8-Aug-07 1:00 PM  CST  

Oil´s global mid-life crisis 

Few people in oil and gas will be unaware of the ticking time-bomb created by the industry´s current demographics.

An uncomfortably large proportion of older professionals will be retiring over the next decade, at an average age of 55, and there are far too few experienced"mid-career"people in the 30 to 45-year-old bracket ready to fill their shoes.

At the entry-point to the industry, things could improve relatively quickly in terms of numbers of graduates. But in the middle of the career path there is a missing generation.

This has been caused by more than a decade of cutback and consolidation, along with the prevailing image of oil and gas among the young, especially in the US.

With oil prices rocketing and the resultant dramatic rise in activity, this personnel vacuum has suddenly become of even greater concern. It looms as a basic pinch-point to hobble project progress in the immediate future.

Precious little information about the precise scale of the problem has been available, let alone much sign of industry

reaching a concensus on the way to solve it. However, a convincingly thorough and unique evaluation has just been completed that could help alter that.

"Everybody has been talking about the big crew change but until now nobody has quantified what it actually means,"says Antoine Rostand, head of Schlumberger Business Consulting in Paris, the business management arm of that company.

What Rostand´s team has done over the last year is to conduct the first real study to quantify the global challenge that the industry faces. They have carried out a benchmarking survey of more than 30 oil and gas companies and nearly every university involved in petroleum studies around the world.

Their report, Surviving the Skills Shortage, examines global supply and demand trends for petrotechnical professionals, how companies are reacting, and what best practices could be imported from other industries.

Much emphasis naturally fell on the sub-surface disciplines of geology, geophysics, and petroleum engineering, where the issue is particularly acute. But, says Rostand, the findings apply across the board of field development disciplines.

Those findings were presented to participants last month. "In the room we had senior people from oil companies representing two-thirds of worldwide oil production,"says

Rostand."They came in with an idea that poaching was a solution. They came out realising it was not. That alone will have an impact on the industry, I think."

The basic conclusions are simple."We need to recruit more young people; we need a large-scale knowledge transfer from those close to retirement to accelerate the development of new recruits; and current approaches like mid-career recruitment will not work."

Demand for petroleum talent will increase by around 7% a year in the next 10 years, and on a global basis the supply of technical professionals is enough for that period, says the report."However, the balance varies significantly across the globe."

The major regions of serious shortage of graduates will be North America, the Middle East (a lot of oil and not a lot of people) and to some extent Russia. On the other hand, Asia and Latin America have"abundant excess"of technical graduates from emerging sources such as Venezuela, Mexico, China, India and Indonesia.

This means companies will have to recruit from new areas—from where the graduates are, not where the companies want them to be—and this presents challenges for the established models currently in place at most international operators.

The mid-career problem is clearly the most pressing:"There are not enough people between 30 and 45 with the experience to make autonomous decisions on critical projects across key areas."

Inevitably things will get worse before they get better."Without any appropriate actions, we see the mid-career picture improving only after 2013,"says Rostand.

The situation can only be remedied by changing the way training and development of people is currently managed, he continues."As an industry we are very conservative. For example, it takes eight to 10 years to make an autonomous geoscience professional. In other industries such as defence, automotive or IT, autonomy can be reached in less than half that time.

"So we need a new way of learning where you mix formal and on-the-job training along with coaching in a blended learning package."No matter that the grey heads are so busy in today´s business climate, he says,"managements have to be convinced that there is no other way".

Rostand also reckons companies may need to change their organisation from the asset-based models created a decade or more ago in the drive to focus on cost-control at a time of low oil prices."Now the issue is not so much cost-control as the right utilisation of people. So I think we will see more power given back to the centre, to central drilling departments and the like."

Coupled with this is the possibility of outsourcing."Companies should ask themselves, what is the core of my business, what should I keep in house and what should I outsource to leverage outside people, including my own retirees."

Rostand concludes:"The core of what I am saying is more recruitment, accelerated development, better location of people, and an outsourcing strategy."

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Source: Castlen

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