On February 12, energy giant Chevron announced its plans to cut staff by 15% to 20% by the end of 2026 in order to reduce costs, streamline operations, and complete a major acquisition.
Chevron stated that it aims to reduce costs by up to $3 billion by 2026 through the use of technology, asset sales, and changes in work methods and locations.
As of the end of 2023, Chevron employed approximately 40,000 workers globally, with a 20% reduction equating to around 8,000 people being laid off. These figures do not include the approximately 5,400 employees at Chevron gas stations.
The slim profits from gasoline and diesel production also impacted Chevron’s earnings in the fourth quarter of last year, with its refining business posting a loss for the first time since 2020.
Chevron’s Vice Chairman Mark Nelson stated in a release, “Chevron is taking steps to streamline our organizational structure to execute more quickly and efficiently, and to make the company more competitively positioned in the long term. We are not taking these actions lightly and will support our employees during the transition period.”
Insiders revealed that the company informed employees during internal meetings that from now until April or May, they can opt for voluntary separation packages.
The source mentioned that Chevron will reorganize its business in the next two weeks and announce a new management structure.
Last year, Chevron relocated its headquarters from San Ramon, California to Houston, and made changes to its long-standing management personnel to refresh its leadership team.
It also announced the establishment of a new center in India, which will be its largest technology center outside the United States.
As the second-largest oil producer in the United States, Chevron has recently faced multiple challenges, putting pressure on CEO Mike Wirth.
In January, Chevron initiated a $48 billion expansion plan for the Tengiz oil field in Kazakhstan. The project has faced delays and significant cost overruns since 2012 due to its high sulfur content and harsh weather conditions. It is expected that post-expansion, its production will account for approximately 1% of global crude supply.
However, Kazakhstan, being a member of the Organization of the Petroleum Exporting Countries (OPEC), currently exceeds the production quota set by the organization and its ally Russia.
The Kazakh Ministry of Energy stated in early February that the country will take all necessary measures this year and next to fulfill its obligations under the production cut agreement and offset the excess oil production in 2024.
Meanwhile, Chevron’s $30 billion acquisition of oil producer Hess and the deal to establish a foothold in the oil fields of Guyana have stalled due to legal disputes with rival Exxon Mobil.
Exxon Mobil has outperformed Chevron in production growth, owning the largest oil field in the United States and the largest stake in a Guyana oil and gas joint venture that discovered over 11 billion barrels of oil.
As the top oil company in the United States, Exxon Mobil acquired Pioneer Natural Resources last year, becoming the largest producer in the Permian Basin.
Chevron’s oil and gas reserves have dropped to their lowest level in at least a decade. Its reserves, the potential amount of oil and gas that can be extracted, decreased from 11.1 billion barrels of oil equivalent in 2023 to 9.8 billion barrels by the end of 2024.
If Chevron successfully acquires Hess, it will gain a 30% stake in the profitable Guyana oil field operated by Exxon Mobil.
However, Exxon Mobil and another minority shareholder in the Guyana oil field, China National Offshore Oil Corporation (CNOOC), have challenged Chevron’s acquisition in court, claiming they have a right of first refusal to buy Hess’s stake in the project.
If Chevron fails to complete the acquisition of Hess, it would be the second deal lost under CEO Wirth’s leadership. In 2019, Chevron abandoned its acquisition of Anadarko Petroleum Corp after Occidental Petroleum raised its bid.
(Based on reporting from Reuters)