UK North Sea Oil Cos Continue to Suffer Skills Shortage

ABERDEEN Sep 6, 2007 (Dow Jones Newswires)

Companies involved in oil and gas production in the U.K. continue to suffer a significant shortage of skilled personnel, contributing to cost inflation that is slowing activity in the region, according to an industry survey published Thursday by the Aberdeen and Grampian Chamber of Commerce.

Seventy percent of respondents in the survey of oil and gas field operators and contractors working in the U.K said they had problems recruiting enough skilled staff, with little improvement seen in the situation from a year ago.

As labor demand exceeded supply, average wages in the year ending August 2007 rose 7.2% which, combined with rapid inflation in the cost of raw materials and equipment, is slowing new oil and gas exploration and production activity in the North Sea, the report said.

There are particular shortages in the area of subsea technology and reservoir modeling, both important growth technologies, said Cliff Lockyer of the University of Strathclyde, who presented the report at the Offshore Europe conference in Aberdeen. Wages jumped by as much as 25% in particularly in-demand jobs, he said.

The skills shortage stems from a period of low oil prices in the 1980s and 1990s which saw a slump in North Sea exploration and little recruitment of fresh blood into the offshore engineering industry. The offshore oil and gas industry faces a manpower crunch as the existing workforce ages and some of the most experienced staff retire. The U.K. industry must also increasingly compete against very strong international demand for experienced oil and gas workers, Lockyer said.

"It is critical that the weaknesses highlighted by the survey...are addressed quickly if the U.K. sector is to attract and retain new investment and talent," said Geoff Runice, chief executive of the Aberdeen and Grampian Chamber of Commerce. He said 15,000 new people have been recruited into the industry since 2004, but it still hasn't reached the level where it can have a sustainable future.

The survey collected responses from 70 offshore oil and gas operators and contractors employing over 35,000 people in the U.K. And 220,000 internationally.

>Copyright (c) 2007 Dow Jones & Company, Inc.

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