UAE oilfield service companies are expecting a drop in profit and a decreased demand for their services as the oil price continues to fall, Gulf News has reported.
Companies are already feeling pressure from the price slump caused by an oversupply and weak demand, according to the report.
Oil prices have more than halved since June last year, when it peaked at $115 a barrel. On Monday Brent crude traded at $55 as analysts went as far as to predict that prices might hit $50 a barrel over the next few days.
A Dubai based company, whose name was not disclosed in the report, said their profit will decrease by 30%.
“Many development projects are already on hold or getting slow based on the directive from oil companies. This will enable oil and gas engineering companies like us to compete in a tough market and the work needs to be executed at a very less or no profit scenario,” said Ashik Subahani, managing director of offshore service provider Great Waters Maritime.
Subahani added that lowered oil price would affect job opportunities causing many to lose their jobs.
Europe will be affected more adversely compared to the Middle East due to its higher oil production costs, according to the MD.
Adrian Nizzola, partner in Abu Dhabi based law firm Simmons & Simmons, predicted a reorganisation of the job pool as a result of the current situation.
“Companies will look to lessen their labour cost. Western expatriate workers could be affected as companies look to reassign and reorganise their work force e.g. they might be put on other projects or other ventures. Individual contractors may see the durations of their contracts shortened or suspended.
National and international oil companies will look for cheaper exploration and production solutions and those service providers that fail to adjust to the new market order will struggle, warned Nizzola.
Ongoing oil and gas projects will continue as before, while the economy of new projects will need to be revisited, he added.
Despite the current instability in the oil market, the UAE has committed to raising production to 3.5mn barrels per day by 2017.
A monthly report by Emirates NBD quoting Bloomberg estimates said total oil production by Organisation of the Petroleum Exporting Countries (Opec) members declined by 122,000 barrels per day in December with the biggest cuts coming from Saudi Arabia and the UAE, which reduced output by a combined 250,000 barrels per day.
However, other OPEC members Iraq and Nigeria raised their output by 150,000 bpd and 110,000 respectively.
