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Why OPEC’s Decision To Delay Makes Sense

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Oil Is Set To Rise, But The Rally May Not Last

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Low Oil Prices Prompt Statoil To Cut Even More Jobs

Once more Statoil is reducing its richest asset – employees – in order to keep financial losses to a minimum because of low oil prices. It will eliminate up to 1,500 full-time jobs and 500 temporary consultant positions by the end of 2016.

“We regret the need for further reductions,” Statoil Chief Operating Officer Anders Opedal said June 16, “but the improvements are necessary to strengthen Statoil’s competitiveness and secure our future value creation.

Related: Kurdish Oil Exports Under Threat

The goal is to save $1.7 billion per year beginning in 2016 under a cost-savings plan drawn up in 2013. Its original goal was merely to corral spending, which had risen gradually during the previous decade. The company saw a stronger need to save after the price of oil collapsed beginning in late June 2014.
And while Statoil is maintaining its dividend for shareholders, it is reducing capital spending by 10 percent to about $18 billion for 2015 alone.

So far, Statoil – two-thirds of which is owned by the government of Norway – has postponed and even abandoned energy exploration projects in its effort to save money, and has eliminated the jobs of 1,340 full-time employees and 995 consultants since the end of 2013.

Now the company will go further, eliminating between 1,100 and 1,500 full-time positions and 525 consultant jobs, or about 7 percent of its remaining workforce. More specific numbers won’t be available until sometime this fall.

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Statoil’s workers are among the highest paid in the energy industry, even at a time when the company’s chief product, Brent oil, has plunged in value by $50 per barrel.

In a statement, Statoil said the layoffs so far have been mutually agreed upon by both the company and the affected employees, and that it hopes to keep it that way. “We have so far solved the workforce surplus through voluntary measures,” it said, “and maintain the ambition to conduct the people process over the next 18 months without forced measures.”

Statoil also appears not to be ready to acquire smaller companies that may be struggling, as Royal Dutch Shell did in buying BG Group. Eldar Saetre, Statoil’s CEO, said in an interview published June 9 in the Financial Times that such acquisitions are too expensive.

“There is really nothing cheap out there, no big bargains to be made,” Saetre said. “The big transformation stuff is challenging.”

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Norway’s government agrees. “It’s natural and necessary that Statoil, as the biggest company on the Norwegian shelf and a large international player, must adapt to a new cost situation, like the industry as a whole,” Petroleum and Energy Minister Tord Lien said in an e-mail.

Nevertheless, Oslo has cautioned that such cost-cutting must not interfere with the efforts by the country’s energy industry to get the most out of its existing oil and gas fields and initiate new, profitable projects.

By Andy Tully of Oilprice.com

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