Demographics, skills shortages and safely producing the black gold

Witnessing a recruitment frenzy at the EAGE, Neil McNaughton reflects on some of the tales we tell ourselves—of oil and gas as a technology laggard and of the graying workforce. He also listens in on a timely ‘Face the Facts’ BBC Radio 4 program—a front-line report from booming Aberdeen.

Industry always likes to have a good tale to tell and when a good tale has been told once, it is usually picked up on and repeated ad-infinitum until it is generally accepted as fact. A while back, one ‘good tale’ was that the oil and gas industry was a technology laggard and should seek salvation by taking on board more shiny new technology, or by hiring more systems integrators with some secret sauce that had proved its worth in other more ‘with it’ verticals. This good, if rather nebulous tale, was widely told by the vendor community and was received reasonably well by engineers looking for something to spend their R&D money on.

Another good tale was and is that of the graying workforce—the notion that as the baby boomers retire, more or less all at the same time, there will be a sudden dearth of skilled folks available to do the work.

The trouble with tale oft told is that it eventually gets more scrutiny than it merits which may expose weaknesses in the argument and or unintended consequences. I am thinking, if oil and gas is such a laggard, who would want to work there? And if the workforce is stretched what will the effect on safe project execution be?

There was good news on the hiring front at the London EAGE where it was obvious that something is afoot. The whole show has been turned into a massive recruitment parlor. Vendors are recruiting, oils are recruiting, everyone is hiring! Oils had massive stands in the front of the exhibition floor where they vaunted themselves as technology leaders. And they also had little recruitment booths scattered around the place ready to press any passing warm body into service. In regard of the dearth of applicants? I am pleased to report that the 2013 EAGE was thronging with young faces.

As these young faces appear, the tale of oil and gas as a technology laggard is becoming something of an embarrassment. In the face of subsea completions in kilometers of water, petaflop HPC capacity it is probably about time that the ‘technology laggard’ tale was itself retired.

A good contribution to the workforce debate came in an edition of John Waites’ ‘Face the facts’ program last month on BBC Radio 4 (podcast available) which looked at the skills gap facing the newly booming North Sea oil industry.

Waites interviewed PriceWaterhouseCooper senior partner Mark Higginson who foresees a rosy future for the North Sea with an extra 30 billion barrels to be recovered and another 30 years of activity—a ‘huge national advantage’ [even though which beneficiary ‘nation’ may be uncertain]. Higginson categorized the employment situation as a demographic ‘time bomb.’ As older workers retire, skills shortages mean that ‘projects may take longer or simply not happen.’ Higginson opined that there was a need for some 120,000 extra people in the UK North Sea.

Aker Solutions’ Matt Corbin concurred. Aker has created around 500 jobs at its Aberdeen subsea business, building components for Statoil’s Åsgard and BP Schiehallion revamp. Aker plans to bring in personnel from other industries and retrain them for oil and gas. Waites asked, ‘what if you don’t find them?’ Corbin replied, ‘then our customers will go elsewhere.’ The shortage has seen Aberdeen employment all but eliminated and day rates double to $800 ‘easily.’ Kevin Forbes, COE of Oilandgas- said that the skills shortage was serious and was being compounded by the fact that the workforce is moving abroad to ‘higher wages, a better climate and tax free salaries.’

John Waites observed that the UK government has put both technology and the oil and gas sector at the heart of its recovery strategy. Industry has some £14 billion of investment plans for 2013 but is struggling to find project managers and other key personnel.

Higginson put the problem down to the cyclical, ‘boom and bust’ nature of the oil and gas industry with major job cuts in the downturn of 1990/2000 when oil was around $30 and industry ‘shut down.’ This has left a hole in the demographic, contributing to the lack of senior personnel.

Ecosse Subsea Systems MD Mike Wilson described the situation as ‘getting harder by the month’ as skills are spread thinner and engineers turnover every 6 months. There is a lot of stress in Aberdeen to meet delivery dates and ‘corners tend to be cut.’ Projects are being delayed and the tight employment situation could affect safety as engineers with only 3 or 4 years experience are ‘now in charge of major operations.’ Some may be up to it, others may not.

Oil & Gas UK CEO Malcolm Webb acknowledged the shortage but denied that the issue was affecting safety or indeed that the situation was out of control. Webb described the problem as ‘a nice one to have,’ reflecting a dynamic industry and employment growth.

Where does all this leave the ‘graying workforce’ tale? I’m not sure. Most gray’ workers I meet are still hard at it (or available for work) even though they may have officially been ‘retired.’ Perhaps I’m not seeing the full picture. Maybe I should spend more time on the golf course or on the beach. Come to think of it, it’s a while since I added to


I thought that I should bring to your attention an insightful piece by John Dizard which appeared in the obscure but informative Financial Times’ Fund Management supplement of June 24. Dizard takes a swipe at another good tale—that of the US shale oil ‘game changer.’ Dizard pigeonholes the USGS (which recently upped the shale oil ante in a new reserves report) as ‘working for the US ministry of truth,’ and is skeptical about shale oil’s sustainability. Close observation of railroad car loading reports from Union Pacific, ‘not a bad proxy for shale oil production’ shows slowing growth suggesting that shale oil’s ‘triumphalism’ might need to be reconsidered.


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