What Will Drive the Next Skills Shortage?

Friday, March 18, 2011

Some estimates put the O&G industry lost revenue in 2006 that was directly attributable to the lack of qualified staff at over 5 Billion dollars. This period also saw salary increases of around 25% for technical staff and in some cases up to 60% for highly sought after people such as completion engineers that pushed employment costs up by around 2.2 billion dollars. We think that this number could be easily surpassed in the coming years due to a number of extra factors.

With the oil prices on the rise and predicted increases in energy demand particularly from the developing world, all industries connected to Oil and Gas are looking to increase staff at an unprecedented rate. This would be difficult enough a proposition with all things being equal but the industry is now facing three extra challenges that will impact the sectors hiring plans in our view.

The first challenge that has been spoken about at length before is an ageing workforce which is now becoming a 'here and now' issue for hiring managers as a result of the underinvestment in training and succession planning in the 1990's. There are a range of examples that bear this out, including the prediction that 40% of US petroleum engineers will retire by 2014.

The U.S. Energy Information Administration projects that the worldwide demand for energy produced by oil and natural gas will double over the next 20 years. To support energy demands, there has been significant physical infrastructural investments. However, comparable efforts to shore up the human infrastructure of the oil and gas industry have not been made.

On its own this would pose a big enough problem for traditional energy companies looking to expand without the competing demand for specialists from the renewables and resources sectors which are expanding at a faster rate than anybody could have predicted even a few years ago.

EarthStream recruits engineering & technical staff for Oil & Gas and Renewables & Resources sectors and we spend a lot of time analyzing trends that will effect demand for engineering, scientific & technical experts. It is clear that growth in demand is significant.

Government's commitment to expanding offshore wind capacity will see it reaching 75GW by 2020, almost 25 times more than today, creating significant demand for engineers. As such we can see a looming talent crisis as this sector goes head to head for certain skills especially in the area of offshore construction, marine services, design, QHSE & logistics. This is also happening against a back drop of demand for offshore locations that are good for both wind farms and oil platforms so the competition between these sectors looks to intensify on many levels.

In addition to this we think the offshore wind sector could potentially receive even more government support as they review their investment in Nuclear power plants after the recent events in Japan.

Finally the resources boom has seen a dramatic increase in the need for geosciences and construction expertise as more and more remote locations have now become viable. With increased worldwide demand for everything from coal & iron ore to rare earth elements and gold, the race is on to get these materials to market and resources companies are prepared to compete for talent in an aggressive manner.

As a result we are already seeing salary increases across the board that will continue over the next few years as competition increases in the face of the ageing workforce. The most immediate impact we have seen in the past 12 month was a 50% increase in the demand for contract staff and we predict that many retirees will be tempted back in the next few years with some very lucrative short term contracts.

Kevin Gibson, CEO, EarthStream

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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