Management consultants, Booz Allen Hamilton says the oil and gas industry has stretched its resources to breaking point, creating the potential to stall the oil and gas boom that is currently occurring. From the industrial platforms of oil rigs to air-conditioned design offices, the oil and gas industry is confronted with a shortage of brawn and brains so severe that it threatens to stall exploration and production growth around the world. In an interview with Oil & Gas Middle East, Raed Kombargi from Booz Allen Hamilton explains the situation.
What are the main threats the skills and labour crisis is posing to the oil and gas sector?
Inability to deliver expansion programs, slowing down of oil & gas exploration programs, missing the boat on knowledge transfer to the new generation of workers and/or from expatriates to indigenous workers and the migration of talent to other industries. More competition will lead to a bit more volatility in the industry as a whole. There will also be less rigour on development of the technical side leading to future leaders that are technically less capable than the current generation.
How can the oil and gas industry reverse the decline in skilled workers?
It is about approaching this problem with a long-term solution designed and implemented as a ‘talent pipeline’ or ‘skills development’ program. There are two fronts that need to be addressed: the demand side and the supply side.
On the supply side, there has to be an effort to recruit, resource, retain and develop talent. On recruiting for example, more awareness needs to be built at the university or high school level informing students of exciting opportunities in the oil and gas industry and raising enthusiasm about technical and environmental challenges.
What are the long-term implications of these shortages?
Shortages may lead to:
· Delays in accessing more difficult oil;
· Decreased production levels in ageing assets and equipments, due to lack of adequate maintenance;
· Health, safety and environmental challenges and accidents.
Why have skills and equipment shortages become so acute in the last few years?
Analysis shows that investment in equipment, skills, services and exploration in the oil and gas industry follow the oil price trend, but lag behind it by one to three years. So with a low oil price for a while (up to late 2004), it is only normal that there was no interest in investing in equipment, skills and services during that period. But with high oil prices over the last two years, and a renewed flurry of activities, equipment and service providers are rushing to meet demand from normal shortages as well as from independent new smaller scale players which have entered the oil and gas activity chain and are eating away at the already thin supply. These new entrants are usually less HSE stringent and willing to pay premium prices on equipment, services and skills that big international oil companies and national oil companies may not be able to agree to, given their often rigid processes.
Who is to blame for the increasing average age of employees working for major operators?
On equipment and services, you can throw money at the situation and solve it relatively easily. On people, the challenge is more difficult – it takes time. When the baby boomers were growing up, an engineer was considered one of the best professions, as it was very well remunerated. These people mostly graduated in the early to mid 1980s and are now in their late forties. Then came Wall Street and the ‘greed is good’ syndrome. Since the late 1980s everybody got an MBA and went to work for investment banks or consulting firms. Very few people obtained science or engineering degrees, let alone a petroleum related subject. Even today, engineers are not usually attracted by petroleum engineering studies. In the early nineties, some US universities went as far as merging their petroleum engineering departments with other departments for lack of enrollment. You cannot run an oil company with MBAs, you need technical talent.
Finally, oil and gas companies are also to blame as they were not offering good remuneration to attract talent. These were absorbed by Silicon Valley and its like, as it was more lucrative but also more exciting.
…Read the entire interview in the April edition of Oil & Gas Middle East.
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