According to Iranian official who spoke to Reuters, Iran’s new oil and gas contracts will have flexible terms that take into account oil price fluctuations and investment risks.
By Nuria Camps – Oil & Gas Consultant – OGAS (Oil & Gas Academy of Scotland)
Since the current oil price crisis hit worldwide economy, the oil and gas industry is facing challenging times. In the North Sea (NS) many companies have announced that they intend to downsize their workforce, leaving a feeling of uncertainty for the UK oil and gas industry and its workers. With this picture in mind one cannot help wonder where skills shortages have gone. Does it mean that there is a reduced demand for skilled workers in the NS? In this post I will critically analyse the current situation and will propose some measures to overcome the danger of leaving skills shortages untreated
— PetroEd (@PetroEd) 16 Juillet 2014
Skills shortage before oil price crises.
It has been established that skills shortage has existed throughout the years for various positions in the UK oil & gas industry, currently skilled and experienced project managers and engineers are in high demand. Before today’s oil price crises hit the industry, skills shortage was seen by many industry leaders as the number one challenge facing the industry, holding the key to unlocking future growth within the industry.
Skills shortage post oil price crises.
Today it seems that skills shortage has dropped down the industry’s league table of important challenges facing it and now these issues sit in sixth position. Currently the industry appears to be more focused on costs reduction initiatives, both in the short and longer term which can sometimes involve redundancies along the way. Over the past 6 months a few oil companies operating in the NS have announced a number of redundancies which have received very much media attention. The current media reports ,in general, seem to paint a negative picture of the industry and this is not a good situation for the UK oil and gas industry to be in.
The vision given to the general population is one that is somewhat incomplete and negative. This gives a feeling to most people thinking that there is not much of a future left in the industry and this does not help to attract top graduates or new recruits who are looking for interesting and long term careers. It is not good for the industry to loose these employees who are currently being made redundant as some may decide to move abroad with their skills or even worse leave the industry all together in order to achieve some kind of job security.
When the price of oil eventually is going to increase and business will pick up again, as it has done so many times in the past, the UK’s oil and gas industry may re-awake to find itself in a more severe situation with skills shortage issues than was foreseen before the oil price crises began.
Over the preceding decades it has been shown that the industry is a very volatile place and it experiences many highs and lows. The continual development in many areas of the industry, such as new technologies or increased cost reduction initiatives, has helped to pull it through the low spells in the past. Often to such an extent that the demand for a skilled workforce grew at a much faster pace than could always be met by the available skills pool, leading to skills shortage within the industry.
Despite all the recent redundancies in the NS, the skills shortage looks set to continue and may grow in the coming years. A recent survey (2015) by Bank of Scotland reveals 92% of those surveyed still expect growth over the next 2 years and that oil and gas companies operating in the NS expect to add 8000 new staff during the same period.
A survey by Oil and Gas People claim at least 125 000 new members of staff will be needed over the next 10 years in the UK oil and gas industry just to cover positions left by retiring oil workers. Today the UK oil and gas industry is considered to have an ageing workforce with the average age being at 45 years old.
The skills gap left behind by retiring oil workers will be very difficult to fill and if appropriate training and mentoring actions are not taken this knowledge may be completely lost. Other also claim that many more professionals will be needed as the industry is both unprepared and undermanned to meet the future demand for a skilled workforce which will be needed in order to meet future economic growth desired within the industry itself and the increased demand for energy to meet the growth of the country’s economy.
The danger in skills shortage
Skills shortage if left to go unchecked and not handled properly can lead to a number of serious and potentially damaging issues for the UK oil and gas industry, affecting its long term growth plans and it can also have a knock on effect for many other areas of the UK’s economy.
Skills shortage can lead to production delays for projects increasing costs for the industry and also leading to more risk taking. Not having enough skilled workers available can hamper future economic growth within the industry and UK’s economy. By not attracting high calibre and the very best of talent to the industry there is a risk that future innovation and progress may not be fully realised. There are also many other effects which may be felt across the whole of the industry if it does not keep in check the future skills shortage challenges that it faces. For instance the current skills shortage and the demand for skilled engineers is pushing wages up in this area of the UK oil and gas industry, this in turn increases the overall cost of operating in the NS.
When a skills shortage occurs employers face difficulties in recruiting suitably trained and qualified skilled workers. In order to overcome some of these issues current recruitment techniques within the UK oil and gas industry tend to focus on companies poaching staff from their competitors. This is achieved mainly by head hunting key people and offering them higher salaries with better benefits and working conditions than they currently receive. This method of recruitment is less profitable and can make some projects unviable. It does not help to deal with reducing any of the skills shortage issues and it is not sustainable as a form of recruitment.
What should be done?
More training and recruitment actions must be taken by the industry working together as a whole. This cannot be achieved by the industry working alone, and it must have the backing of the government, training agencies, universities and the education system. Only by achieving full co-operation between all the stakeholders will the industry reach its full potential. Better public relations are also required in order to attract a new breed of talented recruits to help deal with the future challenges facing the industry and helping reduce any future skills shortage. The industry must continue to attract bright and talented people from diverse backgrounds and across both genders if it is to stand a chance of meeting the future skills challenges that will rise to the top again.