Rewind to September 2013 and a day out at Offshore Europe in Aberdeen.
From the moment you stepped off the plane it felt like you were at a careers fair, rather than an oil and gas suppliers exhibition. Everywhere you looked, every type of company was touting for your services on every billboard and every taxi door.
Today the landscape has changed. With the recent decline in oil prices, the impact on the sector has seen several oil and gas firms operating in the North Sea announcing plans to axe jobs and reduce salaries. As a result there is now the threat of industrial action as North Sea workers vote over changes to jobs, pay and shifts. Yet at the same time the industry recognises the need to make efficiencies and increase productivity in order to prevent further redundancies and prolong the life of the North Sea following a period of unsustainable cost inflation.
So is this latest workforce upset, merely a blip? Can the industry really afford to lose talent given the huge shortage in 2013?
The short answer is yes it is a blip (albeit cyclical) and no, it cannot afford to lose talent.
Recent estimates put the remaining North Sea reserves between 15-24 billion barrels, providing energy to the UK for at least another 35 years. In the future the oil and gas industry could contribute an additional £200 billion to the UK economy over the next 20 years.
But to get there the UK oil and gas industry must continue to invest in talent to support the development of the significant potential from estimated remaining reserves. Hence, there is a need to understand the impact of people expected to retire over that period, and whether there is a sufficient talent pool coming through to counter-balance the impact of retirees.
A retiring workforce
Part of the problem is that there is a generation of geoscientists, petroleum engineers and process experts who are now approaching retirement age and yet it is unclear who will replace them. In 2011, a survey by Schlumberger Business Consulting (SBC) said more than 22 000 senior “petrotechnical professionals” would quit the industry by 2015 – equating to a net loss of more than 5500 people. Recruitment of new graduates would offset this reduction in the total number of oil workers, but “will not fill the experience gap”, it noted. More worryingly, SBC’s 2012 survey says by 2016 the shortage of experienced oil industry professionals will reach 20 per cent of the talent pool.
However, an Ernst & Young report published in December 2014 dispels the ageing workforce myth citing the proportion of over-55s as lower than the national average (13 percent vs 32 percent).
The report estimates that the combined workforce for Tier 1 (integrated majors, large/small independents, energy utility companies, non-operating companies and exploration companies) and the supply chain represents 281 000 full-time equivalent (FTE) (out of the 375 000 total). The report estimates that this number will reduce to 255 000 by 2019. It expects around 38 000 FTEs within the combined Tier 1 and supply chain workforce to retire over the period. The anticipated decline in UK capital expenditure over the next five years is expected to translate into an overall workforce reduction of 9 percent. For Tier 1 and the supply chain, this equates to a combined decline of 26 000 FTEs.
“This opens up opportunities for over 12 000 new entrants to join the upstream UK Continental Shelf workforce over 2014-2019,” says the report. “With the recent fall in oil price to under US$80 a barrel placing renewed focus on operational effectiveness and cost reduction, this talent pool will be key to unlocking the sector’s ability to delivering sustainable value for the UK economy.”
Alternative career choice
During previous oil price dips, most notably in the 1990s, companies shed lots of people, many of whom left the industry for good. It was believed that the fallout from this era meant that the industry was missing the capable, competent, multi-skilled engineers with 10 to 20 years’ experience - the 35-50 year old senior manager. However, the Ernst & Young report claims that the perceived gap at mid-career level is not as significant as previously thought. The industry has a high proportion of mid-career professionals with half the workforce aged 25-45.
Despite this, the competition for engineering talent in other sectors is causing the oil and gas industry concerns. Today, engineers have far more career choices in “new” sectors such as renewables, like wind and solar, smart grids and digital media. With large-scale infrastructure projects such as High-Speed Rail 2, Crossrail 2 and Britain’s proposed new generation of nuclear power stations in the pipeline, the need is bound to become more acute. And that’s if the financial services industry does not woo the talent first with super salaries and more appealing working conditions in the city.
Those that do decide to stay in the oil and gas sector have a tough decision to make between working in environments like the North Sea or Nigeria. Quite often overseas locations win, buoyed up by generous tax-free expat packages. Australia, for instance, identified a shortfall in the labour pool for specific ‘hard-to-fill’ roles and responded with high salaries and attractive working terms and conditions. In the UK we compete for talent in a global market, but often the costs, pay and terms are not the best on offer in the industry.
One solution to recruitment that automation companies like ABB has adopted is to look at the skill sets offered by military personnel that are set to leave the armed forces. There are some 29 000 servicemen leaving the forces by 2015, and some have very transferrable skills, for instance telecommunications expertise coupled with the experience of working in arduous environments in some of the riskier parts of the world.
Is University education enough?
If the demand for new petroleum or process engineers wanes, students are more likely to look elsewhere. In fact there are only three UK universities offers courses in petroleum engineering today.
According to a 2012 study commissioned by the Royal Academy of Engineering, the system will have to double the number of university graduates in science, technology, engineering and maths – the so-called STEM subjects – that it turns out annually. The study said the country needed more than 100 000 new STEM graduates a year until 2020 – yet only about 90 000 students a year graduate in those subjects.
Despite this, the Ernst & Young report estimates that there are 6000 graduates and 13 000 apprentices currently employed in the sector. More than 86 percent of companies that took part in the survey said they have a formal structured programme in place for graduates and/or apprentices; this reflects the industry’s ongoing efforts to ’develop–their-own’ and build a sustainable pool of talent for the future.
For instance, every week, between January to March this year, ABB opened the doors of its Aberdeen facility to apprentices from the UK Upstream Oil and Gas Industry Technician Training Scheme (UOGITT).
Groups of up to 10 apprentices spent time at the facility learning how a major electrical and automation provider to the industry helps to improve operational performance through advanced technologies and services.
“It is important that the apprentices get to see the role that companies like ABB contribute to the major operators,” explains Troy Stewart, ABB’s Service Manager for Oil, Gas and Chemicals. “We have some of the most advanced technologies and services that are helping reduce operating costs while enhancing safety, improving efficiency and maximising production. It’s important that apprentices see this technology first hand and spend time interacting with the engineers who operate it.”
Another challenge facing universities is the need to get students engineering “street-wise” as quickly as possible. Industry acknowledges that a three year degree course will only offer 5 percent of the skill set needed to operate in industry. A further three to five years on-site training is then needed before graduates have the skills to operate as engineers independently. How many academics have industry experience? How many universities are chasing the research projects, rather than the real-world challenges? While none of these are wrong, it is important not to overlook the very different skills needed once a student has graduated.
That is why universities like Imperial College London have built a working carbon capture plant, spread over three floors at its Kensington campus. ABB has invested close to £1 million and signed a 10-year agreement with Imperial College London to support the carbon capture pilot plant teaching facility located at the university’s central London campus.
The agreement between ABB and Imperial gives the university access to the most advanced control and instrumentation technology available from any supplier.
ABB’s involvement in the project is aimed at raising the awareness among chemical engineering graduates of the benefits of a career in control and instrumentation engineering.
“By investing in the pilot plant and the awards, we are effectively investing in our own future, by making sure that ABB will have ready access to a stream of bright young engineers,” says Martin Grady, General Manager, Oil, Gas and Petrochemical - UK, ABB Ltd. “One of our biggest problems is finding enough suitably qualified engineers to fill the ever growing range of opportunities we can offer. Obviously if engineering in the UK flourishes, then we flourish too.”
“The pilot plant contributes to making Imperial the leading international centre for practical, hands-on chemical engineering education and training,” says Dr. Daryl Williams, Reader in Particle Science and Director of Development at Imperial. “It provides a once in a lifetime opportunity to influence the training and education of thousands of young chemical engineers over the next 20 years at one of the world’s premier chemical engineering departments.”
The impact of a skills shortage is massive. In the SBC survey, 73 percent of responses from international oil companies said staffing difficulties could trigger project delays, while 59 percent said it could lead to more risk-taking.
Meanwhile, it is the two-yearly cycle which sees Offshore Europe back in Aberdeen this September. It will be interesting to see who is investing in the show this year, but more importantly whether there will be a high recruitment drive as you step off the plane.
Adapted from report by Joseph Green
Report by Will Leonard, Oil Gas & Chemicals Marketing Manager, ABB Limited