'Graying' of Oil Patch Spells Trouble for Producers
Further fueling concerns that there may not be enough domestic
gas supply to meet a 30 Tcf demand market down the road, a new
study warns the industry likely will face a shortage of production
personnel to explore and drill for natural gas if the current trend
towards consolidation, divestiture and downsizing continues.
Since 1982, the employee count at the top public oil and gas
companies has dropped 61% to 640,000 from 1.65 million, according
to a study by John S. Herold Inc., a global energy information
company based in Stamford, CT.
"On average, the largest oil [and gas] companies have shed an
astonishing 5.2% of their work force every year for the past dozen
years. Our analysis found that the ten largest oil companies again
wielded the 'human hatchet' in 1999, axing 38,811 workers," the
study, entitled "Downsizing's Downside: Energy Industry Facing
Severe Personnel Crunch," revealed.
Despite the fact that oil now hovers at around $30 per barrel
and delivered natural gas has exceeded $4 per Mcf, the major
producers "continue a 'downsizing momentum' that is inconsistent
with today's upbeat energy market," it said. "With crude oil and
natural gas pricing and demand fundamentals extremely solid today,
energy sector employment should be expanding."
With its depleted work force, Herold questions whether the
industry will be able to "ramp up" activity to develop new energy
resources, said CEO Arthur L. Smith. With only a "trickle of new
blood" flowing into the energy sector - less than 600 petroleum
engineers are currently enrolled in U.S. colleges --- and with the
experienced production employee pool drying up, Herold fears the
aggressive upstream growth goals of many large energy companies may
There is a noticeable "graying of the energy work force" from
the drilling rig to the boardroom, according to the Herold study. A
Labor Department study found that more than 65% of workers in the
oil and gas industry are between 35 and 54, while just a small
percentage are in their twenties. A recent survey revealed that 70%
of the members of the Houston Geological Society are age 40 or
Meanwhile, recent trends suggest that a personnel shortage in
oil field service already is becoming evident. In fact, well
operators contend the lack of experienced personnel is much more of
an issue now than equipment availability, the study said.
Looking to the future, the Herold study believes the oil and gas
industry may have a difficult time overcoming its tarnished image.
"At best, the energy industry is tarred with being a mature,
low-growth, 'old economy' sector, making it unattractive to bright
new talent. At worst, energy companies can be charged with brutal
and short-sighted treatment of their people --- their greatest
The Labor Department forecasts that employment opportunities in
the energy industry will remain bleak in the years ahead. It
projects employment in the oil and gas sector will decline 6%
between 1998 and 2008, giving the energy sector the "dubious
distinction" of offering the worst employment prospects of any
segment in the U.S. economy.
But Herold is more sanguine about the industry's job prospects.
"For the first time in many years, the energy business is firing on
all eight cylinders. Supply/demand/inventory fundamentals for the
oil and natural gas markets are very strong. And despite a
two-decade long bear market in the energy sector, we take exception
with the Labor Department's dreary forecast which merely
extrapolates the past."