Have we got talent?

Andrew McBarnet wonders what's changed about the Big Crew Change.

Last time when the high price of oil launched the oil and gas industry into a frenzy of E&P activity, it wasn’t long before questions were being asked not just about the capacity to meet the surge in demand for everything from marine seismic surveys and drilling rigs to permanent offshore installations. There was also a nagging human resources worry.

We were told the ‘Big Crew Change’ was upon us, brought on by the expected retirements of the so-called Baby Boomer generation, leaving a major vacuum in seasoned professionals with the experience needed to meet the technological and operational challenges of the new era of ‘harder to find’ hydrocarbons. In addition, at university level, the oil industry was no longer the attractive career it had been. Among students it had earned itself a reputation of being an unreliable employer (the oil company downsizing and consolidations of the late 1990s was the main culprit here), environmentally unfriendly and even unethical. Ironically one of the preferred career options at that time was the financial sector.

That was all five or six years ago. As we know, the marine seismic community reacted to the increased demand for seismic surveys by embarking on a splurge of vessel newbuilding. Predictably this got out of control, and only now in the new upcycle are we seeing the predictable over-capacity was typical of concern expressed in being squeezed out of the system. There is no indication yet that today’s healthy activity is going to be stunted by a fresh round of fleet expansions by the main contractors or opportunistic investors: most newbuilds in the pipeline can be passed off as upgrades rather than specifically targeting the current uplift in the market.

Coping with the forecast shortage of human resources has turned out to be a different story. The problem seems to have evaporated if you judge by the disappearance of the ritual mention of the Big Crew Change from the pronouncements of oil and service company top management. Yet in 2007 there were a number of studies pointing to a looming crisis. Schlumberger Business Consulting (SBC) came out with a report Surviving skills shortage – the title pretty much made the point. SPE produced some alarming statistics showing the ageing profile of the graduate workforce (approaching 50) with the less than adequate number of qualified replacements. Management consultant Booz Allen Hamilton reported that only 1700 people were studying petroleum engineering in 17 US universities compared with over 11,000 in 34 universities in 1993. Geophysics Education in the UK, a report by Prof Aftab Khan of Leicester University for the British Geophysical Association, was typical of concern expressed in many western industrial countries about the need for geoscience expertise and the decline of interest in the national education system.

In theory the current serious uptick in E&P activity worldwide, thanks to bulging oil industry coffers, should be stretching the capacity of staff in oil companies, the service sector and suppliers of equipment. But as yet no one seems to be whining in public. This is odd, because at least one of the fundamental issues has not gone away, and indeed is becoming more acute. Here we’re talking retirement of the senior professional workforce. The generations of geoscientists and petroleum engineers, or petrotechnical professionals (PTPs), hired before the sweeping recruitment cuts of the mid-1980s, are now approaching retirement, according to SBC, in its 2011 Oil & Gas Human Resources (HR) Benchmark Survey, now in its eighth year of publication and one of the few organisations tracking HR trends in the oil business. The 2011 survey estimates an outflow of more than 22,000 senior key PTPs by 2015 which is said to equate to a net loss of more than 5500 experienced PTPs in the same timeframe. The recruitment of new graduates will compensate for this loss in total net numbers of PTPs, but will not fill the experience gap.

The report suggests that the pressures on the industry’s technical workforce threaten the timely completion of projects. Of the respondents in the 2011 survey, up to 70% of national oil companies (NOCs), 60% of major international oil companies (IOCs), and 45% of independent companies acknowledged project delays due to staffing difficulties. Companies participating in the report said that the amount of recruitment of mid-career personnel was up in 2011, by as much as 60% in the case of the majors which are being severely hit by the retirement of senior PTPs. This is certainly borne out by anecdotal evidence from geoscience service companies which say that Big Oil has been poaching big time recently. The report says that attrition in the geosciences now varies 4-5% on average versus 2.6-4% in 2010. For petroleum engineers, turnover ranges 4.5-7% in 2011 versus 3.5-6% a year earlier.

Recruitment targets

An additional pressure on the global employment market noted by SBC is that oil-rich developing countries have become increasingly ambitious in their targets for national recruitment by local subsidiaries of foreign operating companies. This trend towards nationalization of talent within the E&P industry is said to be a major challenge in many countries where there is often a lack of experienced local staff, especially in emerging oil and gas producing nations. Today, it is not unusual for regulatory bodies to set recruitment targets for nationals at 80-90% of middle management positions.

The report states: ‘Although NOCs, IOCs and independent operators are slowly building national workforces, the acceleration of requirements by governments and state agencies is stretching companies’ capabilities. Competency development programmes require time for education, but there is also a need for a shift in culture and people management. Even though many companies are international in terms of operations personnel, the top executives of major IOCs remain almost exclusively from the home country.’

SBC focuses principally on the staffing issues of its oil company respondents, but the implications have a more universal application. For example, it finds that high growth companies tend to have a higher ratio of PTPs per unit of operated growth, a measure it calls PTP intensity. The 2011 HR Benchmark survey shows that high-growth companies, whose portfolios often contain unconventional or deepwater assets, employ more technical people than their lower-growth peers. The lower-growth companies with complex portfolios and fewer PTPs may only demonstrate production growth of 0.5-2% per annum. Complex hydrocarbon exploitation coupled with a high number of PTPs show a statistical correlation to higher growth.

Supporting the contention that human resource policies do impact company performance, the survey notes that high- growth companies tend to foster diversity in the workforce, implement innovative competency development programmes, and demonstrate flexibility in career management. High-growth companies have more women in their technical talent pool. In the geosciences, 27% of PTPs were female in the high-growth survey participants versus 18% in lower- growth companies. Among petroleum engineers, the female ratio was 19% for high-growth companies versus 11% for lower growth.

SBC concludes that ‘for all companies, whatever size or growth rate, the development of key capabilities remains the biggest hurdle in talent management. The concept of ‘time to autonomy’, developed by SBC in 2006, has become ‘a key indicator that companies seek to reduce’. In other words the lack of middle management is really the big pressure point right now, and for oil companies and the service sector, this is really an internal issue. It might help to explain the current silence on the Big Crew Change. If poaching rather than career development/promotion is one of the options, it is not something companies want to brag about too openly.

Graduates are returning to the industry.

It is also true that the economic downturn of the last few years has been the industry’s friend from one important point of view. There seems to be plenty of visual evidence, let alone statistical, that many industry professionals who could have retired have opted to stay on, or left their organisations and effectively remained on the payroll as consultants. A survey last year by employment consultancy Working Smart in association with the American Association of Petroleum Geologists (AAPG) found 25% of respondents likely to work beyond normal retirement age. It is not too presumptuous to suggest that love of the job is probably not the first reason for this choice, it is more an economic decision; people are simply worried about the value and sustainability of their post-retirement income in these uncertain times. At the same time the industry is making them welcome to stay. Every year that goes by with the old crew means the opportunity to transfer knowledge to the upcoming generation. In larger companies, mentoring programmes for newcomers is increasingly being seen as a valuable way to have the seasoned professionals pass on their expertise and experience.

Science education

Any conversation about the Big Crew Change used to include lots of alarmist talk about the recruitment of geoscientists and engineers. One general issue has been the statistically verifiable declining interest in the sciences in general at the high school and university level, also reflected in fewer science teachers. This clearly has implications for the number of potential recruits to the oil & gas industry. However, the industry can do little more than cheer from the sidelines when it comes to doing something about the basic trend. This involves the basic education policies of national governments, which in the western world appear to be well aware of the problem but rather less certain about the solution in an era of government cutbacks in every sector including education.

A more familiar worry that used to surface as part of the Big Crew Change executive speech was how to turn the tide to bring back students into the oil and gas industry. It would seem that there has been a significant turnaround, borne out by the SBC data (see graduate recruitment chart above left), which may seem surprising. When the number of recruits began to slide early in the last decade, the industry assumed it was the image problem mentioned earlier, ie job prospect uncertainty, perception of companies profiteering from high oil prices, environmentally uncaring, etc. The scale of ExxonMobil profits and the Macondo disaster in the Gulf of Mexico would still appear fodder for any student looking for negatives about a career in the industry, and in the world of public opinion these are hard to defend.

Indeed the International Association of Geophysical Contractors (IAGC) which represents most of the seismic companies has on an impossibly slim budget been trying to differentiate its activities in the eyes of regulators (especially in the US where Gulf of Mexico marine seismic operations are under scrutiny) and those of students and the public at large. Up until now its role has largely been to deal with operational issues, create industry agreed manuals, represent the seismic community in government negotiations, etc. Last year, however, it launched a website ‘Geophysics Rocks!’ to promote geoscience activities and its latest move after many decades without one has been to advertise for a communications manager to raise the profile of the IAGC and the business of its members, a herculean task.

Student poster presentation. Photo: EAGE

Arguably what has changed for young people is not the industry image but the realistic options available to science- oriented or just bright adaptable students. Recession may well have changed some mindsets. There was a period when oil companies felt they were losing out to students dazzled by the financial and dot.com sectors. In a shaky world economy the oil & gas industry remains a substantive employer, which offers excellent remuneration, opportunity to travel, benefits – the full meal deal.

Youthful ideals

Impressionistic though this may be, a portion of the younger generation continues to be persuaded that the oil & gas business can meet its youthful ideals, in other words energy exploitation is not just a necessary evil but can be a force for good in the world conducted with proper concern for the environment. The technological challenges ahead also seem to excite students.

The more favourable rating for oil & gas operations hopefully has something to do with the efforts of the main professional associations, Society of Exploration Geophysicists, European Association of Geoscientists & Engineers, and AAPG which these days go to inordinate lengths to reel in those students showing an interest in the geosciences. Scholarships, lecture tours, student conferences, student chapters, and other initiatives are all designed to give potential recruits an early experience of the business and what it has to offer.

It is a measure of the interest in student recruitment that at the EAGE Annual Meeting in Copenhagen this month (report in OE next month) the student participants, some of them funded by the association, will have their own parallel conference and activities programme with a separate sponsored conference evening.

In the exhibition hall of the main event, there is a job centre and opportunities for students to meet prospective employers. Students can even sign up for practice interviews for when the time comes to apply for a real job.

The point is that bringing in new talent is being taken seriously and appears to be paying off. Whether these efforts and others will be sufficient is a question for the Big Crew Change next time someone mentions it. OE