Depleted Crews, Idled Rigs Lie In Shale Oil's Path To Revival

Depleted Crews, Idled Rigs Lie In Shale Oil's Path To Revival
Two years ago, Reg MacDonald's 20-day drilling classes were packed to capacity, with nearly 40 students eager to land lucrative jobs in the booming oil and gas industry. Now he is lucky if he gets half a dozen to enroll.

Reuters

HOUSTON/RUNGE, Texas, July 14 (Reuters) - Two years ago, Reg MacDonald's 20-day drilling classes were packed to capacity, with nearly 40 students eager to land lucrative jobs in the booming oil and gas industry. Now he is lucky if he gets half a dozen to enroll.

The latest rout in oil prices has been the last straw for many workers just getting back on their feet after the last downturn in 2008, said MacDonald, president of Maritime Drilling Schools Ltd in Nova Scotia, Canada, which trains both entry-level and experienced workers for oilfield jobs all over the world.

"It's not stable. It's too cyclical. You get ahead and you lose," said MacDonald, who has been in the industry since the mid-1970s.

Supply outages brought oil prices close to $50 a barrel that many U.S. shale producers say they need to lift output, and drilling has picked up in some of the best oil patches.

Conversations with larger producers, contractors and suppliers suggest, however, that any recovery will look very different from the 2009-2014 shale boom that nearly doubled U.S. crude output and turned it into one of leading global producers. (Graphic:http://tmsnrt.rs/29HMpuL)

The loss of thousands of workers during the two-year downturn and dearth of candidates to replace them is just one challenge.

Oil professionals also talk about equipment idled for so long that it has become unusable, rising service costs, and the threat of extra supply from the backlog of drilled-but-uncompleted wells.

A Dallas Federal Reserve survey of about 200 oil companies found last month that 70 percent were optimistic that oil would fetch higher prices in a year. But it is a cautious optimism, tempered in part by oil's 13 percent retreat in the past few weeks to around $45 a barrel.

"Oil tickled $51 dollars for about four hours," said Raymond Welder, president of privately held Welder Exploration and Production Inc, which has more than 150 wells in south Texas.

"And I must admit, I felt better on that Thursday afternoon. But it didn't last very long."

Engineers and Rigs

Over the next two to three years, if oil recovers, labor shortages are going hit the industry hardest, producers and recruiters say.

More than 100,000 U.S. oil and gas extraction and support jobs have been lost since late 2014, according to the Bureau of Labor Statistics. Early retirements, minimal hiring of new graduates, and a loss of early-career professionals to other industries have reduced the workforce that will be available when the recovery takes hold.

Torgrim Reitan, executive vice president at Statoil USA in Houston, said a shortage of skilled contractors would force producers to dial down their plans if they all tried to boost output over the next six months or so.

"So many people have been let go, and so many people have left the industry," he said. "We need to be prepared for growth in activity that needs to be at a slower pace than we thought earlier."


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Dutch Wayne | Jul. 14, 2016
Articles like this fail to investigate the differences between the newest rigs and the units that are decaying in storage. Reality is most of the stored rigs will never be used again because they are too out of date. During the $80+ barrel oil, they could make money, but no longer. There was a radical leap forward in drilling technology from 2002 on and the rigs active today are the newer units. Many can handle the new 60-ft long drilling pipe instead of the old 20-ft standards. Most of the new rigs have 2-3 times the power of the old for faster drilling. Industries have boom cycles where the obsolete and marginal equipment can make money, but in the crunch that follows, the old is scrapped. The reality is the active rigs today are drilling as many linear feet of well as twice their number 10 years ago.


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