The oil and gas industry is now facing one of its greatest challenges since its inception – finding the motivated and skilled talent pool to sustain growth in the next several decades. Several major trends contribute to this talent gap. First, the baby boomer generation is both facing retirement and contemplating second careers that give back to society. Second, the Boomer follow-on generations, Gen X and the Millennials, tend to view the oil and gas business as dirty and environmentally hostile. Both Gen X and Millennials place a greater emphasis than Boomers on work-life balance and the social bottom line of their employers. Finally, enrollments in the engineering and sciences are on the decline, especially in the West, as students seek the more profitable career paths that an MBA degree might enable.
The talent gap is not new. The pricing cycles of this commodity business have led to booms and busts in hiring on 10-year cycles since at least the 1960s. Recall the hiring booms and subsequent employment crashes of 1986, 1998, and most recently 2008. This hire/fire behavior has resulted in demographic gaps in the workforce—a bimodal distribution with groupings of entry-level and highly experienced employees—nothing in the middle. At least until the most recent crash, however, the skill pipeline could be turned on and off almost as easily as the flow of hydrocarbons from the wellhead. So is it really different this time? And if so, what mechanisms are oil and gas employers using to win the competition for talent?
For examples of possible solutions, we can turn to the labor-intensive Canadian oil sands business as it endeavors to scale up thermal production over the next 10+ years from rates of less than 500,000 barrels/day to more than 3,000,000 barrels/day.
The Canadian oil sands play illustrates the critical workforce skill set issues typical of the unconventional resources business. More than 10 large operators are intensely competing for engineering and business talent as they scale up. The business is full of technology challenges requiring ‘out-of-industry’ skills as far ranging as bioscience and aerospace. Partnering arrangements now may mandate knowledge transfer to new participants. The commercial and regulatory landscape is being redefined, and with that redefinition comes new skills requirements. Finally and most importantly, oil sands is a massive start-up business with a rapid learning pace that demands continuous innovation, collaboration, and fast, effective decision-making on par with high-technology industries such as complex manufacturing. All of these factors contribute to demand for skills, both known and yet-to-be-defined.
How are oil sands players responding to the combination of the generational shift and the potential talent gaps? Companies are focusing in three major areas: positioning themselves as the preferred employer within the tight labor pool, improving the effectiveness of the existing workforce, and striving to expand the talent pool beyond conventional sources.
Specifically, companies are testing the following approaches:
• Developing ‘green’ employer brands to better attract the Boomer, Gen X, and Millennial generations
• Attracting talent through a combination of offering higher quality first-line leadership, more aggressive training and career development plans, and ‘bigger assignments sooner’
• Leveraging current talent through sophisticated information systems, such as expert control centers, knowledge management systems, and computer-based expert advisory software
• Experimenting with initiatives to ‘raise the tide’ for all industry participants, in order to improve the overall efficiency of the industry and cumulative demand for skilled labor
• Sourcing talent from emerging countries with strong engineering and science reputations by building and leveraging offshore centers of excellence
Developing ‘Green’ Employer Brands
Some oil sands companies recognize that active investment in green energy technologies helps build a stronger brand and demonstrates to potential hires that the companies are serious about addressing the carbon footprint, water quality, and high energy intensity issues of oil sands. For example, Cenovus actively strives for good rankings on the Dow Jones Sustainability Index, which globally rates firms on economic performance, environmental strategies, and stakeholder involvement. Additionally, Cenovus invests in technologies, such as efficient salt water desalination, cleaner burning natural gas processes, and far-out game-changers such as fusion through its Environmental Opportunity Fund. Suncor has commissioned separate businesses in wind power and biofuel generation. These actions demonstrate to professionals that prospective employers are thinking beyond oil sands, in a serious way, toward a future with cleaner energy sources as well as alternate career paths.
Attracting Talent
Oil sands operators are placing higher emphasis on the quality of the entry experience for new hires. The compensation package is still important, but beyond that package professionals value investment in training courses, mentoring by senior professionals, and the quality of their first-line leadership. Companies are now developing formal training programs for these critical roles, where technology and business first converge. This training emphasizes the development of leadership skills for high-performance teams by establishing clarity around roles and responsibilities, ensuring the right balance between collaborative input and efficient decision-making, and managing functional skill growth while simultaneously delivering results to the business. More and more an individual’s career is managed by both functional and line managers to ensure the best sequence of challenging assignments and development opportunities.
Leveraging Current Talent
While competing for scarce talent, companies are now thinking hard about leveraging that talent for maximum impact. Conventional oil and gas businesses, firms such as Chevron, have pioneered the digital oil field concept. Advanced computing technology in the field coupled with performance-monitoring software and sophisticated control rooms has enabled small pools of experts to provide oversight on global drilling programs, and on production networks in major basins such as the Norwegian Sea and the Gulf of Mexico. Several oil sands participants are in the process of creating the equivalent ‘digital oil sands field’ where Calgary-based teams can provide expertise and oversight to leanly-staffed operations in the northern camps around the Fort McMurray area.
Experimenting with initiatives to ‘raise the tide’ for all industry participants
Efforts to identify and leverage human capital efficiencies across companies are in initial stages. One such effort is the Oil Sands Leadership Initiative (OSLI), chartered in 2010 by the Government of Alberta, and by operators ConocoPhillips, Nexen, Statoil, Suncor, and Total. OSLI members strive to share resources in the environmental areas of water, carbon, and land management, as well as drive critical technological breakthroughs through joint research. While in early days, OSLI is beginning to get traction in developing common water management approaches and in leveraging participant research skills through focused partnerships with global universities. An old concept, sponsorship of research grand challenge prizes open to all who are interested, is also attracting talent across the industry. Most oil sands operators, however, would like to see not only the pace of this type of leveraged innovation accelerated but also the cooperation expanded to include other high demand, low technology areas. Such areas include the provision of shared remote services for transportation, medical support, and basic logistics. All agree that large human capital efficiencies can be gained in these areas.
Sourcing Talent from Outside the Industry
Finally, some companies are thinking beyond the current talent pool toward how that pool might be expanded to meet projected demand. One conventional approach, largely interrupted during the downturn of 2008, was to recruit back retired senior professionals on a part-time, mentoring basis. A more radical approach taken by one operator has been to establish a new technology center in the Pacific Rim, hiring the best and brightest engineering talent from local top universities and then slowly blending that talent into unconventional resource projects. Early results indicate positive impact on business performance. More of that approach—global insourcing and traditional back-office outsourcing—is expected as the oil sands business grows and matures.
In summary, we are seeing a combination of approaches to meet the oil sands human capital demand. These approaches range from traditional methods to better compete within the existing workforce to newer methods to increase the efficiency of the workforce, and finally to cutting-edge efforts to expand that workforce. As oil sands becomes a 3 to 6 million barrel/day business, the question that remains unanswered is whether or not these efforts will be sufficient to meet the huge demand run-up expected over the next several decades.
About the Author
Robert Peterson is a Director with Marakon, a Charles River Associates company (http://www.crai.com). He leads the North American oil and gas management consulting practice, and works extensively with conventional and unconventional operators on issues of strategy, technology monetization, performance improvement, and organization design. He may be contacted at rpeterson@crai.com or +1-214-578-4989.
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