LONDON (Dow Jones Newswires), October 22, 2008
Falling raw material and equipment costs in a slowing world economy offer an opportunity for oil and gas companies to solve the problems of rising costs and delays at major projects, but the industry again finds itself confronting a longstanding enemy - a shortage of people with the skills and experience to lead these developments.
The Legacy of the '90s
"Where there is a real skills shortage is in the senior technical appointments, engineering, geologists, geophysicists, reservoir engineers, petroleum engineers, drillers," said Bob Greenwood, head of the U.K. oil and gas practice at recruitment firm Odgers, Ray and Berndtson.
The Skills Gap
"Resources are now found in reservoirs which lie at greater water depths, at higher temperatures and pressures and require complex drilling and completion designs. Bringing them into production is going to be difficult," said BP's Inglis. "Turning these resources into reserves and then production is going to require leadership, ingenuity and innovation."
But all those things are in short supply. In 2006, one in 10 job vacancies in the U.K. oil and gas sector went unfilled, said Inglis. Headhunters working for Western oil and gas companies say their job has become much more challenging.
"We've got to talk to an awful lot more people to generate our shortlist of four or five candidates. We're typically talking to upwards of 250 people per search now, whereas four or five years ago we would have been talking to perhaps 100 people," said Odgers, Ray and Berndtson's Greenwood. Senior technical staff "are getting half a dozen calls a week from headhunting firms. It's very much a candidates marketplace," he said.
"You do not find as readily the caliber and quality of people," said Babb. For example, when a company operating in Africa came to him looking for a senior manager, there were only six people who could do the job globally and it took 15 months to put one of them in the position, Babb said.
"The issue is leading to project delays or deferral," said Inglis. Salary and benefit costs have also risen rapidly.
But the problem may get worse before it gets better because almost half the industry's aging workforce is within five to eight years of retirement.
New Blood and Silver Hair
Most companies are well aware of the problem and their proactive measures, combined with the dramatic boom in the oil sector in recent years, have been drawing new blood into the industry.
"We have seen a consistent rise in applications for the last eight years," said David Macdonald, head of the school of geosciences at the University of Aberdeen, Europe's biggest oil and gas hub. "Knowledge has got about that if you get a decent degree you will get a job, and salaries have gone up."
Many companies also have programs in place to talent-spot students while they are still undergraduates, attract them into the industry and keep them interested once they are on the job, Macdonald said.
"We see an increase in the 20- to 34-year-old bracket - reflecting more intensive recruiting in the last 10 years," but that still leaves a large gap in the 35- to 49-year-old age bracket that needs to be filled, said Inglis.
There is no one way to fill this hole in the industry's demographics.
"Some companies would look at other resources sectors," said Mat Green, head of energy at executive search firm Russell Reynolds. Someone with experience in mining may be suitable for a position in onshore oil and gas, he said, but the scale and complexity of big oil and gas projects, particularly offshore, means that in some cases there is no substitute for direct experience. "You can't take a $50 million project guy and put him in charge of a $750 million project," Green said.
One way BP aims to solve the problem is by diversifying its workforce, bringing in more people from developing countries through ventures such as its Caspian Technical Training Center in Azerbaijan. But the industry is already global and recruiters say there are few untapped pools of skilled workers.
There is broad agreement that one of the best solutions to the problem is for companies to delay the retirement of their most experienced workers with tempting pay packages and flexible hours. BP has a program in place to do just this and its success will be crucial because the mentoring and sharing of experience from senior colleagues is such an important part of on-the-job training for new recruits, said Macdonald of Aberdeen University.
"These people are the lifeblood of their industry," said Babb. "In 15 years' time there will be more sliver hair floating around companies than you can shake a stick at."
Copyright (c) 2008 Dow Jones & Company, Inc.
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