Whatever Happened to the Skills Crisis in the Oil and Gas Industry?
- Peter Peek (Centre de Recherches des Entreprises et Societes) | Patrick Gantes (Centre de Recherches des Entreprises et Societes)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- July 2009
- Document Type
- Journal Paper
- 32 - 34
- 2009. Copyright is retained by the author. This document is distributed by SPE with the permission of the author. Contact the author for permission to use material from this document.
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Talent & Technology
During the years leading up to the financial crisis of 2008–09, growing skills shortages were one of the main concerns of the oil and gas industry. A 2007 study by Cambridge Energy Research Associates estimated a shortage of 55,500 engineers and project management staff to deliver the more than 400 major projects that were then scheduled to come on stream over the next 5 years. A 2008 Ernst & Young survey showed that nearly 90% of senior human resources executives at 22 top international oil and gas companies thought the industry faced a major talent void and they called the problem one of the top five business issues facing their companies. Several research institutions even ventured to calculate the cost of skills shortages for the industry, and one of the more conservative studies estimated that the US oil and gas industry alone lost between USD 4 and 5 billion in 2006 as a result of the skills shortage.
A number of oil and gas executives argued that if nothing is done, there would be a slowdown in reserve replacements, a “capacity shut-in,” and a major increase in operating costs within the next 5 to 10 years. Already, during 2007 and early 2008, reports were coming in of project delays around the world because of the lack of skilled personnel.
We all know that that situation has changed since then. Crude oil prices plunged from more than USD 140/bbl to under USD 40/bbl as the global recession reduced energy demand in the importing countries. And the demand for higher-skilled workers dropped as production declined and producers cut capital expenditure on exploration and new production facilities. The outcome is that many companies and governments, which had developed plans to invest in human resources to tackle the skills shortage, have decided to drop these or scale them down significantly.
This raises an important question: Once the current recession is over, and the industry gears up to meet growing energy demand, will it again be faced with skills shortages restricting production? Clearly, smaller energy companies with limited access to capital have fewer options. But the larger ones with more capital, does it make sense they drop human resources from their investment plans?Several large companies are already positioning themselves for the recovery. They have maintained or even increased capital expenditures to be able to meet higher demand in the future. But what we have seen so far is that these plans only cover capital investment in production and exploration. So far we have not seen any major plan to address the potential of future skills shortages once the industry gets ready to meet higher energy demands. In our view, the industry risks paying a high price if it ignores the threat of skills shortages limiting future production.
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