(By Keith Orchison, published in The Weekend Australian, 7-8 February 2009)
One of the biggest challenges the current global economic problems throws up for the petroleum industry is to avoid letting history repeat itself and ending up facing another skilled worker shortage somewhere in the next decade.
Currently the upstream petroleum industry worldwide, after years of frenetic pursuit of qualified staff, is in the process of letting thousands of employees go as the oil price plunges back towards low levels after touching almost $US150 a barrel.
The bellwether company for employment in the upstream industry is Schlumberger, the world’s biggest oil service company, and it shed 5,000 jobs internationally in January. This was a dramatic turn-around for a company that had been complaining in early 2008 that a shortage of engineers and geologists was “plaguing” the global oil industry.
Schlumberger’s CEO, Andrew Gould, warns that, if exploration falls away under low prices, a “very significant” decline will follow in oil and gas production, with further impact on employment.
For those who have observed the petroleum industry’s fortunates over the past quarter century, this development is Groundhog Day all over again.
Worldwide, it is estimated that the sector laid off as many as two million people in downturn periods since the late 1980s after driving employment upwards at record levels during the 1970s oil price crisis.
When the international price “fell off a cliff” in the late 1980s after seeming to be inexorably heading for $US100 a barrel – at its lowest in 1988 it hit $US8 a barrel -- experienced geologists were walking the streets of Brisbane, Adelaide and Perth, stopping industry management figures they passed to ask about jobs.
Here and overseas, many people discarded by the upstream industry found working lives elsewhere and never returned, contributing to the past decade’s shortages.
A few people, mostly in recruitment and academia, are already starting to speak up this time, warning that people with good skills who lose their jobs in the present crash will find work elsewhere and not return to the “oil patch” while young people entering university will be scared off the industry.
In Alberta, Canada, where funds for mega-projects to develop oil sands resources have largely dried up as the barrel price crashes and and several thousand people have been sacked, Ayo Jeje, an engineering professor at the University of Calgary’s highly-regarded school of engineering, is calling on petroleum executives to look beyond the current situation and to appreciate that the thirst for fossil fuels inevitably will trend higher and, with it, the need for engineers.
In Britain, at the rather awkwardly-timed opening of a new oil and gas academy in Aberdeen during January, David Doig, the head of the North Sea’s main training organisation, warned a room full of senior industry figures that they could not afford to let their focus on skills diminish if they did not wish to find themselves back in the situation of less than two years’ ago where staff shortages constrained operations and pushed up costs.
“We must continue to promote the industry to a new generation of workers,” Doig said, “as well as to further develop those already in the sector to ensure that we have a sustainable, competent workforce in the future. We do not want to find ourselves with another missing generation of skilled workers.”
In Australia, this problem could be exacerbated if a downturn now adds to the lack of earth sciences graduates that was being felt when oil prices were high. Petroleum executives acknowledge that the industry has a negative public perception as a result of the climate change debate, especially among teachers, and this has contributed to low take-up numbers in earth science courses, especially during a period when there has been fierce competition for talent from law, commerce and medicine.
The local situation is not helped by the industry having an ageing workforce, with many of its skilled employees aged 50 and older. Even if the impact of the global economic meltdown on superannuation keeps older staff working for several more years, the problem is not going to go away.
Meanwhile leaders of the oil industry, and spokesmen for governments with large oil interests, are talking up the need for the price to return to $US60 to $US80 a barrel in order to stablise the market and prevent another bout of extreme volatility in the next decade. Manufacturers, on the other hand, and the governments of countries where they are a large part of the economy, are arguing that oil prices need to stay low to enable the global economy to recover from what is predicted to be a standstill this year.
If prices do not rise, however, said OPEC, representing the Middle East and other large producers, “we will not invest.”
How the Federal Government and the Australian upstream petroleum industry handles the flow-on effects of this situation, both for those in current employment and those in or joining the relevant parts of the tertiary education system, will dictate whether the media are once again publishing stories about the impact of skills shortages on new oil and gas development in a few years’ time.
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