Managing the oil and gas workforce for long-term growth

Huw Rothwell

Oil and gas recruitment has traditionally been a case of ‘square pegs for square holes’, but as the industry adjusts to low oil prices, the importance of a sustainable resourcing strategy becomes clear, says Huw Rothwell.

Oil and gas firms are beholden to macroeconomic factors and exposed to substantial levels of risk relating to market volatility, uncertainty and geopolitical instability.

Costs have increased substantially against the backdrop of high oil prices. But when prices slide, there is shareholder pressure to cut costs across operations, including the workforce. This has been illustrated by the recent oil price slump, with several operators and service companies announcing layoffs and rate cuts. But this pattern has been repeated numerous times with the perpetual cycle of boom and bust, demonstrating that lessons still need to be learned.

Some firms are recognising that a better balance between contract and full time employees is required. Contractor rates have increased three times more than staff salaries over the last five years, thus it can be more cost-effective for firms to hire contractors as permanent employees. More importantly, by transitioning contractors to staff, firms can secure the skills and experience they need for when new opportunities arise.

Although the industry is experiencing the lowest oil prices seen since 2009, its cyclical nature makes it essential that firms adopt a strategic approach to recruitment if they are to secure the appropriate resources when prices recover.

US in the spotlight

With technology opening up new types of resources, the US is predicted to overtake Russia and Saudi Arabia as the world’s largest oil producer during 2015, according to the International Energy Agency.

However, data compiled by Bloomberg New Energy Finance suggests that 19 US shale regions are no longer profitable, and that the increase of US oil supply to more than nine million barrels a day has driven down prices by as much as 32 per cent since June 2014.

Meanwhile, the Gulf of Mexico remains a key deepwater region, despite analysts forecasting limited growth. In 2014, the US Bureau of Ocean Energy Management offered almost 40 million acres in the Gulf of Mexico for bid, with leading industry players planning to inject billions in E&P activity.

Seeking the right efficiencies

Efficiency and cost effectiveness are the watchwords for the industry today. Yet efficiency has been a focus for E&P firms for some time.

The workforce and rate cuts seen to date are hitting the support functions hardest. Yet there are other ways in which efficiencies can be created – with the supply chain being a key area.

There is a growing trend to recruit professionals in supply chain management that are experienced in driving efficiencies from outside of the industry. This bucks the conventional ‘square pegs for square holes’ approach of only hiring individuals with an oil and gas background.

Many disciplines possess the same skills and knowledge required to drive greater operational efficiency – irrespective of the industry. There are several oilfield services companies actively looking to hire people specifically for their experience in low margin, high volume industries.

Sustainable strategy

Previously, recruiting professionals from other industries was relatively easy. Candidates found the prospect of moving into oil and gas very attractive – not only because it was booming, but because locations such as Houston offer a cost-effective place to live and a desirable way of life.

Ironically, a growing US economy coupled with lower oil prices means this is no longer such an easy sell. Operators therefore need to be more proactive in mitigating risk by adopting a sustainable approach to managing their workforce requirements.

Ensuring greater elasticity in the supply of personnel is paramount. With the labour supply likely to fluctuate between direct hire and contract during a period of change, firms must partner with recruitment specialists that have equal capability to supply both permanent and contract personnel.

But while there are plenty of companies with a good reputation in the contract space, few can provide quality talent on the permanent side too. The same applies for those experienced in recruiting technical professionals versus support function staff. Only partners with integrated expertise can help firms to gain more control over the supply of skilled labour and prepare for tomorrow’s opportunities.

Huw Rothwell is Regional Director USA at Petroplan.