One significant factor that will continue putting pressure on the oil and gas industry is the declining number of petroleum engineers (PE) available, according to a report by Raymond James & Associates. The latest statistics from the Society of Petroleum Engineers puts the average age of PEs in the United States at 51 compared to 41 internationally. About 59% of PEs in the U.S. in 2003 were 45 or older (compared to 45% in 1997) and only 25% are under 36 (compared to 33% in 1997), Raymond James said.
“The ‘graying of the oil patch’ is arguably an even more acute problem [than underinvestment in infrastructure], because while a rig can be built in months, it takes many years to train a new petroleum professional,” said Raymond James analyst Jeffrey L. Mobley. “Of course, this is not the only reason why oil supply will increasingly have difficulty meeting demand, or even the most important one, but it is a major challenge for the industry to overcome in the coming years. Without large numbers of talented people, the industry has no future.”
PEs do essential work in the industry, creating plans for exploration and development and working with oilfield service companies on operational efficiencies among many other tasks. But over the next 15 years at least half of the current group of PEs in the industry will be retiring.
Many of them may not have replacements. The number of students entering the field has fallen from 8,300 in 1982 to 1,500 today in the United States. Furthermore, there is a steep learning curve with 5-10 years of training required for students to reach the level of experience necessary to do the job.
Part of the reason the number of PEs in training has dwindled is the oil supply glut of the 1980s and 1990s and the massive layoffs that came with it. Today there still is a lack of confidence that the current price environment will hold, said Raymond James. “This is reflected in the fact that most integrated majors still assume $20 long-term oil in project planning. While some E&P independents are moving closer to a $25 assumption, they are still concerned about over investing and over hiring.
“Similarly, many young professionals considering a petroleum career are afraid of entering the industry at what they believe is the peak of the latest boom phase. Continuing consolidation among the majors and independents is also raising concerns about the potential for future downsizing.”
Moreover, a career in petroleum is “often not viewed as particularly exciting or stimulating. In a word it is less ‘sexy’ than the more popular careers in biomedical, aeronautical or even civil and mechanical fields… The perception on today’s college campuses is that working in the oil business is dirty, dull and dangerous,” said Mobley.
Although technology has reduced the size of the needed workforce, demand still is outstripping supply. As a result, salaries must rise to attract more, and they have. The average entry-level salary of a PE is about $60,000, among the highest of all engineering disciplines. The median income of PEs is $115,000, also near the top of the field. Scholarships are becoming more attractive for PEs.
The tide could eventually turn, but until then companies will be forced into hiring skilled PEs from abroad while keeping some retirees as consultants.
“Of course this is not the only reason why oil supply will increasingly have difficulty meeting demand, or even the most important one, but it is a major challenge for the industry to overcome in the coming years.”
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