Brent plunged nearly 6% from its 42-month high settle of $79.80 at the beginning of the week after the energy ministers of Saudi Arabia and Russia, de facto leaders of the OPEC and non-OPEC producers cutting output, said on May 25 that they had agreed on the need to raise supply by 1 million b/d. The market had been overly squeezed due to unintended output reductions in recent months and crude prices were overheated, was the shared view from their meeting in St. Petersburg.
However, by mid-week, doubts set in that all the OPEC and non-OPEC ministers were on board with the idea and would agree to ease the cuts when they meet in Vienna on June 22. The combined curbs by OPEC and its 10 non-OPEC collaborators, aimed at suppressing about 1.72 million b/d of supply, are currently valid until the end of December 2018.
The doubt not only arrested crude’s sell-off, but also prompted a nervous market to quickly rebuild some length — albeit in Brent, not WTI.
By Thursday’s market close, front-month ICE Brent futures had clawed back more than half of their $4.50/barrel drop from the 42-month peak but not WTI, which clung to its losses. The WTI/Brent spread blew out to more than minus $10/barrel, the widest since the US lifted its crude export restrictions in December 2015. There are forces at work on both ends — WTI is being weighed down by surging US supply running against pipeline capacity constraints, especially in the Permian region, while Brent is being propped up by an over-tightened OPEC production and an anticipated crimping of Iranian supply under US sanctions.
The OPEC/non-OPEC meeting later this month will likely be a contentious one, unless a consensus is forged in advance during closed-door negotiations, in which case those would be tough as well. The oil ministers of Saudi Arabia, the UAE and Kuwait were reportedly due to meet in Kuwait City this weekend to discuss production policy.
We expect the cuts to be relaxed, likely starting from July 1. With several producers in both camps unable to sustainably increase production, it could end up being an unconventional arrangement, involving bigger contributions by Russia and Saudi Arabia. The proposed 1 million b/d increment is conservative, in our view, as close to 1.5 million b/d has been removed from the market due to unavoidable declines in Venezuela, Mexico, Angola, Kazakhstan and Azerbaijan as well as outages in Nigeria and Libya in recent months.
However, OPEC now probably has more price hawks than ever before, keen to preserve crude’s price gains and to prevent the market from tipping into oversupply again. These members could negotiate down the quantum of increase or push for phased hikes.
As the anxiety levels in Tehran continue to rise, it has been pushing the Europeans and even OPEC for support against US sanctions, while furiously lobbying its crude buyers to stay put. But China and India, the biggest buyers of Iranian crude, are prepared to cut back, anticipating major shipping insurance and payment problems.
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‘Nine to five plus a single employer’ is no longer an equation that the current workforce operates on. This traditional marketplace has been disrupted with the advent of new technology that has heralded gig or on-demand economy. Players like Uber, Airbnb, & Deliveroo offer a classic example of how these innovators have leveraged on this concept of gig economy and have shaken up the traditional setup. Millions of people today, prefer flexible work timings, multiple employers, interest-based projects and multiple revenue streams, the working style we commonly refer to as gig economy.
CIPD describes the gig economy as a new way of working that is based on the temporary jobs or projects, which is paid on the project or hourly basis. It is also referred to as the ‘sharing economy’ or ‘collaborative economy’
The gig economy: pros and cons in the context of the Oil & Gas Industry
The Oil and Gas industry is considered traditional when it comes to adapting to new technology or concepts. However, the notion is changing now with 30% of its workforce comprising of gig workers and the trend is expected to rise in coming years. Instead of depending on the recruitment agencies, companies are now focussing on targeted industry digital platforms to search, shortlist, verify and hire the gig contractors or freelancers. However, like everything else, there are pros and cons of hiring freelancers or gig employees:
Reduced Overhead cost
The cost of hiring an in-house employee is immense because apart from salary it also includes costs of insurance, perks, benefits, training, leaves, and cost associated with providing the facilities like internet, sitting arrangements, refreshments, canteen, electricity, and so on. All the extra cost apart from salary gets waived off when it comes to hiring gig employees or also known as “freelancers” in the market. Thus reducing the huge chunk of overhead cost for the employing company.
Low Financial Risk
In the case of full-time employees, the company needs to pay even during “down-times” when the work is low, or the productivity standards are not met. However, in the case of temporary staff or freelancers, the company only pays for the work accomplished as per the specified standard. Thereby lowering the financial risk.
Bigger and better pool of talent
The energy sector is a highly specialized sector and hence requires employees with a specific skill set. Specially for an on-site project, location is the biggest constraint. What if you do not find the right talent at your location? Then you are left with two options: either to hire a new employee and provide training or offload and distribute the work to the current employees. Both this scenario is risky. That’s when the gig employees are a real life-saver. The boundaries are no barrier, you can gain access to any person sitting in any part of the world. You do not even have to compromise on the skills and invest in training.
Innovation and knowledge-sharing
The company spends a substantial amount on strategizing and talent development. However, when you opt for a freelancer, you gain access to knowledge that the employee brings in by working with other organizations. So, in the oil and gas sector, a new employee can bring an innovation in the process or methodology by his experience and observation with different clients.
Round the clock functioning
Sometimes, the gig employee operates from different time zone which means that you can get your work running even while you have closed down at your part of the world. Additionally, you can reach out to freelancers for revisions, urgent works, even after the fixed working hours and during weekends, which is a great relief during tight-deadline projects.
Lack of supervision and discipline
Most gig workers operate remotely, and you cannot monitor their work physically which means that you can never be sure whether the hourly rates that the employee billed you for, is actually spent on work or for leisure. However, now there are numerous monitoring sites like Hubstaff that tracks the productivity level of the employee. Also, working in oil and gas sector involves potential hazards that can lead to serious injuries and even death. In case of remote workers, managing and monitoring all safety measures pertaining to explosions and fires, equipment safety, machine hazards and so on is a daunting task.
Until you gain mutual trust, there is a lot at the stake. For example: if you hire a temporary staff or freelancer to work on a project, you cannot be certain if the person will be able to deliver his/her duties. The risk of losing time, money, and energy is high. If all turns well, you can enjoy the perks however if it didn’t go your way then you suffer a loss on multiple levels. To avoid this scenario, it is advisable to ask for previous work references and keep reviewing the work periodically so that you are aware of the direction things are shaping in.
Loyalty and company ethics
Because, each company has its own set of principles and working guidelines which forms the culture of the company, it is challenging for the freelancer to operate as per the company’s code of conduct or policies. Furthermore, they work for multiple clients at a time, their loyalty may be questionable.
Training and development issue
Every company works and operates differently though key process remains the same. The complete onboarding of the remote worker is not possible as in the case of a full-time employee where the company’s working style becomes their second nature. Additionally, the effort to organize a training program for the gig worker is tricky because of the location and time bound issues.
Thus, for a dynamic industry like oil and gas, gig employees can be an asset if they can bring in the required expertise, skill set and attitude to outperform your expectation. You can find the right talent by using dedicated oil & gas professional networking platforms that bring talents and employers together. Use it to your advantage and you are good to go.
Malaysia has the fourth largest oil and gas reserve in Southeast Asia and produces a whopping 30,000 megawatts of energy per year. The country continues to be hopeful about the prospects of its oil & gas industry and expects it to contribute meaningfully towards the growth of its economy. But then again, what does it mean for the employees who are working in the industry or plan to enter it? Is it a profitable industry in terms of salary growth and expectations? Let’s figure out what the industry holds for its employees and job seekers of oil and gas jobs in Malaysia.
What does the number say?
The best way to analyze the oil and gas job sector is to look at the recent studies and research conducted, which can give a substantial view into the future of the industry. As per the statistics department, Malaysia saw 8.1% growth in the salary in 2017 amounting to RM 2880 as compared to 2016, in which the average salary recorded was RM 2657. Additionally, the chief statistician of the department, Datuk Seri Dr Mohd Uzir Mahidin, said that an increase in the mean monthly salary and also the wages are in sync with the country’s economic performance. Even the exports indicated to grow by 20.3% which amounts to RM935.5bil. He made these observations based on the results of Salaries and Wages Survey 2017 of oil and gas professionals and entry-level oil and gas job seekers.
What the number means for prospects of oil and gas salary in Malaysia
If the above data is viewed on a sectoral basis, then the mining and quarrying sector indicated the highest monthly salaries as well as wages, which amounted to a mean of RM5,709 and a median of RM3,700.
Datuk Seri Dr Mohd Uzir Mahidin, further added that capital-intensive industries like the oil and gas, which is a major part of mining and quarrying sector, employs professionals, who are highly skilled and hence a bigger paycheck and higher mean and median salary.
The observation made by the chief statistician gets further backing by an online job site’s employment index. Although, it shows a decrease of 11% in May 2018 for the hiring activities in comparison to the previous year. However, it pointed towards a steep growth in the Oil & Gas sector. The hiring activity went up by 14% year-on-year in May 2018.
What can be the salary expectations for energy professionals?
The above studies and research indicate a positive outlook for both upstream and downstream players of this sector. However, it is important to note that a lot of factors help to determine your salary potential, which includes: education, years of experience, expertise, work ethics, job location, skill set and so on.
As per payscale.com, a Petroleum Engineer can earn on an average RM 104,343 per year. Which means an average salary of RM 99,803 with an estimated average bonus of RM 22,500 and profit sharing of RM 5120. Your experience and education play a major role in determining your salary. Similarly, in oil and gas industry, the average salary of a mechanical engineer amounts to RM 72,000 whereas the average salary of Account is RM 82,248 and for Project Engineer is RM 57,000 while a sales manager has the potential of RM 120,000.
Since the industry prefers professionals with high-level skills in the respective areas, it is advisable to enhance your overall employability factors to enjoy higher compensation and perks. And also use oil and gas professional networks to your advantage in getting the desired contacts and opportunities.
Headline crude prices for the week beginning 13 August 2018 – Brent: US$72/b; WTI: US$67/b
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