Booming Economy Leads to Shortage of Land Rig Workers
"Wanted: entry-level workers, roustabouts, floorhands, mechanics
and electricians. Training, benefits provided." It's a virtual
posting in drilling companies' offices across North America.
Unemployment is so low, and jobs so plentiful across nearly every
job sector that finding potential employees who are willing to work
for low-end wages in the oil and gas industry has reached a
It's a double-edged sword, say analysts. Because the rig count is higher
--- and is expected to grow --- more workers are needed. With higher oil and
gas prices, E&P is growing, and thus will lead to more rigs, and more
workers. Salomon Smith Barney's E&P: Natural Gas Outlook (May 19) reports
a "dire outlook for North American gas deliverability." Storage is down, demand
is up. The workforce for land rigs, however, remains low (see related
story this issue).
Austin-based Stanton Mineral Development has been waiting on a
well to get back on line for weeks, but the contractor it uses has
had trouble getting workers to get it going again. So the well sits
out of production.
"It's a problem for us and for a lot of operations large and
small," said Stanton operations manager Christopher Long. "I can
see where the contractor doesn't want to hire unskilled workers.
This is dangerous work, and if someone gets hurt, then you have a
litigious situation." Long said the worker shortage "has to be
addressed," but it's difficult to convince someone coming out of
high school to look at the oil and gas industry as a viable option.
"When the economy is so strong, and McDonalds is paying $9 or
$10 an hour, and you can earn the same amount going to work on a
rig, what would you rather do? Work inside in air conditioning or
outside in the hot sun for the same money?"
The Texas Independent Producers & Royalty Owners Association
(TIPRO), which numbers 1,800 large and small companies across the
state, hears about the problems in recruiting certain types of
workers every day. Martin Fleming, TIPRO's public affairs director
said that the "truly unskilled" are easy to find and finding them
is "not much of a problem." He said that most of the feedback he
gets from members, which include giants like Apache and EOG to the
four-person mom-and-pop operations, is about the dwindling
workforce for certain types of professionals and skilled workers.
"We really have two areas of employment problems in Texas for
oil and gas companies," Fleming said. "The number one problem is
that there aren't enough geologists and geophysicists. They are
hard to come by. The second area is finding skilled workers in
drilling, the roughnecks who have some experience. They've gone on
to find other jobs since the market was down, and I don't think
they're coming back."
The skilled worker, who typically has about 10 years of
experience, found another job when the market took a dive. Those
that did stay are also getting older, Fleming said, and now,
companies have to find ways to recruit younger workers.
"It's tough getting younger workers," he said. "They are turning
to the high tech companies, which stole a lot of workers out of oil
and gas a few years ago."
Though it has not implemented any formal policies, TIPRO has
considered helping oil and gas companies with their recruiting.
However, Fleming points out that the very nature of their business
makes many of the companies handle employment on their own.
"They are independent," he said. "We might get more involved in
issues like worker training and education, but it's difficult to
get an owner or staff to come to Austin to learn about how to
recruit over coffee. They've got work to do."
The problem is not short term either. Ronald Barone, a
PaineWebber analyst, said that the very nature of the business
makes some prospective employees probably consider other types of
jobs because they could face almost certain unemployment at the
next downturn in the industry.
"Why should anyone go back to the energy patch when they could
be out of work in a few months?," questioned Barone. He said the
strong U.S. economy has sent prospective employees toward more
certain areas of growth and stability, such as the computer
industry, and moving prospective workers back to the energy patch
won't be easy. Barone said he hears oil and gas company executives
talk about the worker shortage, but they seem to have no answer for
what to do. "It is an issue," said Barone.
Even tempting workers who have to stay employed, such as
recruiting prison parolees, has not been the answer for land-based
E&P companies. Recently, some Oklahoma drilling operators were
quoted as saying they actively recruit prison parolees, even going
so far as to wait outside prison gates to talk to those being
released. However, many in the industry, and even officials at
Texas Department of Criminal Justice (TDCJ) think that recruitment
idea is far-fetched and short term.
In fact, the TDCJ implemented a worker training program
specifically designed for the oil and gas industry three years ago.
Prospective workers were trained at the Abilene, TX roughneck
school for oil and gas jobs. The program, still available, has not
done well despite extensive training and a wealth of job
"It's unfortunate, but most of the training and the jobs are in
rural communities and the ex-prisoners don't get to reunite with
their families and they are usually far away," said Dr. Virginia
Ross a program specialist in cognitive intervention with TDCJ. "The
jobs are good, but it hasn't always worked out too well."
TIPRO's Fleming said the idea is a good one, and would be worth
continuing, but he said that workers come into the business based
on the very nature of it - such as the dangerous aspect of it, and
the idea of working outside. Those who stay in the business stay
because they love it, said Stanton Mineral's Long.
"The nature of what we do is that you have to love it," Long
said. "It's not as sexy as say, a high tech job right now. And
we've got a real need for domestic workers. Twenty years ago, this
was the industry. That's a fantasy now, and that's why we're having
trouble convincing people to come to work."
When oil prices dropped in 1997 and 1998, Texas lost nearly
15,000 jobs and Louisiana lost 3,400. Nearly 3,000 workers in
Oklahoma also lost their oil field jobs. All told, the Interstate
Oil and Gas Compact Commission estimates that nearly 29,300 oil
field workers were laid off in the last bust. Now, while the rest
of the U.S. economy is pushing full steam ahead, the oil and gas
industry continues to recover, and while rig counts are growing,
the employee count is not.
According to Baker Hughes Inc.'s latest count, U.S. working rigs
as of May 19 numbered 849, up 19 from the previous week, and up
more than 300 from the same time a year ago --- 518 in 1999. The
Canadian rig count stands at 261, up 44 from the previous week and
157 rigs higher than at the same time last year. The biggest
increases have occurred in Texas, up to 308 from 177, and New
Mexico, up to 80 from 34.
Gary Flaherty, a Baker Hughes investor relations analyst, said
that labor market is tight everywhere, and he doesn't see much of a
difference between the oil and gas industry and other U.S.
"Obviously, a booming economy is going to be a factor for anyone
trying to recruit," he said. "The economy is very strong."
Along with trying to find workers to fill the positions, oil and
gas companies also are faced with trying to become healthy again,
said Fleming. "The industry is not as healthy as it looks," he
said. "Most of our members were hanging on by their fingernails two
years ago, and now they're just trying to pay down the debt. But
they can't pay down the debt despite the high earnings if they
can't recruit the workers to get the drilling done to keep making
the money. It just doesn't work."
Said Stanton's Long: "As high as the markets are now, I see rigs
sitting idle because the contractors can't find that skilled labor.
We're going to have to find a solution, but we've always had this
problem, and because the market is up and everyone is hot to get
the rigs going, it's just worse."
Worker shortages are an issue for the land-based E&P
companies, but it's a different story offshore, where drilling
contractors seem to have an easier time adding to and improving
their workforces. Jobs are plentiful, and there are plenty of
"We're still getting lots of applications and people to work,"
said Guy Cantwell, manager of corporate communications for
Transocean Sedco Forex Inc. based in Houston. "On land rigs, you
put the rig together, you have a lot more of a different
atmosphere. Offshore, we usually pay an average of 25% higher, and
we paid housing, laundry and catering services. It's 12-days on and
12-days off, and we'll fly the workers home."
Still, Cantwell is aware of the low reserves, and the inherent
problems involved with increasing production.
"A mild winter at this point would be a positive," he said.
Carolyn Davis, Houston