Tackling the oil and gas industry skills gap

by 04 Feb 2008

THE AGEING workforce, the need for specialised skills, an increasing workload and escalating costs are the four major factors that are contributing to the skills crisis in the global oil and gas industry, according to a recent Booz Allen Hamilton report.

It found that around 50 per cent of professional staff in the industry are between 40 and 50 years old, while barely 15 per cent are junior recruits. This is compounded by the fact that up to half of the current workforce is likely to retire within the next 10 years.

“Within the industry, it takes up to three years for staff to develop basic industry operating competence and up to 10 years plus for many professional disciplines,” said Raed Kombargi of Booz Allen Hamilton. “Therefore, the gap is easily noticeable.”

Furthermore, in 22 leading US oil and gas companies, there are significant shortages in sub-surface engineering as well as in other technical disciplines. In addition, an estimated 40 per cent of industry employers worldwide report difficulties in filling skilled-worker positions, according to the report.

The nature of the oil industry has also changed, with oil that is more difficult to extract requiring customised technology and project management expertise. The geology of reservoirs is also an issue, with more complex formations and physical access more challenging than ever (in deep water, for example), requiring different technology applications.

Additionally, the report found that the costs to organisations for skilled workers are increasing. The salary of a geologist with 10 years’ experience increased more than 25 per cent between 2003–06. Salaries for oil drilling rig jobs increased by 60 per cent during the same period. Companies have also been driven to hire retirees as contractors –at twice the price.

The impact of the skills gap is already being felt across organisations around the world, and the report found that there are too few experienced people across the industry to support existing operations, or to support the future growth plans and the execution of major projects that are currently in the pipeline.

“Capability building is a long-term approach achievable by pursuing demand-side and supply-side strategies,”said Kombargi.

“Oil and gas organisations that proactively manage their capability will enjoy a significant advantage in the industry. There are clear signs that those with a strong response to the capability challenge will have a far higher probability of being able to deliver on the potential of their asset portfolio.”

He said the oil and gas industry is witnessing is a huge decline in job capability coupled with a lack of proper remuneration for the skilled workforce.

“The ageing workforce combines with the lack of job-ready skills among undergraduate recruits, where rising salary costs also play a role. We are also seeing increased competition for skilled workers, meaning workers are quick to resign for a position with greater remuneration.”

The report highlighted that effective management of people issues is now a strategic business challenge, and that short-term gains will not deliver long-term solutions to the problem.

“Short-term fixes are inadequate to cope with the magnitude of the challenge. HR must be allowed to take a more strategic role for closing the skills gap – and in organisations where this happens – people issues are successfully, jointly-owned by technical, operational, and HR managers.”

A number of companies have developed solutions on the supply side to deal with the skills shortage. “One oil company we looked at created the position of director of capabilities within its technology group,” Kombargi said.

“The result of this specialised position enabled other staff with strengths and capabilities for specific job roles to be recognised for further development. It reduced the time needed to develop staff to the same high levels of competence expected in the organisation.

The report found that demand-side strategies must be addressed and companies can and must change the way in which they conduct business in order to effectively close the gap.

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