Cost Optimizations (Layoffs) in the Oil and Gas Industry in 2025

The year 2025 has been marked by the start of a wave of layoffs in the oil and gas industry, impacting even major players like Chevron and BP. This analysis delves into the factors driving these job cuts, analyzes the strategies employed by companies to navigate this period, and explores the potential impacts on the industry.

Layoff Trends Across the Industry

The energy sector has been experiencing job losses since the start of the year. This trend gained significant momentum in February with major layoff announcements from companies like Chevron. Chevron aims to reduce costs by 2 billion to 3 billion by 2027. To achieve this, the company plans to reduce its global workforce by 15% to 20% by the end of 2026, impacting an estimated 8,000 to 10,000 employees. BP has also embarked on a cost-cutting initiative, resulting in the elimination of 4,700 jobs and a further reduction of 3,000 contractor positions.

These layoff announcements reflect a broader trend within the oil and gas industry. Shell, another industry giant, is reportedly planning to cut 20% of its workforce in its exploration and development divisions. These cuts are part of a larger trend of workforce reductions across various sectors, including technology, finance, and aviation.

Factors Driving the Layoffs

Economic Uncertainty

The global economy is facing a period of uncertainty, with high inflation, rising interest rates, and potential slowdowns impacting corporate profitability. In response, companies are implementing cost-cutting measures, including job cuts, to preserve cash flow and maintain competitiveness.

Energy Transition

The ongoing transition towards cleaner energy sources is putting pressure on traditional oil and gas companies. As governments and consumers prioritize renewable energy and decarbonization, demand for fossil fuels may decline, impacting the profitability and long-term viability of oil and gas operations. Climate change and energy transition agendas are also playing a role in this shift.

Technological Advancements

Advancements in automation and artificial intelligence (AI) are transforming industries, including oil and gas. Automation is leading to increased efficiency and productivity, which in turn reduces the need for human labor.

While these technologies offer opportunities to improve efficiency, they also raise concerns about potential job displacement. The International Energy Agency (IEA) warns that millions of jobs in traditional energy roles could be eliminated by 2030 due to advancements in digital technologies. This changing landscape requires companies to invest in digital capabilities and reskill their workforce to adapt to the new demands of the industry.

Geopolitical Events

Geopolitical tensions, such as the conflict in the Middle East, can disrupt oil supplies and create uncertainty in the market. This volatility can impact investment decisions and potentially lead to job cuts as companies adjust to changing market dynamics. The policies of the new US administration are also expected to have a significant impact on the industry.

Company-Specific Factors

Companies may undertake restructuring initiatives to streamline operations, optimize efficiency, and adapt to changing market conditions1. These restructuring efforts can involve job cuts as companies reorganize, consolidate departments, or exit unprofitable business lines1. In some cases, declining reserves and production challenges can also contribute to financial pressures and layoff decisions10.

Other Contributing Factors:

Declining oil prices: Geopolitical tensions and global market fluctuations have contributed to a decline in oil prices, impacting the financial performance of oil and gas companies.
Shareholder pressure: Shareholders are increasingly concerned about the impact of green policies on profits, pushing companies to prioritize cost-cutting measures and higher return.
Competition from US rivals: Some companies, like Shell, are aiming to reduce their workforce to match the employee count and cost-cutting methods of their US competitors.

Strategies Employed by Companies

In response to the challenges driving layoffs, oil and gas companies are employing various strategies:

Restructuring and reorganization: Companies are simplifying organizational structures, centralizing operations, and streamlining processes to improve efficiency and reduce costs15. This can involve consolidating departments, eliminating redundancies, and redefining roles to optimize workforce utilization1.

Cost-cutting measures: Beyond layoffs, companies are implementing broader cost reduction programs to improve profitability and competitiveness10. This can include reducing capital expenditures, optimizing operational expenses, and renegotiating contracts to lower overall costs16. Companies like Shell are selling non-core assets, such as refineries and pipelines, to generate cash and focus on higher-margin operations.

Investment in new technologies and renewable energy: Recognizing the long-term shift towards cleaner energy, some companies are investing in renewable energy sources, carbon capture technologies, and other low-carbon solutions17. This diversification can help mitigate the risks associated with declining fossil fuel demand and position companies for a sustainable future17. BP, for example, plans to invest in digital capabilities, especially AI and automation, to enhance efficiency and competitiveness.

Mergers and acquisitions: The industry is witnessing a wave of mergers and acquisitions as companies seek to consolidate operations, gain access to new resources, and enhance market share18. While mergers can create synergies and improve efficiency, they can also lead to job cuts as companies eliminate redundancies and streamline operations19. ExxonMobil's layoff announcement, for example, is a direct result of its merger with Pioneer Natural Resources5. Mergers and acquisitions can also decrease firm value due to the loss of human capital and expertise.

Talent retention and development programs: Companies are focusing on retaining skilled workers and developing talent to navigate the changing industry landscape20. This can involve offering competitive compensation packages, providing opportunities for career development, and investing in training programs to upskill employees and prepare them for future challenges21.

Company-Specific Examples

Company	Layoffs	Reasons	Strategies	Geographic Focus
Chevron	15%-20% of global workforce by the end of 2026	Cost-cutting, simplifying structure, declining refining margins, legal challenges with ExxonMobil over the Hess acquisition	Restructuring, leveraging technology, expanding global centers, relocating headquarters from California to Houston	Global
BP	4,700 jobs, 3,000 contractor positions	Cost-cutting, restoring investor confidence, refocusing on traditional oil and gas business, falling behind	Reducing costs, undergoing departmental reviews	Global, with potential impact on Houston office and technology division
Shell	20% of exploration and development workforce	Cost-cutting, increasing shareholder value, transitioning away from fossil fuels	Restructuring, divesting assets, focusing on higher-margin operations, scaling back on fossil fuels and growing LNG business	Houston and The Hague (primary focus), with potential impact on UK offices
ExxonMobil	Nearly 400 employees (post-Pioneer merger)	Restructuring after merger with Pioneer Natural Resources	Integrating Pioneer's workforce, offering positions to majority of Pioneer employees	Texas offices (Big Lake, Irving, and Midland)
TotalEnergies	No layoffs reported in 2025	Focused on responsible industrial transitions	Providing tailored solutions to employees during transitions, including early retirements and internal mobility	Not specified
BASF	Not specified yet	Possibly 10% workforce reduction	Restructuring to become more sustainable	Not specified
Neste	600 (10% of workforce)	Neste's share price has dropped by over 60% after a disastrous financial year	Cost cutting measures, including a 10% workforce reduction	Local

1. Chevron:

Layoff Announcement: Chevron plans to reduce its global workforce by 15% to 20% by the end of 2026, affecting approximately 6,000 to 9,100 employees.
Reason: The layoffs are part of a broader strategy to cut costs by $2 to$ 3 billion, simplify operations, and enhance long-term competitiveness.
Additional Information: This decision follows Chevron's relocation of its headquarters from San Ramon, California, to Houston, Texas, aiming to better collaborate with industry leaders.

2. BP:

Layoff Announcement: BP intends to cut approximately 4,700 jobs and reduce its contractor positions by 3,000, totaling about 5% of its workforce.
Reason: The company aims to reduce costs by at least $2 billion by the end of 2026 to boost returns and address investor concerns, especially following the resignation of former CEO Bernard Looney in 2023.
Additional Information: Since mid-2024, BP has paused or canceled 30 projects to prioritize profitability and streamline operations.

3. ExxonMobil:

Layoff Announcement: ExxonMobil plans to reduce nearly 400 positions in Texas following its $64.5 billion merger with Pioneer Natural Resources.
Reason: The layoffs are intended to eliminate redundancies and optimize operations post-merger.
Additional Information: The company has faced challenges, including a court battle over its $53 billion acquisition of Hess, affecting its efforts to bolster declining oil and gas reserves.

4. Shell:

Layoff Announcement: Shell is reportedly considering reducing its workforce by up to 20%, particularly in its oil and gas exploration and development divisions in Houston, Texas, and the Netherlands.
Reason: The potential layoffs are part of a restructuring effort to cut costs by $2 to$ 3 billion by the end of 2025 and refocus on core oil and gas operations amid rising costs and market volatility.
Additional Information: Shell has also revised its low-carbon energy plans, scaling back investments in floating offshore wind and hydrogen projects.

5. LyondellBasell:

Layoff Announcement: LyondellBasell is set to lay off over 400 employees as it prepares to shut down its Houston refinery by the end of the first quarter of 2025.
Reason: The decision to exit the refining business follows unsuccessful attempts to sell the plant and aligns with the company's broader decarbonization and sustainability objectives.
Additional Information: The refinery, operational since 1918, will transition to recycling operations to produce plastic pellets after 2027.

6. TotalEnergies and Equinor:

Announcement: Both companies have announced reductions in their low-carbon energy investments, which may impact their workforce structures.
Reason: The adjustments are in response to rising costs, supply chain challenges, and a strategic refocus on more profitable ventures.
Additional Information: TotalEnergies continues to invest in low-carbon energy, leading in renewable energy capacity among its peers, while Equinor is scaling back certain projects due to economic and technical challenges.

7. NESTE

Recent news indicates that Neste is implementing a significant cost-cutting program that includes substantial layoffs. Multiple sources report that the company plans to reduce its workforce by around 600 jobs worldwide, with roughly 450 of those cuts occurring in Finland.

Cost-Cutting and Profit Pressures:
Neste’s Q4 core profit has plunged amid an oversupplied renewable fuel market and weaker-than-expected margins. This performance has led the company to revise its guidance on renewable sales margins multiple times throughout 2024.

Layoffs and Dividend Changes:
To address the financial challenges, CEO Heikki Malinen announced the reduction of about 600 positions and a cancellation or significant cut in its dividend payout. These steps are part of a broader performance improvement and turnaround initiative.

Market and Operational Challenges:
The headwinds include weak demand, excess supply, and regulatory uncertainties (notably in the U.S.), which have all contributed to the challenging market conditions in the renewable fuels segment. Additionally, delays and cost overruns at its Rotterdam refinery have further pressured the company’s financials.

These news items are reported by several reputable outlets:

The Financial Times noted that Neste's share price has dropped by over 60% after a disastrous year and detailed the company’s cost-cutting measures, including a 10% workforce reduction overall.

Top sustainable fuel producer to cut spending and jobs after disastrous year

Reuters reported that Neste plans to cut around 600 jobs following a 78% plunge in Q4 EBITDA, citing weak market conditions and oversupply issues.

Regional sources like The Loop and Helsinki Times have also highlighted that about 450 of the 600 job cuts are expected to occur in Finland, emphasizing the local impact of these measures.

In summary, amidst a challenging market for renewable fuels and underperforming margins, Neste is undertaking aggressive cost-saving actions—including cutting 600 jobs and revising its dividend policy—as part of its turnaround strategy

Potential Impact and Future Outlook

The layoffs in the oil and gas industry have the potential to significantly impact both the industry itself and the broader economy.

Impact on the Industry

Layoffs can lead to a loss of skilled workers and expertise, potentially hindering innovation and growth within the industry. Companies may face challenges in attracting and retaining talent, especially as the energy transition creates new opportunities in renewable energy and clean technology sectors. This "brain drain" to the renewable energy sector could exacerbate existing talent shortages within oil and gas.

The International Energy Agency (IEA) found that clean energy sectors have added more jobs globally than fossil fuels in recent years, highlighting the shifting employment landscape within the energy industry. This trend, coupled with the increasing use of technology and automation, could lead to a "jobless recovery" in the oil and gas industry, where companies prioritize efficiency and automation over hiring new workers.

The geographic concentration of oil and gas jobs and the mismatch between fossil fuel job locations and renewable energy job locations pose challenges for a smooth workforce transition34. Workers in remote oil and gas producing regions may find it difficult to relocate or transition to jobs in the renewable energy sector, which are often concentrated in different geographic areas.

Stock Performance

As of February 18, 2025, stock performances of major oil and gas companies are as follows:

Shell Plc (SHEL): 67.13
BP plc (BP): 35.00
TotalEnergies SE (TTE): 61.41
Chevron Corp. (CVX): 155.34
Exxon Mobil Corp. (XOM): 108.24
Equinor ASA (EQNR): 23.09
LyondellBasell Industries NV (LYB): 76.70
NESTE (HEL:NESTE) : 9,08

1. Shell Plc (SHEL):

1-Year Performance: The stock has experienced a 3.61% increase over the past year.

5-Year Performance: The stock has experienced a 61.78% increase over the past five years.

2. BP plc (BP):

1-Year Performance: The stock has experienced a 7% decrease over the past year.

5-Year Performance: The stock has experienced a 39% total return over the past ten years.

3. TotalEnergies SE (TTE):

1-Year Performance: The stock has experienced a 12.56% decrease over the past year.

5-Year Performance: The stock has experienced a 30.22% increase over the past five years.

4. Chevron Corp. (CVX):

1-Year Performance: The stock has experienced a 4.37% increase over the past year.

5-Year Performance: The stock has experienced a 42.50% increase over the past five years.

5. Exxon Mobil Corp. (XOM):

1-Year Performance: The stock has experienced a 11.26% increase over the past year.

5-Year Performance: The stock has experienced a 80% total return over the past ten years.

6. Neste (HEL : NESTE)

1‑Year Performance:
Neste’s share price has fallen by roughly 65–67% over the past year. This steep decline reflects the impact of operational setbacks, margin squeezes in its renewable fuels business, and the broader market reaction to its cost-cutting measures (including the planned 600 job cuts).

5‑Year Performance:
Over the past five years, Neste’s share price has declined by about 63–76%. The range in these estimates reflects varying data sources, but overall it shows significant downward pressure as the market has reacted to its strategic challenges during the energy transition

General Industry Layoffs News

2025 Oil and Gas Industry Outlook by Deloitte Insights:

This report provides a comprehensive outlook for the oil and gas industry in 2025, highlighting key trends that are directly relevant to potential layoffs. It emphasizes that the industry's transformation is driven by a strategic blend of innovation and cost-reduction measures. Companies are leveraging digital capabilities and implementing cost-reduction strategies like restructuring operations, streamlining corporate structures, and exiting nonprofitable business lines. These measures directly contribute to workforce adjustments and potential layoffs as companies seek efficiency and profitability in a changing market.

2025 Oil and Gas Industry Outlook | Deloitte Insights

Oil Market Report - February 2025 by the International Energy Agency (IEA):

The IEA's monthly oil market report offers an in-depth analysis of the current global oil market, including demand and supply forecasts. The February 2025 report highlights a slight increase in global oil demand growth for 2025, but also points out that non-OPEC+ oil supplies are set to expand significantly, potentially leading to a supply surplus. This market dynamic puts pressure on oil prices and necessitates cost management within oil and gas companies, which can lead to workforce reductions. The report provides essential macroeconomic context for understanding the industry's need to optimize operations and potentially reduce staff.

Oil Market Report - February 2025 – Analysis - IEA

Global | 2025, a year of restructuring for the oil market by BBVA Research:

This report directly states that 2025 will be a year of restructuring for the oil market. It points to factors like subdued economic growth in major oil-consuming economies and increasing supply, leading to a downward trend in oil prices. This price pressure and market uncertainty are key drivers for oil and gas companies to restructure their operations, which often includes workforce adjustments to improve efficiency and reduce costs.

Global | 2025, a year of restructuring for the oil market - BBVA Research

Top Oil & Gas Job Trends for 2025 by Stream Marine Training

This report focuses on the evolving job market within the oil and gas industry. It highlights trends like technological advancements (automation, AI), the green energy transition, and evolving skill demands. While it doesn't explicitly detail layoffs, it underscores the shift in required skills and roles within the industry, suggesting that companies are adapting their workforce to these new demands, which can involve reducing positions in traditional areas while increasing hiring in new technology and sustainability-related roles.

Top Oil & Gas Job Trends for 2025 - Stream Marine Training