Further fueling concerns that there may not be enough domesticgas supply to meet a 30 Tcf demand market down the road, a newstudy warns the industry likely will face a shortage of productionpersonnel to explore and drill for natural gas if the current trendtowards consolidation, divestiture and downsizing continues.

Since 1982, the employee count at the top public oil and gascompanies has dropped 61% to 640,000 from 1.65 million, accordingto a study by John S. Herold Inc., a global energy informationcompany based in Stamford, CT.

“On average, the largest oil [and gas] companies have shed anastonishing 5.2% of their work force every year for the past dozenyears. Our analysis found that the ten largest oil companies againwielded the ‘human hatchet’ in 1999, axing 38,811 workers,” thestudy, entitled “Downsizing’s Downside: Energy Industry FacingSevere Personnel Crunch,” revealed.

Despite the fact that oil now hovers at around $30 per barreland delivered natural gas has exceeded $4 per Mcf, the majorproducers “continue a ‘downsizing momentum’ that is inconsistentwith today’s upbeat energy market,” it said. “With crude oil andnatural gas pricing and demand fundamentals extremely solid today,energy sector employment should be expanding.”

With its depleted work force, Herold questions whether theindustry will be able to “ramp up” activity to develop new energyresources, said CEO Arthur L. Smith. With only a “trickle of newblood” flowing into the energy sector – less than 600 petroleumengineers are currently enrolled in U.S. colleges — and with theexperienced production employee pool drying up, Herold fears theaggressive upstream growth goals of many large energy companies mayprove unattainable.

There is a noticeable “graying of the energy work force” fromthe drilling rig to the boardroom, according to the Herold study. ALabor Department study found that more than 65% of workers in theoil and gas industry are between 35 and 54, while just a smallpercentage are in their twenties. A recent survey revealed that 70%of the members of the Houston Geological Society are age 40 orolder.

Meanwhile, recent trends suggest that a personnel shortage inoil field service already is becoming evident. In fact, welloperators contend the lack of experienced personnel is much more ofan issue now than equipment availability, the study said.

Looking to the future, the Herold study believes the oil and gasindustry 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 brightnew talent. At worst, energy companies can be charged with brutaland short-sighted treatment of their people — their greatestasset.”

The Labor Department forecasts that employment opportunities inthe energy industry will remain bleak in the years ahead. Itprojects employment in the oil and gas sector will decline 6%between 1998 and 2008, giving the energy sector the “dubiousdistinction” of offering the worst employment prospects of anysegment 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 onall eight cylinders. Supply/demand/inventory fundamentals for theoil and natural gas markets are very strong. And despite atwo-decade long bear market in the energy sector, we take exceptionwith the Labor Department’s dreary forecast which merelyextrapolates the past.”

Susan Parker

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