examined the guidelines for diversification of specialties, the guidelines for disinvestment, and the maneuvers of debt reduction.

This preliminary study will open the doors to invest more deeply in leading oil sector company’s strategic actions during the crisis, and how to put them into action, the risk study related to the implementation of these strategies, and what may be generating satisfaction or dissatisfaction among stakeholders in the crisis will be the subject of further investigation.

Author: TAHA GHORBEL

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[1] CNBC, Challenger, Gray & Christmas- September 2015 Data.

[2] Occupational Health Psychology – Edited by James Campbell Quick and Lois E. Tetrick – American Psychological Association Washington DC – 2001.