December 18, 2014
A sense of déjà vu ripples through the oil and gas industry, as the sector once again finds itself at the mercy of another recession. As the price of oil continues to fall, many within the industry are questioning whether the exact same mistakes are being made to liken this recession to its 1980s predecessor. And if this is the case, what can the industry do to future proof itself through the downturn?
Learning from past mistakes
Since the 1970s’ ‘Great Crew Change’, it is well-known that the industry needs to do more to establish its next generation of managers. Although the present day recession has unfortunately created a saturated talent market through global job losses and companies being forced to shut down operations; it is still fair to say that talent shortage will once again be a key issue as and when the market upturns.
What can the industry do in the interim to better prepare for its future? Integrating mentoring schemes, diversifying further into the renewable energy market and increasing local content are a few options to explore. But, let’s start with the argument that companies should not automatically discard the idea of building or retaining their workforce during the downturn. Statistics regarding the number of oil & gas professionals due to retire are alarming. The Society of Petroleum Engineers reported that in 2014 over 8% of its members were older than 65 and further data indicates that half of the industry’s workforce is set to retire in the next five to seven years. The Financial Times also cites that by 2016, the industry will have a 20% shortage of oil & gas professionals, whilst at the end of this year approximately 22,000 engineers and geoscientists will retire.
Ideally the industry would retain knowledge to prevent vital insight disappearing with those who are due to retire or have been made redundant and simultaneously develop younger talent to eventually take over from senior management.
Using existing knowledge
Continuous development of staff is critical for any industry to survive and can help create innovative solutions for its future. The US Federal government recognises this very point and has enacted legislation to allow employees eligible for retirement to switch to working part-time and a partial salary and annuity to the time worked. In return, these experienced individuals spend a portion of their time mentoring younger employees. Is this a possible route for the oil & gas industry to follow?
Canvassing of our in-house engineering interns supports the US government’s tactic. All would seize the opportunity to be mentored and continue to learn about the industry they are about to enter. With such optimism the very idea that experienced workers could become industry ambassadors and mentor a younger workforce is embraced. This will also tackle the fear of the industry having a ‘grey ceiling’ that offers little career progression for those who are still developing and help bridge the generation gap.
Appealing to the next generation
For industries to appeal more to Generation Y, it can be argued that companies need more than branding to attract this demographic. Presenting a career with a ‘cause’ will go a long way for a generation that is considered to be highly conscientious and has a deep compassion for the world. Oil and gas companies can easily tap into these values by promoting their ongoing investment within digital technologies and renewable energy projects. Although their brands may be known globally, a wider promotion of energy efficiency, reducing carbon emissions and renewable energy initiatives would certainly appeal to a broader audience. For those with an avid interest, such initiatives are well-known. However, how much more would the industry’s appeal grow if it was better known that such projects are already injected within the major companies’ investment plans?
Growing local talent
Local content has increasingly become an important factor for oil & gas companies, as more countries demand their participation to help benefit local economies. Whether there is an increase of hiring and training more locals or helping to build local ecosystems for goods and services, companies will need to rethink their approach to local talent and incorporate strategies that will make better use of an ever-ready workforce. BG Group and BP are training local talent up to senior positions in Brazil and Azerbaijan, and Baker Hughes has a range of research centres and university links in Brazil and Russia . And Tullow Oil opened an enterprise centre in Uganda to provide business skills training to not just local hires but also local entrepreneurs and small to medium-sized businesses.
Such actions not only help to forge improved relations between companies and governments, but could very well be the future solution for talent shortage. With the number of entry level roles limited in comparison to post-graduates from the US and Europe, more oil & gas companies must either create further opportunities for individuals to take their first step into the industry or look towards the emerging markets to boost their future workforce at all levels.
In spite of the oil and gas industry being here before, the outcome from this recession must be different to tackle pre-recession challenges that will re-emerge; accompanied with new one once the market turns.
At its peak, skills shortages forced the industry to pay inflated salaries. This time, the recovery could swiftly head to an even more critical situation. Documented issues such as an ageing workforce and the industry’s rigid career pathway will only be magnified by the limited number of entry-level roles, which could possibly force the next generation to pursue their careers elsewhere. As a result, salaries could become further inflated, which could slowdown or prevent future projects to advance the industry. For those already working within the sector, the knowledge gap is palpable. Now is the right time to fully explore and learn from those who belong to the ‘Great Crew Change’, before they disappear into the retirement vortex.