Optimum Talks Blog

“Terrifying Oil Skills Shortage Delays Projects and Raises Risks”

Jane Christopherson of The Curzon Partnership Featured in Financial Times article: “Terrifying Oil Skills Shortage Delays Projects and Raises Risks”

When Jane Christopherson tries to recruit experienced oil workers, she almost always receives the same reaction. “They say: “I’m getting a bit tired of this. You’re the fourth person I’ve heard from this week,” she says.

A managing partner at the Curzon Partnership, a London-based executive search company, Ms Christopherson fills senior slots at big energy projects for clients that include some of the world’s largest oil and gas companies.

But with seasoned oil workers so difficult to come by these days, her job is becoming harder. “People are inundated with offers,” she says.

The skills shortage in the oil patch is frequently cited as one of the biggest challenges facing the industry. In what has been called the “Great Crew Change”, the older generation of geoscientists and petroleum engineers who were hired before the sweeping lay-offs of the 1980s are now approaching retirement age and will soon leave the world of work. But it is still unclear who will replace them. The pool of potential talent is too small, and companies are scrambling to cope with the crunch.

A 2011 survey by Schlumberger Business Consulting (SBC) highlights the problem. It said more than 22,000 senior “petrotechnical professionals” would quit the industry by 2015 – equating to a net loss of more than 5,500 people. Recruitment of new graduates would offset this reduction in the total number of oil workers, but “will not fill the experience gap”, it noted. SBC’s 2012 survey delivers an even starker message: by 2016, it said, the shortage of experienced oil industry professionals will reach 20 per cent of the talent pool.

“The demographics are terrifying,” says Greg Lettington, director of engineering at Hays, the recruitment consultant. A recent survey by Hays found that skills shortages were by far the main concern for oil and gas employers worldwide, outstripping factors such as economic instability, and worries about security or safety regulations by a wide margin. The skills gap reflects the cyclical nature of the industry. Oil companies have tended to shed staff whenever the oil price dips and the economics of crude production weaken: attrition was particularly high during the 1990s, when oil prices bounced around at $20 a barrel.

“Companies made lots of people redundant and those people left the industry for good,” says Ms Christopherson.

Recruitment and training virtually stopped. As demand for new engineers and geoscientists waned, so did students’ interest in oil-related courses. Universities responded by closing down their geosciences and geology departments. Ms Christopherson says that only three UK universities now offer courses in petroleum engineering.

Oil’s wheel of fortune began to turn again in the early-2000s, when surging Asian energy demand pushed up crude prices, heralding a decade-long rally. Oil companies started hiring, and engineering was once more back in vogue.

But the 1990s cull left the industry bereft of a hugely important category – engineers with 10-20 years’ experience, capable of taking on senior managerial roles. “The biggest gap we have is the mid-career types, aged 35-50,” says Alix Thom, employment and skills manager at Oil & Gas UK, the trade body for the North Sea oil industry.

One of the reasons for the hollowing out of the technical professions has been the growing allure of the financial services industry, which, even after the 2008 crash, offers lavish salaries and bonuses and has tended to suck talent in from all other walks of life. “A lot of people who went into engineering later moved to accountancy, law and finance,” says Mr Lettington of Hays.

The North Sea is particularly exposed to the problem. When faced with a choice between working in the UK or overseas, oil professionals tend to plump for abroad. “They can get generous tax-free expat packages in places like Nigeria, but not Aberdeen,” says Ms Christopherson.

Companies are increasingly fighting over a shrinking cohort of experienced staff. In a recent survey by Aberdeen and Grampian Chamber of Commerce and Strathclyde University, half of all respondents said they had lost core staff in 2013 – either because they retired or were poached by rival operators. Contractors said they had not found it so hard to recruit new staff – particularly for professional and managerial roles – since 2007, during the oil boom that preceded the financial crisis.

Such staff shortages can often have highly negative consequences. In the SBC survey, 73 per cent of responses from international oil companies said staffing difficulties could trigger project delays, while 59 per cent said it could lead to more risk-taking.

The UK government has sounded the alarm. Michael Fallon, who until this week was business and energy minister, recently warned that the North Sea industry would require an additional 15,000 staff over the next 3-4 years, across a range of disciplines. He said the shortage of skills in the sector was a “major threat to its overall competitiveness and one of the biggest challenges that the industry faces today”.

But it will take big changes to the British educational system to provide graduates in sufficient numbers to plug the gap. According to a 2012 study commissioned by the Royal Academy of Engineering, the system will have to double the number of university graduates in science, technology, engineering and maths – the so-called Stem subjects – that it turns out annually.

The study said the country needed more than 100,000 new Stem graduates a year until 2020 – yet only about 90,000 students a year graduate in those subjects. With large-scale infrastructure projects such as High-Speed Rail 2, Crossrail 2 and Britain’s proposed new generation of nuclear power stations in the pipeline, the need is bound to become more acute.

In a sign of the urgency of the situation, the UK is turning to its armed forces. Ministers are hoping some of the 29,000 servicemen due to be shed from the forces by 2015 could top up the oil industry’s depleted talent pool.

This is not the only unorthodox measure being adopted to address the skills gap. Companies are spreading the net ever wider, looking to China and India to find engineering talent. They are increasingly coaxing older professionals out of retirement. And they are also looking to recruit more women. But what needs to change most urgently, according to some, is the image of the technical professions, especially among children. “A lot of people still think it’s about fixing a washing machine,” says Mr Thom.

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