Chevron is set to trim up to 20% or some 8,000 members of its global workforce by the end of 2026, as part of a broader effort to streamline operations, curb expenses, and integrate a significant acquisition.

The move underscores the energy giant’s challenges in maintaining production momentum while navigating market uncertainties.

The second-largest US oil producer has encountered operational hurdles, notably cost overruns and project delays at a major Kazakhstan oilfield. Simultaneously, its ambitious US$53 billion acquisition of Hess – which would bolster its presence in Guyana’s booming oil sector – is caught in a legal crossfire with Exxon Mobil, Reuters reported.

Exxon has been surging ahead with record-breaking production in Guyana and dominant positioning in the Permian Basin, putting additional pressure on Chevron to remain competitive.

In response, Chevron has pledged up to $3 billion in cost reductions by 2026, leveraging technology, asset divestments, and restructuring workflows. These measures align with a broader trend in the oil sector, where firms are prioritising mergers and efficiency over aggressive exploration.

The impact of cost reductions on the workforce

At the close of 2023, Chevron’s headcount stood at 40,212. This means a 20% reduction could affect approximately 8,000 employees – excluding an additional 5,400 working at Chevron service stations.

The announcement came amid weaker margins in refining, which led to the company’s first quarterly loss in this segment since 2020.

Mark Nelson, Chevron’s vice chairman, acknowledged the difficult decision, stating: “Chevron is taking action to simplify our organisational structure, execute faster and more effectively, and position the company for stronger long-term competitiveness. We do not take these actions lightly and will support our employees through the transition.”

Internally, the company has offered employees an option to take voluntary buyouts, with the window for applications open until April or May.

A reorganisation of Chevron’s leadership team is also expected within the next two weeks.

Chevron’s current restructuring efforts highlight the ongoing consolidation trend in the oil industry. Rivals like Exxon have been fortifying their market dominance through strategic acquisitions, exemplified by their $60 billion purchase of Pioneer Natural Resources last year, cementing their lead in the Permian Basin.

For Chevron, successfully acquiring Hess is crucial to replenishing its dwindling oil and gas reserves, which have hit their lowest levels in over a decade.

Shifting hubs and leadership revamp

Chevron has been undergoing a broader corporate transformation, including relocating its headquarters from San Ramon in California, to Houston in a bid to be closer to the heart of the energy industry. The move also coincides with leadership changes, as several long-standing executives have been replaced.

Chevron is also expanding its footprint in technology by establishing its largest international tech centre in India, reflecting a shift towards digital and operational efficiency in a rapidly evolving energy landscape.

Managing efficiency and growth at a critical time

Chevron’s workforce reduction and cost-cutting initiatives highlight the need to stay competitive and ensure long-term sustainability.

With legal battles, acquisition risks, and production challenges looming, however, the company is expected to navigate these headwinds strategically.

Whether Chevron can turn these challenges into an opportunity for reinvention remains to be seen, but the coming months will be pivotal in shaping its trajectory in the energy sector.