The so-called "oil layoffs" trend, which since June 2014 is said to have claimed 100,000 employments globally, has finally landed in the tightly-regulated Pakistan energy market. Byco Petroleum Pakistan Limited, which posted Rs 1.16 billion operating profit during first half of FY16, appears to be the first local energy firm to have decided to send hundreds of its employees packing for cost cutting.
Sources privy to the matter, however, link Byco's "rightsizing" plans to an "immense pressure" the local refiners were facing from their 30-40 percent shareholders in UAE's Abraaj Group. "Abraaj Group pressure is at work in Byco's cost cutting plan," they claimed.
Since October 2015 fire, Byco's 120,000-barrel-per-day (bop) Oil Refining Complex II (ORC-II) at Hub stays shut with the company engaged with its insurers for securing the financial claims it made post "minor" blaze. Abraaj holds shares in Byco's refinery business which now is confined to a smaller 35,000bpd facility which, along with a marketing company with over 260 retail outlets, is listed at Pakistan Stock Exchange as Byco Petroleum.
Aiming to cut what company spokesman Imran Ghaznavi said internal costs in multiple operating departments, Byco has started issuing termination letters to lay off at least 200 of its 800-900 staff members, including some top officials having "overlapping" departmental responsibilities. Half of those being fired are regular and as many are contractual employees.
The layoffs, which would have an "across-the-board" effect in Byco Oil, Byco Petroleum and Byco Terminal, are expected to help the company save at least Rs 100 million a month.
"In the light of current market environment, Byco has decided to reduce internal costs in multiple operating units as well as at the head office, which includes rightsizing," said Imran in a statement issued Friday.
To justify the move, the spokesman said more than 70 percent reduction in international crude oil prices since 2014 had squeezed revenues of energy firms globally. "Global oil layoffs exceed 100,000 and leading international energy companies have announced spending cuts of more than $40 billion," he said.
Calling it "restructuring" of the company, the spokesman said Byco was putting in place a detailed exercise to adopt across the board initiatives focusing on increasing synergies across various companies and operating platforms, reducing costs and supporting business priorities. "The falling crude prices have impacted OMCs the least and upstream excavation firms the most," said an industry source. Byco's layoffs, he insisted, had its roots in last year's inferno at ORC-II.
The refinery, the source claimed, was lying dysfunctional since then, making the company's huge human resource a liability. The assertion appears weighty given the fact that most of the employees being fired belong to Byco's ill-fated ORC-II unit. "ORC could never have achieved operational consistency and had produced only 115,000 tons of diesel and 20,000 tons of petrol when a fire erupted therein," the source went on to claim.
Asked Imran rejected the claims saying Byco, being a refinery operator, was very much in the crude oil business and was, therefore, vulnerable to the adverse impact of global fall in crude oil prices. From its peak $110 level in June 2014, the benchmark US West Texas Intermediate (WTI) is presently staggering at $31 a barrel. The British Brent stands at $33. "No, this trend you call oil layoffs is not prevalent in the overall local industry," said Aamir Butt general secretary Oil Companies Advisory Committee (OCAC).
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