The 'capability crunch' in the oil & gas industry

Tuesday, November 23, 2010
London
The Geological Society

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Many companies, and their CEOs, have been heard to declare that “people are our most valuable resource” and many an investor, especially in small-to-medium sized entities, has been heard to say “I put my money behind good management teams”.
With this in mind, what do we make of the following facts and anecdotes about people in the oil & gas industry:

1. The petrotechnical population in western Europe and North America is:

a. ageing and as a large number approach early retirement or even normal retirement, we are edging towards what some have referred to as “The Big Crew Change”, and

b. shrunken, as many folk permanently left the industry during the many lay-offs and mergers of the last 20 years, and

c. a diminishing number of good quality graduates are joining the industry.

2. Increasing numbers of high quality graduates are joining the industry from Russia, China, SE Asia etc.; ‘global’ companies, whether Majors or the bigger oil field service companies, are best positioned to access this new source of talent.

3. In the ‘global’ companies “attrition” rates are quite low, reward levels are high. Good petrotechs are in demand and feel more able to say “No thanks!” to postings to the back-of-beyond.

4. There is a lot of interesting work in the world – a lot of oil still to be found, a lot of reserves still to be converted to production, lots of exciting projects! Demand for staff is exceeding supply?

Andy Inglis, Upstream CEO of BP, has described what he refers to as the ‘capability challenge’, pointing to an interesting study by CERA that estimated the overall effect of the above pressures as a potential 10-15% “people deficit” by 2010, compared to the estimated number of staff need to deliver projects.

It seems as though the ‘global’s – the Majors, the bigger Independents, the bigger sevice contractors – have taken a number of steps to adjust to these realities and are not ‘feeling the crunch’…..but then who is? Which companies will find it difficult to attract and retain good people; and therefore be the ones whose projects suffer, who do not get developments completed on time, who drill dry holes through lack of “Know How”?

Investors have become pretty accomplished at figuring out where an ambitious company’s funds are going to come from; a pertinent question for this year might be “What is your capability strategy?”

For our November Forum, we have put together an agenda to help everybody ask the right questions and find the right solutions.

Agenda