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 In Our Opinion… Relatively stable oil prices, increasing demand, and field depletion have led most oil and gas companies to revise upwards their budgets for the coming year. All indicators are that the industry is on the mend, and as sure as night follows day, the demand for quality people will explode. The recent downturn and heightened merger activity has greatly affected the available knowledge base. We have witnessed senior managerial and technical personnel leave the industry in large numbers. According to AAPG statistics, the remaining geoscience workforce has a median age of 49 years with only 16 percent under the age of 35. The industry is going to be severely understaffed in the coming years. Clearly, now is the time to secure the best available talent. We advise our clients to get ahead of the demand curve and proactively look at future requirements, succession planning, employee retention, etc. The Energists would be pleased to provide no obligation advice on how best to secure your company's most valuable asset…people. The following excerpt is just a sampling of the data available to substantiate our position.
Houston
We Have a Problem…. More than
one million employees have been shed by the largest twenty-five oil
companies since 1982 in a consolidation, divestiture and downsizing
frenzy that could leave the industry critically short of skilled
professionals, according to a comprehensive study of oil industry
employment by John S. Herold, Inc.
Over the past twenty-five years of strong economic expansion that have witnessed the creation of a net 20 million new jobs in the US, large energy companies eliminated nearly one-third of the workforce that existed in 1974. "We question the industry's ability to "ramp up"
activity in new energy resource development."
With only a trickle of new blood flowing into the energy sector
-- less than 600 petroleum engineers are currently enrolled in US
colleges -- and with the experienced oil employee pool drying up, Herold
is concerned that the aggressive upstream growth goals of many large
energy companies may prove unattainable with a today's depleted 'bench'
of both young and veteran oil professionals. In the
defense of the energy sector, Herold stressed that industry executives
have had to adopt a "siege mentality" to cope with a very
difficult operating environment over the past two decades. The extreme
volatility in oil and natural gas prices taught a valuable lesson to oil
executives; rely on operational efficiencies and productivity to boost
the bottom line, not commodity prices.
And, Herold's analysis confirmed that downsizing can generate
positive results for the large oils, as evidenced by average growth in
pre-tax cash flow (EBITDA) per employee of 5% per annum over the past
five years. Herold
found that energy industry distress, coupled with the inability to
attract young talent, have contributed to a pronounced "graying of
the energy workforce" from the drilling rig to the boardroom.
A Labor Department study found that more than 65% of workers in
the oil and gas industry are between ages 42 and 57, while just a
"small percentage" were in their twenties.
A recent survey found that 70% of the members of the Houston
Geological Society are age 46 or older. Meanwhile,
recent trends suggest that a personnel shortage in oilfield service is
already becoming evident. Operators
that Herold has contacted lament that the dearth of experienced
personnel is much more of an issue today than equipment availability.
And today's level of global drilling activity is still well below
historical measures of a vibrant market.
Talent Void: A Top Five Business Issue for Oil and Gas Executives Nearly 90% of senior human resources (HR) executives at 22 top international oil and gas companies believe their industry faces a talent shortage and call the problem one of the top five business issues facing their companies. Working with Rice University, Ernst & Young recently surveyed HR executives in the oil and gas industry to glean insights on the challenges of workforce recruiting and retention and how to overcome these challenges. Eighty-eight percent of the respondents agreed the shortage has the potential to impede growth and financial performance. Respondents were asked to rank the following issues on a one to 10 scale, with 10 representing a significant problem:
"It is clear that the talent void in the oil and gas industry has transformed from an organizational challenge into a critical business issue," said Dina Pyron, a leader in the Human Capital practice within Ernst & Young's Global Oil & Gas Center. "The lack of key talent could potentially impact corporate growth, financial performance, safety and reputation. This should raise a red flag to leadership that immediate and innovative solutions are necessary." According to the findings, the greatest threat to recruiting and retention is competition from counterparts within the industry. Respondents ranked competition from peer companies as a major challenge. Also, nearly unanimous was the industry's response to increased compensation as another significant problem. "Compensation is important, without a doubt, but the survey results show there is a real opportunity to do something different, stand out from the competition, lure new recruits and create loyalty among existing employees," said Bill Lee, associate dean of executive education for Rice University. "The first company with a break-out strategy could position itself as the leader in a highly competitive recruiting and retention environment." Some new approaches to turning the tide on the talent shortage include.
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