It should be no surprise that, in the face of $50/barrel prices, oil and gas producers are facing stark days for the coming year. As part of their cost-saving measures, many of them have announced or are planning for worker layoffs and considerable cutbacks in hiring. Oil services company Schlumberger, for example, is in the process of cutting 9,000 jobs. BP also announced that thousands of layoffs will be made by the end of this year. Norway’s Statoil and Canada’s Nexen Energy have also indicated employee cuts.
According to the annual oil and gas benchmark study from industry advisor DNV GL, almost half (47 percent) of its survey respondents plan to reduce headcount in 2015. That’s a huge leap from just 16 percent last year and 11 percent in 2013. At the same time, only 10 percent of those responding expect to expand recruitment this year, compared with 38 percent last year.
So what does all of this mean for the skills shortages we’re always hearing so much about? Is that out the window now? Well, not exactly…
True enough, the oil and gas industry players that DNV GL surveyed are much less concerned about skills shortages than they were even just a couple years ago. In the 2013 survey, 55 percent saw the skills shortage as a significant concern, citing it as the top barrier to growth. This year, it’s down to only 14 percent, and has dropped to the No. 10 barrier.
But that’s not because the skills picture has improved out there; it’s only because they can’t afford to employ them right now. In the long term, however, the problem will not only persist but may be even worse. “Over time, sustained periods of layoffs and recruitment freezes reduce the overall attractiveness of the industry to young people,” DNV GL notes in its report. “Indeed, previous downturns have seen large-scale layoffs from oil companies, depriving the industry of skilled staff when the inevitable revival happens.”
The large number of skilled workers approaching retirement also makes for more of a long-term issue. “We’re bringing along younger people who see the opportunity, but they’re not going to be fit to take on these projects in 10 years’ time,” says Paul Sullivan, director of global LNG and FLNG at EPC provider WorleyParsons. “It’s going to take them 20 years to get to that stage, so you’re going to have a bit of a shortage in the meantime.”
Even in the short term, it’s not so simple. As DNV GL notes, many of the job reductions expected by oil and gas companies will be support staff. Many specialist technical roles will remain difficult to fill.
In its analysis, DNV GL proportions out those companies expressing confidence in hitting their profit targets for the year. Granted, that number is considerably lower than it was in last year’s survey—30 percent for 2015 vs. 69 percent for 2014. Not surprisingly, this “profit-confident” group has a somewhat different perspective than the other 70 percent.
One difference is their perspective on workforce retention. Compared with the 47 percent of layoffs expected for the whole survey group, 28 percent of the profit-confident group plans to make employee cutbacks this year. Still considerably higher than in previous years, to be sure, but this profit-confident seems to be more cognizant of the continued need to talent. Compared with the pessimists, nearly twice as many consider skills shortages and the aging workforce a key barrier to growth.
New technologies—in particular, giving people the information they need—can offer part of the solution to overcoming future skills shortages, according to Elisabeth Tørstad, CEO of DNV GL – Oil & Gas. “The opportunity to transfer big amounts of data in a secure and reliable manner will enable a much more free flow of competence,” she says. “Both data and expertise for decision-making will be available anywhere, anytime, and we will spend less time travelling. This will shift the competence needs of the industry and also the cost level in the longer term.”
Also, laying off employees is certainly not the only cost-cutting measure the oil and gas companies are tackling. In fact, it’s fifth on the list of priorities for imposing stricter cost controls, according to DNV GL’s survey. Topping the list is making tough decisions on which capex projects to approve, but also up there is improved workflow/work processes.
Companies need to seize digital initiatives, for one, says Ernst Meyer, director of technology, services and governance for DNV GL – Oil & Gas. “One example is the remote operation of offshore oil and gas platforms,” he says. “If you have a portfolio of platforms, why do you need a fully manned control room on each of the platforms when they could sit onshore, and you could have a specialist following the same parameter on all the platforms? There is a lot of opportunity for efficiency improvements in that space.”