Offshore Rig Workers Call The Shots on Jobs

STAVANGER (WALL STREET JOURNAL via Dow Jones Newswires), November 10, 2008

Industries world-wide are slashing costs and laying off workers. But one sector continues to recruit employees aggressively, dangling before them six-figure salaries, signing bonuses and job-training programs.

Multinational oil companies are grappling with a shortage of specialized labor for offshore rigs that promises to get worse. Drillers plan to erect 180 new offshore rigs over the next three years -- adding to the current total of 640 -- spanning the globe from the Vietnamese coast and the Caspian Sea to the Gulf of Mexico and Brazil. Every new offshore drilling operation requires an average of 200 workers, some offshore and some onshore.

It will take more than the recent drop in oil prices to $65 or $75 a barrel to derail these rig projects, companies say, even if the price downturn since the summer has led to postponements elsewhere, such as in oil sands and refineries. Oil development projects "take an average of 10 years to complete and operate for more than 30 years," said Susan Houghton, a human-resources official at Chevron Corp. "In 2008, we hired approximately 6,000 new employees and will continue that rate in 2009," she said.

Salaries for the most sought-after categories of oil workers have risen about a third over the past four years, according to Stephen Whittaker of Schlumberger Ltd., the world's biggest oil-services company by revenue. An experienced "roughneck," the nickname for rig workers, can make $100,000 a year, and top white-collar engineers can make as much as $500,000 a year, industry analysts and officials said.

But it's not easy money. Offshore rig work involves round-the-clock shifts of manual labor in whatever weather Mother Nature dishes out.

Exxon Mobil Corp., Chevron, BP PLC and others are increasing budgets for training and recruitment, and are spending more time on college campuses. "Kids are getting summer internships that pay $5,000 to $7,000 a month, and signing bonuses of $10,000 and $20,000," said David S. Schechter, a professor of petroleum engineering at Texas A&M University in College Station, Texas.

A hundred students a year are graduating from his department, four times the number just five years ago. "Historically, enrollment has always tracked the oil price pretty closely," he said.

Shawn Dawsey, one of Dr. Schechter's undergraduate students, switched his major to petroleum from electrical engineering last year. It has paid off. He will graduate in May and already has received eight job offers of around $80,000 a year. He said some of his peers worry about how declining oil prices could affect their prospects, "but the job offers keep coming," he said.

Oil companies, in large part, are playing catch-up from the early 1990s, when they sharply curbed hiring due to the slump then in oil prices. Labor shortages ensued, leading to widespread recruitment and training efforts, and a determination to hold onto workers even through downturns.

"Companies hired so few people when oil was $10 a barrel in the 1990s, so at $75 a barrel, there's still a huge personnel deficit," said Doug Wearley, a recruiting manager at CSI Recruiting, a Denver-based placement service. "It's a business with a lot of 25-year veterans and a lot of five-year veterans and not much in between."

The hiring extends beyond Western college graduates. BP is investing $50 million in engineering schools in Libya. The company also runs an apprenticeship program in Angola.

The oil workers' status is evident in Stavanger, the home of Norway's offshore oil industry. Though North Sea output is down, the region is teeming with companies looking to extract some 7.3 billion barrels lying deep under the ocean.

Workers enjoy salaries starting at $100,000 and a month off between two-week shifts. The month off is a point of contention. Companies need workers to put in more hours, said Kjetil Hjertvik, a spokesman for the Norwegian Oil Industry Association. Employers plan to use the next bargaining session with the country's three big oil unions in 2010 to lobby for a reduction in time off to three weeks. Mr. Hjertvik conceded, though, that "in a tight labor market, workers have the leverage."

"Our time off is pretty much nonnegotiable," said Dog Unnar, a 54-year-old union representative at StatoilHydro ASA.

Oil workers have had checkered success in unionizing, but in the past two years, they have used their newfound power to successfully strike for better pay, perks or conditions in Nigeria, Scotland, Gabon, Norway, Iraq, Mexico and Brazil.

Looking to control labor costs, oil companies are relying more on unmanned rigs and wells. At the new Ormen Lange field in the North Sea, six companies pump natural gas with 24 underwater wells. Engineers sitting in offices on the coast run the rigs. For oil companies, "that's the new model," said Mr. Hjertvik.

In the Gulf of Mexico, BP runs several oil-rig power-generator turbines from an office in California to save on costs. "In the past, one individual was able to monitor 40 engines; today that person can monitor 4,000," Andy Inglis, BP's chief executive for exploration and production, said during a speech at Houston's Rice University in October.

Copyright (c) 2008 Dow Jones & Company, Inc.

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