Lost Generation Of Oil Workers Leaves Few Options For Next Boom

Lost Generation Of Oil Workers Leaves Few Options For Next Boom
The oil industry is fighting a generation gap.

(Bloomberg) -- The oil industry is fighting a generation gap.

Already contending with a global price slump, U.S. explorers are also grappling with the demographic hangover of the last great industry downturn in the 1980s, when scores of drillers went out of business. That rout drove a generation away from the business, leaving a shortage of workers in their late 30s to 50s today just as companies try to replace the Baby Boomers who make up much of senior management.

What the industry calls the Great Crew Change -- the looming retirement of thousands of older workers -- has companies trying to plug the gap by training younger employees, recruiting outside the industry and enticing veterans to hang on longer. It’s also forced drillers into a delicate balancing act amid the current downturn, as they lay off thousands but try to hold on to hard-to-replace scientists and engineers.

“Everybody that’s going through the process of downsizing their business right now is faced with this extra complication," said Robert Sullivan, a management consultant for New York-based AlixPartners. “Decisions that get made right now on how you right-size the company are going to have a huge impact when the market turns."

Employers have spent years trying to prepare. Baker Hughes Inc., the oilfield services company, runs a mentoring program for young engineers. Exxon Mobil Corp. has spent about $2.6 million on workforce training initiatives in the Gulf Coast over the last decade, Bill Holbrook, a company spokesman, said. It’s also sponsored ad campaigns to entice more Americans into engineering careers.

Houston-based Apache Corp. has been bracing for the Great Crew Change for 15 years, Chief Executive Officer John Christmann said by phone. The driller has asked some senior staff to extend their careers past retirement age. It also runs a three-year professional development program for new hires designed to cement their ties to the business. About half the company’s technical staff are 36 or younger; another third are over 50.

“There’s a big gap from 1985 to 2000 when not very many people entered this business," said Christmann, 50. While Apache is prepared for the transition, the industry as a whole is “reeling a little bit because we don’t have a lot of those managers," he said.

The wave of retirements comes as the oil sector is already bleeding talent. Worldwide, oil and natural gas companies have cut more than 350,000 jobs since crude prices started to fall in 2014, according to a May report by Houston-based consultant Graves & Co.

Hiring Needs

The oil, natural gas and petrochemical industries employed 1.4 million people last year, according to the American Petroleum Institute. Those companies will need to hire almost 30,000 workers annually over the next two decades to replace departing and retiring employees, the trade group said in March.

The challenge is partly the residue of the industry meltdown in the 1980s, when a glut of oil sent prices tumbling below $20, about where they stayed on average for the next 15 years. More than 6,000 U.S. companies disappeared. By the early ’90s, oil looked like a lousy career path for new graduates in the cohort known as Generation X -- roughly, those born between the mid-1960s and mid-1980s.

“There was a fairly significant amount of time when there wasn’t nearly as much recruiting as there should have been," said Robert Gruman, a partner at PricewaterhouseCoopers who advises companies on hiring. Now, “there is a gap in leadership and management ranks across the industry as people retire," he said.

Companies today are trying to be more judicious with layoffs, Gruman said, keeping on seasoned technical employees who may be hard to replace even if their paychecks are among the biggest.

Newfield Exploration Co., a driller based in The Woodlands, Texas, is down about 450 positions since 2012. Still, “we’ve been very careful at trying not to cut too much of our technical talent," said Cindy Hassler, a spokeswoman. “We still have significant operations and you are going to have to have talent to operate those when things turn around."

Millennial-age workers have also benefited. Companies have expanded benefits thought to attract younger employees, offering more flexible work schedules, on-site gyms or stripped-down medical plans with lower premiums.


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Copyright 2016 Bloomberg News.

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GenerationX | Jul. 9, 2016
Whilst on the face of it, this article is more or less chronologically accurate when it comes to the hiring patterns over the last 20-30 years, its contemporary view of the industry is naive. As a member of Generation X, I have been hearing about this great crew change since entering this industry from University in 1996. This crew change simply has not occurred and likely never will. Instead, I predict that Generation X will overlooked for Generation Y (a.k.a. the world owes us a living) and they will continue where the baby-boomers left off and drive whats left of our industry over the cliff.

Amiya Mandal | Jul. 8, 2016
Such articles make me laugh. Picking up few disconnected facts from some oil companies or from oil & gas consultancy firms do not constitute the complete picture. There are thousands and thousands of experienced oil field engineers and scientists who have been laid off since crude price fall from 2014. I am a(n) experienced oil and gas technologist, and after 34 yrs, I too am looking for a job which is not there. So the shortage of experienced people in the O&G sector is superficial that will vanish once you open the doors! It all boils down to economy, let the crude price go north, and you won't have any shortage of workers!

Norman Flores | Jul. 8, 2016
Ive been in the industry for a long time and was a survivor of the down turn in the 80s. It is hard to believe that there will be another oil boom in the future as the cost of renewable energy is going down and the over supply of oil & gas, thanks to cheap shale oil/gas. I think there would be sufficient talent for the future from employed personnel who will survive this extended downturn in the industry.

carlo capitanio | Jul. 8, 2016
Nice article, but again we are facing something called 'the sin of the fathers.' In fact what, the industry is doing (is) is to destroy what is left in the sector. The only way to recover is to start to drill again but with the actual price and with our mind with price above $100 per barrel nothing, will happen for a year or two. I must admit (that) I am a lucky person who, despite all, is still working. The problems is that like for any other sector, we, O&G employees, need to be more flexible to align ourselves with reality and we should invest in ourselves so we can be recycled in other industry.

John Greydanus | Jul. 8, 2016
Back in the 1980s North Sea boom we used to say about Americans on the rigs, 'He's a good old boy.' But they're not looking for any old boys! Maybe that's changed now, and I happen to be a good old boy myself now!

Todd | Jul. 8, 2016
I have 28 years experience and I cannot find a job. I have sent out 100s of CVs with hardly a response or that I need to be a US resident. If the industry wants to keep the experienced guys like me (and) 1000s of others, then start hiring us back instead of the unskilled young guys.

Brad | Jul. 8, 2016
Some of his comments are true, but this round of layoffs did not discriminate. People were hired and trained by experienced personnel, and the experienced lost their jobs because of their salary. I gave 15 years to this industry with the notion I would be able to retire, and I am on year one of being unemployed with no prospects of being hired anywhere. The bottom line, all of us are just a number is the grand scheme of things. Do I want to go back? I have no choice like so many other times in the patch. We work ourselves to death to pay off our debt only to lose our jobs, and the cycle starts over. This time, I went back to college to finish my degree with hopes that I might land a decent hourly wage job before I pick out my street corner and cardboard box.

Mark Diehl | Jul. 8, 2016
At the end of the day companies are run by financial concerns, people are just another commodity - no different than office space, materials, or equipment. When you need more people, simply go to the marketplace and get what you need at the best price you can. I have heard this from a number of CEOs, CFOs in my career. Articles like this one are just pulp fiction for the masses.

Pietro Di Zanno | Jul. 8, 2016
Interesting that 350,000 people have been asked to leave the industry, but there is a shortage of personnel. Must be one of those management issues I will not be able to understand.

todd weatherly | Jul. 7, 2016
The crisis is not now, but in the future. The downturn is still fairly young. It's if low oil prices last for a more prolonged period, say 8-12 years as it did in the mid 80s. What will happen is that the industry will not get fresh young talent. Scores of young people will focus on other professions and the experienced employees will begin to age. Those that were experienced within the industry (10 yrs or more) that had been laid off will likely have found other employment and not be interested in re entering the industry. At that point if a boom hits it will look like the beginning of this boom. With young, unexperienced and dangerous employees. There was a great book/article wrote about this in the 90s ... "The Lost Generation," I believe it was called.

Stephanie Z | Jul. 7, 2016
Same here, not quite sure where the writer is getting these facts from. I am in the so-called sweet spot age range that fills the so-called gap. Off the top of my head I can reel off 10-15 names of similarly-aged, technically-adept oil and gas folks who have been laid off in recent times and have not been able to secure positions due to a dearth of opportunities. It's one thing for these companies to attempt to harvest some positive PR status in these times with such claims about retaining talent. However, the true report on the state of affairs is clearly evident when you attend job search work teams and see in a room of 200+ people, and 80% are oil and gas workers with ranging from as little as 3 years to as much as 25/30 years. Some have been laid off since 2015 and still cannot find work. More research is needed to paint the true picture about the current affairs in the industry.

Rod Guice | Jul. 7, 2016
Agree with Mr. Combs comment. There are many very highly skilled and experienced engineers and geologists who want work now, but have difficulty finding it. Not only should employers post those opportunities for highly experienced workers, but they should also realize that they could hire this talent for lower cost than in the past. Its a win-win right now.

Larry Combs | Jul. 7, 2016
Not sure where this writer gets his information as I am a experienced oil and gas technologist that wants to work and can't get a job. If the industry is needing workers that have experience then why don't they post those positions and more importantly hire people who want to work? I believe the real problem right now and for the near future is low crude and natural gas prices.

Randolph Roberts | Jul. 7, 2016
I'm seeing more of these staffing crisis articles. Therefore, being a former O&G employee and now defunct entrepreneur, my suggestion is: Why not open the doors to those of us that wish to re-enter the industry as floating assistants or office roustabouts, as a friend of mine used to say?


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