“Wanted: entry-level workers, roustabouts, floorhands, mechanicsand electricians. Training, benefits provided.” It’s a virtualposting in drilling companies’ offices across North America.Unemployment is so low, and jobs so plentiful across nearly everyjob sector that finding potential employees who are willing to workfor low-end wages in the oil and gas industry has reached acritical stage.

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 awell to get back on line for weeks, but the contractor it uses hashad trouble getting workers to get it going again. So the well sitsout of production.

“It’s a problem for us and for a lot of operations large andsmall,” said Stanton operations manager Christopher Long. “I cansee where the contractor doesn’t want to hire unskilled workers.This is dangerous work, and if someone gets hurt, then you have alitigious situation.” Long said the worker shortage “has to beaddressed,” but it’s difficult to convince someone coming out ofhigh 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 arig, what would you rather do? Work inside in air conditioning oroutside 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 thestate, hears about the problems in recruiting certain types ofworkers every day. Martin Fleming, TIPRO’s public affairs directorsaid that the “truly unskilled” are easy to find and finding themis “not much of a problem.” He said that most of the feedback hegets from members, which include giants like Apache and EOG to thefour-person mom-and-pop operations, is about the dwindlingworkforce for certain types of professionals and skilled workers.

“We really have two areas of employment problems in Texas foroil and gas companies,” Fleming said. “The number one problem isthat there aren’t enough geologists and geophysicists. They arehard to come by. The second area is finding skilled workers indrilling, the roughnecks who have some experience. They’ve gone onto find other jobs since the market was down, and I don’t thinkthey’re coming back.”

The skilled worker, who typically has about 10 years ofexperience, found another job when the market took a dive. Thosethat 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 turningto the high tech companies, which stole a lot of workers out of oiland gas a few years ago.”

Though it has not implemented any formal policies, TIPRO hasconsidered helping oil and gas companies with their recruiting.However, Fleming points out that the very nature of their businessmakes many of the companies handle employment on their own.

“They are independent,” he said. “We might get more involved inissues like worker training and education, but it’s difficult toget an owner or staff to come to Austin to learn about how torecruit over coffee. They’ve got work to do.”

The problem is not short term either. Ronald Barone, aPaineWebber analyst, said that the very nature of the businessmakes some prospective employees probably consider other types ofjobs because they could face almost certain unemployment at thenext downturn in the industry.

“Why should anyone go back to the energy patch when they couldbe out of work in a few months?,” questioned Barone. He said thestrong U.S. economy has sent prospective employees toward morecertain areas of growth and stability, such as the computerindustry, and moving prospective workers back to the energy patchwon’t be easy. Barone said he hears oil and gas company executivestalk about the worker shortage, but they seem to have no answer forwhat to do. “It is an issue,” said Barone.

Even tempting workers who have to stay employed, such asrecruiting prison parolees, has not been the answer for land-basedE&P companies. Recently, some Oklahoma drilling operators werequoted as saying they actively recruit prison parolees, even goingso far as to wait outside prison gates to talk to those beingreleased. However, many in the industry, and even officials atTexas Department of Criminal Justice (TDCJ) think that recruitmentidea is far-fetched and short term.

In fact, the TDCJ implemented a worker training programspecifically designed for the oil and gas industry three years ago.Prospective workers were trained at the Abilene, TX roughneckschool for oil and gas jobs. The program, still available, has notdone well despite extensive training and a wealth of jobopportunities.

“It’s unfortunate, but most of the training and the jobs are inrural communities and the ex-prisoners don’t get to reunite withtheir families and they are usually far away,” said Dr. VirginiaRoss a program specialist in cognitive intervention with TDCJ. “Thejobs are good, but it hasn’t always worked out too well.”

TIPRO’s Fleming said the idea is a good one, and would be worthcontinuing, but he said that workers come into the business basedon the very nature of it – such as the dangerous aspect of it, andthe idea of working outside. Those who stay in the business staybecause they love it, said Stanton Mineral’s Long.

“The nature of what we do is that you have to love it,” Longsaid. “It’s not as sexy as say, a high tech job right now. Andwe’ve got a real need for domestic workers. Twenty years ago, thiswas the industry. That’s a fantasy now, and that’s why we’re havingtrouble convincing people to come to work.”

When oil prices dropped in 1997 and 1998, Texas lost nearly15,000 jobs and Louisiana lost 3,400. Nearly 3,000 workers inOklahoma also lost their oil field jobs. All told, the InterstateOil and Gas Compact Commission estimates that nearly 29,300 oilfield workers were laid off in the last bust. Now, while the restof the U.S. economy is pushing full steam ahead, the oil and gasindustry 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 rigsas of May 19 numbered 849, up 19 from the previous week, and upmore than 300 from the same time a year ago — 518 in 1999. TheCanadian rig count stands at 261, up 44 from the previous week and157 rigs higher than at the same time last year. The biggestincreases have occurred in Texas, up to 308 from 177, and NewMexico, up to 80 from 34.

Gary Flaherty, a Baker Hughes investor relations analyst, saidthat labor market is tight everywhere, and he doesn’t see much of adifference between the oil and gas industry and other U.S.industries.

“Obviously, a booming economy is going to be a factor for anyonetrying to recruit,” he said. “The economy is very strong.”

Along with trying to find workers to fill the positions, oil andgas companies also are faced with trying to become healthy again,said Fleming. “The industry is not as healthy as it looks,” hesaid. “Most of our members were hanging on by their fingernails twoyears ago, and now they’re just trying to pay down the debt. Butthey can’t pay down the debt despite the high earnings if theycan’t recruit the workers to get the drilling done to keep makingthe money. It just doesn’t work.”

Said Stanton’s Long: “As high as the markets are now, I see rigssitting idle because the contractors can’t find that skilled labor.We’re going to have to find a solution, but we’ve always had thisproblem, and because the market is up and everyone is hot to getthe rigs going, it’s just worse.”

Worker shortages are an issue for the land-based E&Pcompanies, but it’s a different story offshore, where drillingcontractors seem to have an easier time adding to and improvingtheir workforces. Jobs are plentiful, and there are plenty ofworkers available.

“We’re still getting lots of applications and people to work,”said Guy Cantwell, manager of corporate communications forTransocean Sedco Forex Inc. based in Houston. “On land rigs, youput the rig together, you have a lot more of a differentatmosphere. Offshore, we usually pay an average of 25% higher, andwe paid housing, laundry and catering services. It’s 12-days on and12-days off, and we’ll fly the workers home.”

Still, Cantwell is aware of the low reserves, and the inherentproblems involved with increasing production.

“A mild winter at this point would be a positive,” he said.

Carolyn Davis, Houston

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