working paper

Just transitions in the oil and gas sector

Considerations for addressing impacts on workers and communities in middle-income countries

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Energy Transition Implications for Workers Supported by Oil and Gas

It is difficult to estimate the total number of people working in the oil and gas sector across countries. The International Labour Organization (ILO) estimates that globally 6 million people were directly employed by the oil and gas industry, and indirect employment in the industry’s supply chain supported an estimated 60 million people (ILO n.d.). The IEA estimates global direct and indirect labor forces of fuel supply in 2019’s oil and gas sectors to be 8 and 3.9 million, respectively (IEA 2022a). There is also a rapid increase in the pace of automation and use of digital technology across the whole value chain of the industry—exploration, production, and supply chain—that is creating downward pressure on employment.26

Many middle-income countries do not provide national employment data for oil and gas production.27 Public data on employment in the oil and gas industry, if available, is often subsumed within data for mining and industry or does not capture informal workers and those supported indirectly by the oil and gas industry. Industry survey data (Figure 5) indicate the majority of oil and gas workers in direct employment are located in Africa (23 percent), the Middle East (20 percent), and Asia (18 percent) (Airswift and Energy Jobline 2022).28 Given existing data limitations, it is difficult to say how many workers directly and indirectly supported by the oil and gas industry in middle-income countries will be impacted by the energy transition, but that number is not insignificant.

Figure 5 | Distribution of Oil and Gas Workers across Regions

Note: CIS = Commonwealth of Independent States.

Source: Airswift and Energy Jobline 2022.

Impact on Employment of Phasing Out Oil and Gas

Employment in the oil and gas industry is strongly correlated with oil prices. Past price crashes have led to severe job cuts in the industry. COVID-19 caused oil demand and prices to drop dramatically and forced the industry to shed thousands of jobs. In 2020, nearly one in three workers worldwide in the industry faced pay cuts (Sharafedin 2021). Conversely, higher prices can create jobs because it becomes economically viable for companies to exploit higher-priced oil and gas deposits.29

In addition to employment impacts due to the industry’s cyclical volatility, workers also face long-term implications from the energy transition. Although the low-carbon transition will lead to an overall increase in energy-related jobs, recent studies provide hints of the potential job losses in the entire fossil fuel sector (IEA 2021d; IRENA 2018; Pai et al. 2021). According to analysis by Pai et al. (2021), jobs in the energy sector as a whole would grow from a current 18 million to 26 million by 2050 if action is taken to keep global warming to well below 2°C. Renewable energy jobs would increase from 4.6 million to 22.0 million, and fossil fuel jobs globally would decline from 12.6 million to 3.1 million. Job loss would be especially concentrated in coal, oil, and gas extraction, which employs 9.2 million workers. The trajectory of energy jobs under stronger climate policies will vary significantly between different regions and countries.30

Other studies have reached similar conclusions about job loss in fossil fuels (IEA 2021d; IRENA 2018; NCE 2018). IEA’s NZE Scenario, for instance, forecasts an increase in clean energy employment by 14 million by 2030, but employment in oil and gas is projected to decline by 1.7 million (IEA 2021d; Figure 6).

Figure 6 | Global Employment in the Energy Sector in IEA’s Net Zero Emissions Scenario, 2019 and 2030 Comparison

Note: The IEA’s 2020 Sustainable Recovery report (IEA 2020b) provides further detail on global direct employment within the energy sector. As of 2019, an estimated 40 million people total were directly employed in the sector, including in: Bioenergy (production, transport, and distribution); Electricity (generation and networks); Coal (production, transport, and distribution); Oil and gas (production, transport, and distribution).

Source: IEA 2021d.

A wide range of analyses conclude that, in most cases, disappearing fossil fuel jobs will be offset by rising employment in the clean energy economy, but even countries with net job gains will not necessarily be adding new jobs in the same regions where fossil fuel jobs are lost. This will lead to geographic inequity in the costs and benefits of the energy transition. Even if new jobs emerge in the same regions where old ones vanish, it will take effort to upskill, reskill, and adapt the transferrable skills from oil and gas to new jobs in the clean energy economy.

Just Transition Implications Arising from Employment Characteristics of Workers Supported by Oil and Gas

There is enormous heterogeneity within the oil and gas workforce and among the type, quality, and characteristics of the skills needed by workers (ILO n.d.). Some of this diversity is due to varying job needs in each phase of the industrial process as well as different locations for specific extraction methods. Technological advancements in recent decades have shifted the location and nature of many oil and gas jobs: a rise in offshore drilling has created jobs on remote rigs, where work schedules often consist of several weeks on and off (Greenpeace 2020; Jensen and Laursen 2014), and fracking and horizontal drilling have grown the industry in places where extraction had previously been uneconomical.

Circumstances and conditions for workers differ across countries and are often more closely related to a country’s labor standards and economic context than to the oil and gas industry in particular. This is especially true of wages, social protections, safety standards, and to some extent unionization levels. Therefore, in many cases, a major factor in the quality of an oil or gas job is the state of workers’ rights in the country.

However, despite the critical role of country-specific contexts for workers, we have identified a set of five key characteristics of employment in the oil and gas industry that are relevant across a number of countries. These characteristics should be carefully considered during just transition planning to support workers displaced by the industry.

  • Extractive industries, including oil and gas production, do not create many direct jobs, but they generate large numbers of indirect and induced jobs that will need to be considered in just transition planning.

Most of the direct jobs are created during the development phase—constructing and installing drilling rigs—which is more labor intensive (Pegram et al. 2018; UNCTAD 2015). Once the oil and gas fields begin operations, they generate little direct employment. In Nigeria, the oil and gas industry was estimated to directly employ roughly 19,820 workers in 2018, accounting for 0.03 percent of the country’s labor force (NEITI 2019). Approximately 5,600 workers were estimated to be working in Ghana’s oil and gas sector in 2015, whereas the total labor force was estimated to be at 12.5 million (Cooper 2019). Mexico’s Pemex employed 125,735 workers in 2020, accounting for 0.3 percent of the labor force (WBA 2021; World Bank 2022a). Nationally, therefore, the oil and gas industry is not a major direct employer in its own right.

However, when indirect jobs (in the supply chain of the oil and gas industry) and induced jobs (in other goods and services purchased by those employed in the industry) are considered, the total employment impact can be significant. A number of African countries have adopted local content policies requiring or encouraging multinational companies to hire local workers and purchase goods and services from domestic companies as a way to stimulate broad-based economic development (Kinyondo and Villanger 2016; Ovadia 2016). Though these policies have often achieved mixed results, the large number of inputs required for oil and gas exploration and production offers numerous avenues of generating indirect and induced jobs (Ackah and Mohammed 2018; Ovadia 2014).

Moreover, the oil and gas industry also tends to be concentrated in specific regions, such as the Niger Delta in Nigeria and the states of Tabasco and Veracruz in Mexico, or even in specific cities, such as Luanda in Angola and Sekondi-Takoradi in Ghana (WECP n.d.a, n.d.b). Even if the number of direct jobs lost in these communities is small, it will have knock-on effects on the broader local economy supported by the oil and gas industry, underscoring the importance of enabling a just transition for oil and gas communities, including place-based economic development to support other employment opportunities.

  • Workers who are unionized may receive more attention and support in navigating the transition, but unionization rates in the oil and gas industry vary by region and job type (ITUC 2019a).

Countries with more mature oil and gas industries, such as Argentina, Mexico, and Nigeria, tend to have higher levels of unionization in the industry than emerging producers. Argentina’s largest oil union, the Sindicato de Petróleo y Gas Privado de Río Negro, Neuquén y La Pampa, represents 24,000 workers (Raszewski 2022). Even in countries where the oil and gas industry is mature, unionization rates can vary. In Mexico, Pemex employees are unionized, but employees of IOCs operating in Mexico are primarily nonunionized contract workers. Although most direct jobs in Nigeria were once permanent and standard, the past few decades have seen IOCs operating in the country shift toward nonstandard and temporary jobs (Aye 2017). As a result, Nigeria’s two well-established oil and gas unions have faced challenges in representing the country’s many contract workers (Aye 2017; Pers. Comm. Olawale 2021).31 Since contract workers have short-term employment contracts, they often do not feel the need to belong to a union (Ajonbadi 2015).32

The level of unionization for a country’s oil and gas workforce is highly correlated with job quality and wages. Union membership leads to higher wages, job security, and better benefits. A permanent junior worker belonging to Nigeria’s National Union of Petroleum and Natural Gas Workers (NUPENG), which organizes blue-collar workers, earns a monthly average of $490, whereas a contract worker earns between $140 and $225 (Houeland 2015). If the oil and gas industry shifts more toward hiring contract workers, unions could have more trouble organizing and effectively fighting for their members’ working conditions.

Unionized workers may be in a better position to demand protection, retraining, or income support during a transition away from fossil fuels, but there are concerns about how some unions might approach just transition discussions (Kalt 2022). The role that they will play in enabling—or resisting—a just transition will be highly consequential. Some have been open to the low-carbon transition, but it may be difficult for unions representing oil and gas workers to advocate moving away from industries with relatively well-paid jobs and benefits. Moreover, with some companies in the emerging clean energy industry generating precarious employment, unions are concerned about transitioning from high-quality fossil fuel jobs to lower-quality jobs (Carmona 2019; Castro 2020). Attempts to prioritize just transition by governments and other stakeholders can become more complicated where unions play a significant role politically—such as with the Sindicato de Trabajadores Petroleros de la República Mexicana (STPRM), the Mexican oil workers’ union, which is politically important and also sits on Pemex’s governing board (Abad and Maurer 2018; Huizar 2015).33

However, some unions are taking proactive steps to explore what transitioning could mean for their workers. In 2017, the Nigeria Labour Congress and Environmental Rights Action–Friends of the Earth Nigeria began to explore what a just transition could look like for petroleum and agricultural workers (Ojo and Mustapha 2019).34 Collaboration across different groups, such as civil society and unions, will be key for advocating for just transition efforts, building social acceptance across multiple groups in society, and planning for processes and outcomes that are just (TNI 2020).

  • The oil and gas industry in middle-income countries is characterized by a high proportion of contract workers, with precarious employment conditions and the potential to be left out of just transition discussions.

The term contract workers describes a wide range of employment relationships in the industry.35 It includes short-term or part-time workers with a direct contract, day laborers, informal workers, and workers in employment relationships with a contractor to an oil and gas company (I. Graham 2010).

The precise number of contract workers in the industry is not known but is growing faster than in other industries. This stems, in large part, from employers’ efforts to operate flexibly given the sector’s boom-and-bust cycles (Dickson et al. 2020). This incentivizes hiring contract workers who can be employed when needed but let go when demand slackens. They are, therefore, vulnerable to job cuts when the industry is not doing well. These cycles have been accentuated in recent decades with the shift toward nontraditional sources such as shale oil and gas because fracked wells produce for shorter periods of time. According to the 2022 Global Energy Talent Index survey of workers in the oil and gas industry, 33 percent identified themselves as contractors, 41 percent identified as permanent staff, and 26 percent were unemployed (Airswift and Energy Jobline 2022).36

Contract workers in middle-income countries may have fewer workplace protections than those hired as employees. Unions in Nigeria report increased casualization of the oil and gas workforce, resulting in different treatment of permanent and contract workers, who receive fewer opportunities for training, lower wages, and no benefits (Fapohunda 2012; IndustriALL 2018; Pers. Comm. Olawale 2021).37

The shift toward more precarious employment points to challenges for transition planning. Reliance on contract workers could grow as the energy transition progresses and work becomes less predictable. They are less likely to have long-term job security or to be represented by unions, and they are potentially more likely to be excluded from just transition discussions, including around issues such as retraining. Ignoring the needs and voices of significantly large numbers of contract workers will make the energy transition inherently unjust.

  • Oil and gas jobs pay high wages, and it will be a challenge to replace them with similarly well-paid jobs.

Oil and gas wages typically are above the local average for jobs requiring comparable skills and education. High wages perhaps reflect the dangerous or short-term nature of the work or the industry’s historically high profits (Airswift and Energy Jobline 2020; Dickson et al. 2020). As of 2010, NOCs outside the Organisation for Economic Co-operation and Development generally pegged wages for their permanent staff at 25–50 percent above the average national wage (I. Graham 2010). The highest-paid jobs tend to be in engineering and management, with administrators and accountants among the lower-paid roles (Airswift and Energy Jobline 2022). In Latin America, for example, a salaried administrator might earn $17,400 per year, or $131 per day on a contract basis, which compares extremely favorably to Mexico’s 2018 median annual household income of approximately $4,500 (Airswift and Energy Jobline 2022; OECD 2021a). Notably, even within the same region, the same job roles are performed by both permanent and contract workers. Appendix B shows the compensation by job role, employment status, and region for a selection of jobs and regions.

As the oil and gas industry shrinks in the coming decades, relatively well-paying jobs in middle-income countries will be lost, threatening the livelihoods of thousands and impacting the local economies. It will be important to determine what substitute industries in erstwhile oil and gas regions are attractive to former workers in terms of wages, job security, and other elements of job quality in just transition discussions.38

  • Despite women’s low participation rates in the direct oil and gas workforce, they are likely to be significantly impacted by the industry’s decline.

Globally, women make up just 22 percent of the oil and gas workforce, compared with 32 percent in renewable energy (IRENA 2019). In Nigeria, women only account for 15 percent of the oil and gas workforce, and mostly in administrative, public relations, medical, and legal positions (Aye 2017). The underrepresentation of women is more acute in NOCs than in IOCs (Rick et al. 2017).

However, women often make up a large share of workers whose jobs depend on the industry. These induced or indirect jobs—in industries such as public service, retail, education, or food service—would be vulnerable to the wider economic effects of the industry’s decline. Women’s caregiving roles would also be affected. For instance, despite the environmental and health risks of oil and gas flaring events, women in some oil- and gas-producing communities who cannot afford cooking gas rely on the heat from gas flares for cooking (Adams 2021).

High salaries in the oil and gas industry mean that spouses, children, or elderly relatives often depend on the income of a male household member. Losing this income may force younger or female household members to enter the workforce, increase their working hours, or leave the paid workforce to provide household labor (especially childcare) that had been outsourced before. As a result, discussions around just transition and economic diversification should focus on strategies that can benefit women, improve working conditions in female-dominated sectors, restructure local employment opportunities to promote gender equity, and ensure a fairer distribution of care work within family and society (ADB et al. 2021; Dhir 2017; Walk et al. 2021).

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