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'Big Crew Change' Seen as Reshaping Energy Industry

The global upstream industry faces the loss of 5,000 experienced "petrotechnical professionals (PTP)" by 2014, according to a human resources (HR) benchmark study by Schlumberger Business Consulting (SBC).

For the first time in its seven-year history the annual Oil & Gas HR Benchmark measured the impact of HR strategies on oil and gas production growth, stated SBC, the management consultancy arm of Schlumberger Ltd. The report was compiled by the SBC Energy Institute using data from 11 national oil companies (NOC), five major oil companies, 12 independents, one oilfield services company and 77 universities. The contributing companies account for 30% of world oil production, SBC noted.

"A big crew change is currently under way in the oil and gas industry," researchers found. "The generation of geoscientists and petroleum engineers hired before the deep recruitment cuts of the mid-1980s is approaching retirement. This natural attrition will result in the industry losing 5,000 experienced PTPs by 2014. Higher graduate recruitment targets are too late to reverse this trend in the next three years."

Using "PTP Intensity," a concept developed by SBC, the researchers showed the correlation between the ratio of PTPs to operated production and production growth based on a company's compound annual growth rate for the previous five years. Growing companies have a higher PTP Intensity number than other firms, and a higher number indicates that there are more PTPs per 1,000 bbls of oil produced.

The demand for college graduates "is recovering and outpacing the pessimistic forecasts of a year ago," according to the report. "Recruitment targets for technical staff in 2011 are 15% higher than levels planned in 2009. NOCs, independents and majors all plan to intensify recruitment efforts from 2011 onwards."

Universities also appear "on track" in providing the oil and gas industry with enough graduates in geosciences and petroleum engineering, the report found. "However, supply from quality universities will remain tight." Asia, Russia and China account for 72% of graduates in geosciences and 79% in petroleum engineering, with more than 30% attributable to China alone.

"Companies will need to adapt their recruitment to the new distribution of talent worldwide," said the report. North American exploration and production (E&P) companies also should recruit more women to match the global companies, according to the annual survey.

"Universities represent an untapped reservoir of female talent for the oil and gas industry. In Asia, more than 40% of graduates are women. However, North American universities hardly reach 20% of females among PTP graduates. Generally the number of female PTPs in E&P companies has increased since 2006. In NOCs, female ratios have risen to 27% from 19% in the geosciences and to 17% from 15% in petroleum engineering."

Independents "show the same increasing trend," with female PTPs in geosciences increasing to 22% from 18% previously, and in petroleum engineering at 14%, up from 12%. "Female ratios remain unchanged at the major companies at 17% in geosciences and 10% in petroleum engineering."

Mid-career recruitment also is "soaring," with NOCs and majors grabbing the most experienced professionals.

"The labor market for experienced PTPs will be tight over the next three years, resulting in the poaching of staff, salary escalation and higher attrition rates," noted the report. "These staffing issues will have serious consequences on projects and production capacity. Companies contributing to the 2010 survey reported that staffing issues will delay projects and may drive decision makers to take more risk."

In a separate report also published on Tuesday, the Petroleum Human Resources Council of Canada found that Canada's oil and gas industry "is already experiencing challenges finding workers -- and this will continue if not worsen over the next decade." The Decade Ahead: Labour Market Projections & Analysis for Canada's Oil and Gas Industry to 2020 was funded in part by the Canadian government, as well as provincial authorities in Alberta, British Columbia and Saskatchewan.

Given the "uncertainty" surrounding the rate of the economic recovery, the authors developed three scenarios using "varying levels of commodity pricing and corresponding industry activity." The "low" scenario considers persistent low oil and gas prices, which would discourage capital investment. A "growth oil/low gas" scenario reviewed how low gas prices would discourage gas-related investments, while high oil prices increase oil-related investment, specifically in oilsands. The "growth" scenario considered where capital investment was encouraged with growth across the oil and gas sector.

"The Canadian petroleum industry will be challenged to meet its hiring requirements regardless of the industry activity scenario it finds itself in," the authors said. "Even in a scenario where job losses are projected for the industry, age-related attrition will contribute to industry's hiring requirements."

In the low scenario, "the industry will need to hire for over 39,000 positions with age-related attrition, driving 100% of the hiring requirements for the industry...Overall, the industry will decrease by about 6,700 positions -- a 4% decline from its 2009 workforce of 170,844."

Under the growth oil/low gas scenario the industry would need to hire 53,500 between 2010 and 2020 because "continued investment in oil-related activity creates approximately 13,000 new jobs specifically in the oilsands and services sectors while decreased gas activity results in about 6,000 job losses. The overall result is a net increase of 7,000 jobs, or a 4% increase from the industry's 2009 workforce." Meanwhile, in a growth scenario "immigration will be the primary source of new workers for the industry," the Canadian survey found. "Unfortunately, oil and gas companies have not hired from this labor pool in a significant way and will need to in the future."

According to the Canadian survey, the oil and gas industry "does not have a decade to address labor shortages. The demographic shift within the Canadian labor market has started and industry is already feeling the effects of chronic recruitment challenges for key occupations. Industry has already begun to collaborate and share research and management costs to address a number of business-related issues. Joint ventures, sometimes between unlikely partners, are on the rise.

"The new reality is that labor supply is not unlike oil supply -- the readily available sources are gone. Labor supply to ensure sustainable expansion of Canada's petroleum industry will take diversification, development and collaboration."

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