Despite reducing its oil and gas workforce by more than 65,000 jobs in less than two years, U.K. oil and gas industry expects to continue cutting jobs and other costs over the next year. A recent report disclosed that workers employed in the sector had dropped from approximately 440,000 to roughly 375,000 since the start of 2014. Much of the decrease in workforce and hiring efforts is attributed to the low global oil prices. In 2014, more money was spent on production than earned, a problem that will be exacerbated this year by the continued fall in commodity prices. While employment within the sector has already contracted 15%, it is anticipated to continue to contract, to allow oil and gas employers to remain in business through the downturn, which is expected to last well beyond the end of 2015.
Companies in the industry are now seeking ways to improve cost and efficiency as reflected in industry performance. Analysts suggest that by the end of 2016 companies will have reduced the cost of operating existing assets by 22% or by over £2 billion. These improvements in cost and efficiency may partially offset the biggest round of job cuts in the oil and gas industry in nearly two decades. However, skilled workers in the labor pool see more opportunities in the renewables sector of the energy industry. Direct and indirect employment in the renewable energy sector increased by 18% globally last year to approximately 7.7 million, with the majority of jobs created in Asia.
The reduction in workforce in the UK oil and gas industry, coupled with the lack of investment, could fuel a migration of highly skilled works to renewable energy. Skill shortages affecting the renewables sector have prompted recruiters to seek talent outside of the renewables sector. With an estimated 5,500 direct oil and gas jobs lost as of June this year, there is an abundance of skilled workers in the labor pool. The majority of new renewable energy jobs being created are in China, India, Indonesia, Japan and Bangladesh, where governments are embarking on more programs to increase the use of renewable energy. This has the potential to create the perfect environment for talent migration from the UK to these countries, as workers seek to find jobs with compensation packages that are comparable to those which they lost in the oil and gas sector.
College and University students studying for a job in the energy sector are also taking notice of the current outlook for the oil and gas industry. They may reassess their courses and training to be more favorable to renewable energy employers when seeking work in coming years. Enrollment in renewables programs is steadily increasing year-over-year at universities. With more students studying for renewable jobs instead of professions more specifically geared towards the oil and gas industry, we could see a skills shortage in the oil and gas industry when commodity prices do finally rebound, and employers are seeking talent to fill jobs over the next decade.
Lack of collaboration, lack of efficiency, declining investments and no improvement in sight for the price of oil over the next year will result in further job cuts within the UK oil and gas industry. Analysts estimate cuts of 10,000 people directly employed in the industry. Some companies were slow to cut jobs, as they were hopeful that the oil price slump would rebound quickly, as it did in 2008-2009 when prices rebounded after a brief downturn. However, price drops this past year and the resulting slump are comparable to those faced by the industry in the 1990s. Oil prices are not expected to rebound anytime within the first quarter of 2016.