Oil prices have been nose diving for a few months now, and the impact of this change is becoming evident not just on the smaller stakeholders in the value chain, but also on leading oil and gas producers across the world.
Sinopec Group, China’s second-largest energy company, is under increasing pressure to cut costs in the wake of this turbulence in oil prices. In a latest move, the company has decided to recall about 40% of all its overseas staff. These employees are currently deployed at Sinopec’s overseas subsidiary, Sinopec International Petroleum Exploration & Production Co.
A senior official from the company said that the staff deployed overseas will now be called back to the Sinopec headquarters in Beijing – reports in the media said. The company is reportedly recalling about 160 employees from its overseas operations. However, this isn’t the first time that the company is bringing back its employees from offshore locations. In 2014 as well, about 100 Sinopec employees were asked to report back to Beijing.
The continued instability in the prices of crude oil is now manifesting itself in the form of eroding profitability of Sinopec’s production units. A senior official from Sinopec, who spoke to the media on the condition of anonymity, said that the dent to profits was the key reason behind recalling employees.
The tumbling oil prices have been a result of the recent shale boom in the United States, which has consequently resulted in a glut in the market. This factor has been compounded by other events such a record spike in exports from Iraq and Saudi Arabia reporting an appreciable increase in oil production during this time.
After tumbling oil prices severely hit the profit margins of oil companies worldwide, many of them began to announce cuts in expenses toward the end of 2014. Chinese companies, too, chose this recourse and continue to do so.