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A machine works at the Suncor Energy Inc. mine in Athabasca Oil Sands near Fort McMurray, Alberta.

Ben Nelms/Bloomberg

Shrinking budgets in the oil and gas industry could lead to as many as 185,000 direct and indirect job losses in Canada this year, according to a new study by an industry group.

The report, released Tuesday by the labour market division of Enform, says the potential losses would represent a 25-per-cent drop in the number of jobs the sector supports and are the result of major budget cuts in the oilpatch. The industry is expected to spend $94-billion this year, down from $125-billion last year, the study said.

While Alberta would be the hardest hit by any cuts, the pain will extend across Canada, says Carol Howes, director of Enform's labour market division.

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"Certainly the impact is fairly significant in terms of various provinces and various industries feeling the oil price downturn," Ms. Howes said.

The expected cutbacks are similar in scale to what happened in the 2009 downturn, but back then the industry recovered fairly quickly as the global economy rebounded. She says the current downturn is more directly tied to the drop in the oil price.

The study says engineering construction firms are the most vulnerable, with roughly 75,000 jobs on the line, while exploration and development drilling could account for the second-highest number of job losses – as many as 26,000.

Ms. Howes says oil and gas companies are increasingly looking at creative ways to avoid cutting staff, including job sharing, shorter work weeks and reduced pay.

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