Energy Industry Faces Labor Gap Challenge

January 2013, Vol. 240 No. 1

Jobert Abueva

Between expanding markets and a wave of retirements, the energy industry faces the possibility of a worldwide shortage of labor. In the upstream oil and gas press, it has been called the “Great Crew Change.” Due to age demographics in the industry, many experienced workers will be eligible to retire in the next few years, potentially creating a drastic loss of experience and expertise that also coincides with a low number of younger individuals entering the industry.

A lack of incoming talent in engineering and science upstream is not new: a 2008 New York Times article by Rebekah Kebede commented on the difficulty of attracting young people to an “old school” industry, especially competing with technology companies like Google who offer comfortable work environments and superior perks.

New energy workers are often required to prove themselves in rural areas, foreign countries, and other difficult environments; by contrast, recent computer science graduates may start careers in industry boomtowns and cosmopolitan cities. A Grant Thornton survey of upstream U.S. energy companies in 2012 stated 71% of oil and gas executives expect employment levels to rise at their companies in 2012-2013. Eighty-six percent believe overall employment levels in the oil and gas industry will increase this year, yet 55% of the executives also anticipate difficulty hiring and retaining.

But the shortage of workers could reach beyond field and drilling work. As energy demand and the industry grow, workers will also be in demand downstream. Recent number crunching from the federal Bureau of Labor Statistics suggests that, in America, there is no particular upswing in energy production jobs, though petroleum and coal manufacturing are predicted to increase.

Further muddying the water, the U.S. Energy Information Agency reports, partly due to popular movements toward energy conservation and independence and reducing carbon footprints, U.S. energy use per person is declining. But these statistics aren’t telling the whole story: even as the amount of energy used by U.S. consumers decreases, the EIA conversely predicts a worldwide increase in energy demand of 50% by 2030, largely driven by expanding economies like China and India, and emerging economies such as Brazil.

Based on current estimates, demand won’t be met entirely by gas and petroleum – coal, nuclear, and renewable energy will all be parts of the equation. As industry insiders realize, economic growth and social progress are completely dependent on a steady supply of energy: to fuel vehicles, to power construction and e-commerce, and to sustain technological society. Burgeoning economies and growing populations will push up worldwide demand in the foreseeable future. And even if U.S. demand doesn’t rise, the existing level of activity in the energy sector is already huge.

“Great Crew Change” aside, the required workforce will not be in just exploration and extraction, but also support workers: in addition to geologists and engineers, energy companies need lawyers, accountants, IT professionals, and other day-to-day operations staff. Extracted fossil fuels have a long trip through the marketplace; crude oil, for instance, needs to be shipped and stored, refined into fuel or non-fuel products and brought to market, and is traded as a commodity. So the sphere of labor around energy is much broader than the number of employees at one company (or many companies).

Not only should companies be concerned with re-staffing, existing demand requires workers to perform the many ancillary functions accommodating increased production, and others in business sectors whose work will cater to core energy. Particularly, as the U.S. looks to become a net exporter of LNG, there is opportunity for more shipping, transportation and storage resources. Additionally, there will be a need for traders and analysts and commercial support professionals who understand the movement of oil and gas through the marketplace and as a commodity.

We are reliant on energy in order to grow the economy: construction and the auto industry cannot grow without energy and all industries, in fact, need to have a growing energy sector. This persistent demand is key – outside factors like natural disasters and geopolitical instability may cause boom and bust cycles in hiring for particular industry sectors, for instance war and volatile political situations in the Middle East have given oil companies pause in expanding.

Similarly, market factors influence company size: the recent low price of natural gas may have dissuaded producers from expanding personnel. But in natural gas there is nowhere to go but up and the current trend toward diversification of energy resources and interest in renewables will also create opportunity.

The initial boost behind green energy has been a result of subsidies and support of government and a lot will be decided by the presidential election, as both candidates are talking about a “balanced portfolio” of energy independence with the need for fossil fuels as well as green energy resources. And there are enough models around the world for the U.S. to emulate, such as in Germany, where a significant percentage of their energy comes from renewables.

Kebede’s 2008 Times piece also provided energy companies with a stark reality check. Consultant Paul Weissgarber, at that time with AT Kearney, was quoted: “The industry has done a very poor job portraying itself as an attractive career.” In intervening years, unfortunate but high profile energy accidents like the Deepwater Horizon spill and Fukushima-Daiichi meltdowns tarnished public perception.

But even worst-case scenarios can have some positive repercussions – in managing bad PR from major accidents, companies are learning valuable lessons about being better at what they do, and being better global citizens. Health, Safety, and Environment jobs will be a significant area of growth, as will compliance – not only for safety but also fiduciary, financial compliance. Banks and energy companies both have had well-documented debacles in trading and accounting, echoed most recently by Chesapeake’s troubles. In coming years, smart companies will steer clear of bringing such problems on themselves.

A multifaceted approach would be best to address a labor shortage. So far, the primary industry response has been in improving its public perception. BP’s cleanup efforts and PR campaign in the wake of the Gulf spill is one of the most visible examples, but increasingly, other major energy players are engaging with a sometimes critical public using messages about new energy incentives and the necessity of the products they provide, putting a collective effort into making energy careers a viable avenue.

Efforts are also being made to promote growth and limit “brain-drain” as the current workforce ages toward retirement. Exploration and Production magazine reported on a recent survey of oil workers, age 55 and up, by global recruitment firm Working Smart. Seventy-seven percent surveyed were actively mentoring junior staff, and many thought wider mentoring programs as well as longer-term planning, such as succession plans and support for workers to earn advanced degrees and training, would be essential in passing on professional knowledge and retaining employees.

With high unemployment making news in the U.S. and abroad, and a demographic trend of educated millennials entering the workforce underemployed, another key is increasing vocational outreach. With a relatively young, potentially available labor pool, it would seem the only obstacle is convincing some workers to retrain for energy careers. Considerable effort is being made to coordinate with community colleges and local employment and career centers to raise the visibility of energy-related careers and to extend specific outreach to veterans and to more diverse communities who may be in search of work options.

The most critical outreach needs to happen in education. A trending news topic is America’s lagging student performance in STEM (science, technology, engineering and math) fields. Contributors to CNN and the New York Times recommend a significant revamp of both primary and college education techniques to keep students engaged and properly instructed in science and math fundamentals, as well as to prevent attrition in STEM college majors.

Similarly, the Working Smart respondents recommended “long-term training programs in conjunction with governments and universities to ensure an adequate supply of skilled people.” Companies are sponsoring energy clubs at business and engineering schools, and industry events such as the Houston International Conference and Exhibition on Liquefied Natural Gas increasingly allocate space and time to career days where interested job seekers and students from high school upward are invited to learn more about possible energy career paths. Through job fairs and career days, even those students not inclined toward engineering and math can be made aware of potential jobs.

Finally, more thought is being given to retention. For example, Chesapeake, despite its current troubles, was renowned for building a luxurious Oklahoma City employee campus including gyms and daycare, an appealing prospect for current generation workers. Some companies are experimenting with new types of flex-time schedules granting up to a month off on rotations to provide better relief during demanding assignments. And in rural North Dakota areas where shale is being drilled, gas producers are hoping to invest some of their success back in local communities: infrastructure, schools, housing developments, everything from baseball leagues to cultural events, because by investing they help improve the quality of life where labor is needed.

Jobert E. Abueva
is vice president, Global Sales and Marketing for The Oxford Princeton Programme, which provides energy business professionals with world-class commercial training courses about the energy and derivatives markets, website: www. oxfordprinceton. com.

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