As global corporations and companies embrace cost reductions to ensure profitability, downsizing moves across the labor market have become a frequent feature of measures undertaken to combat inflation and keep companies afloat.
These workforce curbs indicate a slowdown in job market openings, creating the perfect storm for an uptick in unemployment rates across many sectors and industries, including the energy arena, despite the surge in demand for energy sources.
The growing consolidation trend is another factor that serves as a double-edged sword, as it assists companies in streamlining their operations in response to shifts in policies, consumer dynamics, climate action, and economic pressures, but job overlaps usually lead to workforce reductions.
On the other hand, job consolidations are a boon for tight budgets, however, workers may find it challenging to pick up the slack, emphasizing the need to strike a balance between operational needs with budget cuts and employee retention and layoffs.
With no industry appearing immune, the recent upturn in employment reductions raises concerns about the global state of the economy which seems to be in the early stages of recession, as slower economic growth, rising costs, and supply shortages expose even the most profitable industries and companies to job losses.
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AI growth often gets the blame as another factor that places even some of the high-paying jobs in multibillion-dollar industries, like the oil and gas sector, at risk, with automation and remote operations making certain positions and roles redundant while also improving the workers’ overall safety. These trends, along with a few others, are likely to continue to shape the employment landscape over the coming years.
As the global energy machinery navigates the complexities of declining oil prices, gas market volatility, geopolitical woes, energy market evolution, the transformation of the energy mix, rise in alternative fuels and sources of supply, decarbonization goals, climate change pressures, and associated net-zero aspirations and policies, which are among the key trends that are affecting the offshore energy industry.
These trends seem to be hitting workers in the offshore energy industry, especially its oil and gas branch, hard as they seem to have drawn the short straw while headcount keeps slimming down even in the Big Oil camp, whose members are still raking in millions and billions in profits.
Cash is king: Financial doldrums water down shift to ‘greener’ pastures
While the offshore wind industry has gained momentum over the years and is considered one of the key ingredients of a net zero energy future, it has come across many bumps in its growth journey, even hitting a profitability snag recently. This prompted Jerome Guillet, Managing Director of SNOW, to write a piece on ‘How utilities and big oil broke the economic model of offshore wind,’ which he considers ‘self-explicit.’
While discussing the so-called ‘heads I win, tails I whine’ business model and its consequences, he provides his take on the offshore wind industry, deeming it to be “broken” as big energy names like BP, Equinor, Shell, Vattenfall, Total, Ørsted, Corio or Bluefloat, take steps to downsize their exposure to the sector amid rising concerns about cost hikes and ‘degraded’ economics.
He puts the blame for the woes the offshore wind industry is going through on the large utilities and energy firms, which pushed away competition, creating a fertile ground for current issues to spring up through a combination of “hubris, ignorance, and reliance on lobbying rather than good business acumen.”
Despite issues that have cropped up, Guillet ends his piece on a positive note, emphasizing: “Offshore wind will not happen everywhere, as it is not always cost competitive against onshore wind and solar, but it is a competitive source of electricity and does not deserve its current doldrums. Now is the time to invest – but you have to stop listening to the often clueless public statements of utilities on the sector.”
With financial strain being felt across many sectors, including the entire energy industry, companies are increasingly pondering whether they are getting a bang for their buck, as they work on revising strategies and adjusting their set course to remain in business.
While the oil and gas industry continues to enjoy a profit bonanza, many companies in this line of business, including supermajors, have been making plays to widen their energy horizons, especially in light of growing climate litigation, which often puts them in environmental activists’ crosshairs, forcing them to navigate stormy legal seas.
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When the first baby steps were made in rebranding, the oil and gas industry was enthusiastic about its foray into emerging low-carbon and renewable technologies, embracing strategic diversification with gusto to come to grips with the energy trilemma and reach its decarbonization and net zero goals. However, time has chipped away at the initial fervor as these new energies and green solutions did not magically bring pots of gold.
These types of projects, especially the more innovative ones that combine multiple clean energy sources, require a lot of spending to get off the ground but have not been able to rake in substantial profits, or even be profitable in some cases. This process takes time, and as one of our interlocutors said, the industry is just not there yet.
In line with this, Stratkraft cited money problems as the main issue for abandoning some of the projects, as explained by Birgitte Ringstad Vartdal, the firm’s President and CEO, who underscored: “The market conditions for the entire renewable energy industry have become more challenging. We are therefore sharpening our strategy to allocate the capital to the most value-creating opportunities with the best strategic fit.”
With the payday from renewable projects being slow in coming, the rising interest rates and costs are increasingly putting the financial stability of such projects at risk, especially since they take years to develop and put into operation before any money starts to trickle in.
The cards offshore energy firms have been dealt now are different not only for those fossil fuel giants that are dipping their toes into renewables and other low-carbon and green pursuits but also for their pure-play brethren in the hydrocarbon arena, depending on the global areas in which they operate.
Those that did make a profit were not able to reach the same or even similar level that the energy industry’s fossil fuel darlings, black gold and the ‘bridge fuel’ or ‘transition fuel’ as gas is often called, have been making.