For professional workers considering transfer into the oil and gas industry, conditions cannot be better.
An acute skills shortage is increasing operating costs and delaying project development. The slump of the oil and gas business and related job cuts in the late 1980s and early 1990s steered students away from petroleum disciplines. The industry now faces recruiting problems as its workload climbs and its workforce ages.
In the US, the number of enrolling undergraduate petroleum engineers hovered at 3,057 in 2007. Countries like China and the former Soviet Union continue to produce petroleum engineers, but importing talent from these countries creates cultural and linguistic issues.
The Global Talent Index by executive search firm Heidrick & Struggles warns that the US status as the world’s biggest talent hotspot is under threat from the UK and China.
“Overall, the survey confirms that talent follows where money leads,” the firm said. “After the US and UK, the next best countries for attracting and developing talent are relatively small but open economies of Canada, the Netherlands, and Sweden.”
Big questions
According to the Society of Petroleum Engineers, the average age of the group’s members worldwide is 47. The big questions are: Where will replacements come from? How can they be attracted and retained?
Rhys Jones, commercial director at headhunters Elliot Marsh Ltd., told OGJ that operators are conscious that their people are integral to success, particularly as the market has become so competitive. “They need to be more imaginative in their packages.”
But finding new mid-level to senior managerial and technical staff was described by one headhunter as “absolute chaos.” Finding and hiring staff can take months. “The demands are very high, and this varies depending on where you are and where you are going to. Salaries are jumping as an engineer can get £600/day for a job in Russia. If something goes wrong, he leaves to go to the next highest bidder, and turnover is high.”
Brian Martin, founder of industry specialist search firm Opus Executive Partners, says oil companies must recruit talent from other industries such as aerospace, automotive, and utility to relieve the crisis.
“Professionals do exist, and you can mentor and technically train them to help their understanding,” Martin says. “Historically, the industry feels its skills are unique and can be easily exported but not imported; this is no longer the case. Some technologies are genuinely proprietary to the industry. However, these are often developed in conjunction with external universities, further confirming that all kinds of intellect can and [are] being used by the industry.”
Over the last 24 months, salaries for senior management and board appointments have risen by as much as 100%, according to Opus. Some companies recruiting new talent are shocked by the minimum salaries they are expected to pay before other benefits, such as pension plans, bonuses, stock options, and expenses are factored in.
According to a report by PricewaterhouseCoopers LLP, engagement metrics and measures for employers are important. In some cases, investors are using employee engagement levels to gauge a company’s financial health and sustainability.
Research by PwC also shows that companies are willing to pay expatriate engineers from developing countries more than what they might expect from their country of origin by giving them a designated country rate. The disadvantage to employees is that they are denied pensions, share plans, mobility allowances, and other benefits so they can be moved on short notice. Some therefore may be cash-rich but lifestyle-poor—a trend not sustainable in the long term if employees are to be fully engaged.
According to Jones, one independent operator uses a points-based benefits system in which employees can create their own packages. “Each year, the employee will tick what they want to suit them at that stage: more holidays, higher pension contributions, gym membership, share options etc.”
Phantom shares
Some public oil companies are experimentally offering phantom share options, in which an employee can receive cash equivalent to an increase in the value of a block of stock. Employees don’t actually own the stock and can’t exercise phantom options immediately. To date there has been no requirement to disclose such schemes in annual reports where senior management normally share extra earnings from stock options.
Oil companies are hungry for new technical employees, but can these trends of record salaries and slick benefits be sustainable in the long term?