More than 4,000 overseas Filipino workers (OFWs) posted mostly on offshore oil rigs and supply ships have been laid off or failed to have their contracts renewed as a result of the closure of more than 300 oil rigs in the North Sea and Norway.
Giant oil companies like Shell, British Petroleum and Conoco, as well as smaller oil companies, have shut down because of the continuing downward trend of crude oil prices.
The price of oil per barrel hit $26.19 on January 20, “which also hit the OFWs, especially the sea-based sector,” recruitment consultant Manny Geslani said.
This, he said, was exacerbated by the entry of Iran into the picture.
Iran, following the lifting of sanctions by US and the European Union, was once again able to export unlimited quantities of oil and gas, he said.
“The additional supply from Iran could not have come at a worse time, given that the market is already oversupplied,” according to Geslani.
He said during interviews with shipping and manning agencies, he was told that they have stopped deployment of seafarers to companies heavily involved in offshore oil rigs.
“Many of the workers have returned from the North Sea areas upon the closure of operations by several hundred oil rigs,” Geslani added.
Diversification
With this dire development, the Department of Finance (DOF) said the country should start diversifying its destinations for OFWs to avoid risks, especially in current situations when oil prices are falling and tensions in the Middle East are still lingering.
In a recent economic bulletin, Finance Undersecretary Gil S. Beltran said while OFWs are in professions that are socially necessary—such as nursing, education, management—and are, therefore, less prone to job turnovers, reduced concentration could minimize risks from sociopolitical upheavals and economic instability.
Remittances continue to be one of the top pillars of the Philippine economy. Remittances keep the country’s dollar stock afloat despite external volatilities and help ramp up consumer spending on the domestic side.
As such, concerns were raised when remittances started to post volatile growth rates in 2015, as oil prices continue to drop, potentially affecting growth in the Middle East countries. This can, in turn, spill over to OFWs working in the area.
Data from the central bank showed that remittances from the Middle East hit $5.243 billion from January to November in 2015, making up about a fourth, or 23 percent, of the country’s total remittances during that time at $22.83 billion.
As of end-November, remittances from the Middle East still grew by 9.6 percent from the same period in 2014.
This is a relatively robust growth compared to other regions that are main remittance sources like Asia, which grew by about 9.57 percent during the period, and the Americas, which grew by about 0.55 percent. Remittances from Europe, meanwhile, contracted by 3.38 percent during the period.
“So far, the steep drop in crude petroleum prices has not affected Middle East remittances. The DOLE [Department of Labor and Employment] should be ready with viable options in case the economic crunch starts to bite,” Beltran said.
Beltran also noted that there are some limitations on the remittance data by source from the central bank.
“A common practice of remittance centers in various cities abroad is to course remittances through correspondent banks, mostly located in the US. On the other hand, remittances coursed through money couriers cannot be disaggregated into their actual country source and are lodged under the country where the main offices are located, which, in many cases, is in the US,” Beltran said.
Deferred oil projects
The web site Offshore Online Shipping has updated its analysis published in July 2015 on the impact of continued low oil prices on upstream oil and gas projects.
It concludes that in the last six months of 2015, an additional 22 major projects and 7 billion barrels of oil equivalent (BOE) of commercial reserves have been deferred, on top of the 46 developments and 20 billion BOE of reserves identified previously.
“It simply means that there will be no further deployment of seafarers to the offshore oil rigs, supply ships, tankers and capesize ships being idled by owners instead of operating this extremely large vessels at a loss, adding to the woes of the manning and shipping agencies,” the consultant added.
“Seafarers have felt the pinch, as more offshore rigs and oil tankers are shutting down and reducing salaries of our OFWs,” according to Nelson Ramirez, president of the United Filipino Seafarers of the Philippines.
Plummeting oil price—from as high as $114 per barrel in August 2014 to $27 dollars per barrel on January 19—has forced the Middle East countries to reduce government and private investments for 2016 as a glut of oil and weakening global demand combined to make 2015 the year of crashing oil prices.
The cost of crude fell to levels not seen for 11 years, and the decline may continue.
Saudi impact
This means that OFWs will have lesser job opportunities in Saudi Arabia, the Organization of Petroleum Exporting Countries’s top producer, as low oil prices are squeezing its domestic budget and prompted the government to impose austerity and taxes in some areas, Geslani said.
Saudi Arabia has announced budget cuts for 2016 to address an alarming deficit of 15 percent of GDP. Subsidies for water, electricity and petroleum products are likely to be cut, and government projects were reined in.
Saudi Arabia has announced plans to reduce its reliance on foreign workers by recruiting only highly technical workers and is monitoring investments closely.
“The kingdom will now be more selective in hiring foreign workers,” said Ibrahim Al-Assaf, finance minister. King Salman Al-Assaf said the kingdom had made substantial progress in training and absorbing qualified Saudi professionals and workers in different sectors, as reported by Arab News.
Saudi Arabia was the top destination of OFWs in 2014 with 402, 837. Coming in second was the United Arab Emirates with 246,231 in 2014.
Qatar is the fourth top destination of OFWs with 114,511, while Kuwait ranked sixth. Bahrain, ranked ninth, completes the Middle East countries on the list of top 10 destinations of OFWs. Middle East countries hired a total of 852,635 OFWs out of the 1,430,852 total deployment by the Philippine Overseas Employment Agency in 2014.
A reduction of Saudi Arabia on new projects and a cutdown in infrastructure projects would mean a large reduction of job orders for OFWs. The same goes for the other Gulf countries.
There are currently 1.8 million OFWs in Saudi Arabia alone.
Image credits: AP