This spring, Lynn Helms, who has been North Dakota’s chief oil and natural gas regulator for nearly three decades, abandoned his usual bullish outlook toward the state’s more than 1 MMbpd of oil and 3 Bcf/d (85 MMcm/d) of gas production while speaking at a monthly webinar he holds for news media.
In April and May, Helms was decidedly negative on current job and operating prospects in the oil patch. On a recent trip he had made to Denver, he reported on the large amount of shrinkage in Colorado’s once thriving oil and gas business, including many of the operators who are involved in North Dakota’s Bakken shale. Workforce issues permeate drilling and hydraulic fracturing (fracking) operations in the Bakken, he said
Helms said that his sojourn to Colorado gave him a glimpse of the impact of the last three years on the oil and gas industry in the Rockies region. In 2019, Helms spent two full days meeting with operators and still missed several he wanted to meet with.
“This time it was possible to visit the entire Denver-based Colorado oil industry in less than two days and in two office buildings,” Helms said. “That is how much it has shrunk. I used to walk up and down 17th Street and into a dozen different buildings.”
What Helms was experiencing is a significant shift of operators out of the Mile-High City to Houston and Dallas-Fort Worth, Texas.
“From all of the people we did talk to, I got pretty much the same story: it is difficult to get workforce in the Rockies, and it is difficult to get capital, so they are looking at 1% to 2% production growth, and delaying the increase until the third-quarter 2022,” he said. All but one of the drilling rig operators have moved 90%-plus of their equipment to the Permian Basin, meaning the Rockies for the most part lack additional rigs.
Colorado’s one operator with rigs has plenty of equipment, but it is limited by the fact it takes two months to complete training of a crew, which means six rigs a year that could be added by mid-2023, underscoring that rapid production growth won’t return soon to Colorado or North Dakota, Helms surmises. Operators don’t have a lot of options for turning around the situation, having earlier this year increased hourly wages by $10 and returned to long distance “super-commuters” for filling fracking crews.
“We’re going to have to leverage the Career and Technical Education Academy process that was kicked off earlier in four cities in the Williston basin,” Helms said. “In this program we’re going to make an enormous effort to get juniors and seniors in high school to intern, get training and have the capability of going to work in oilfields the day after they get their diplomas. Over the long term, pretty much we are going to have to grow our own [workforce]. That is the page everyone’s on these days.”
The Associated General Contractors of America, including those working in midstream energy projects, has reported this year that 81% of its members are having trouble filling skilled craft positions, shifting reliance for these skilled workers more and more to subcontractors.
Officials at the global Houston-based software consulting firm Veriforce said this raises risks for energy operations and hiring outcomes.
“What happens when [subcontractors] are not properly vetted?” asked Veriforce’s spokesperson Coleman Pyeatt. “Contractors risk the possibility of unqualified subcontractors and their workers creating hazardous working conditions, subpar project outcomes and reputational risk for themselves and their hiring client.”
As most midstream operators are aware, subcontractors can be held to the same contractual obligations as prime contractors, including prequalification, verification and performance criteria.
That is why most hiring companies now require contractors to implement qualification programs for subcontractors, according to Veriforce. In a time of more emphasis on subcontracting work to fill labor gaps, Veriforce urges “comprehensive and effective subcontractor management programs” to ensure safety requirements and worksite Occupational Safety and Health Administration (OSHA) compliance are met.
Not so long ago, in the pre-pandemic years, the U.S. oil and gas industry was boasting about 10 million jobs, or 5.6% of the nation’s employment totals. Consulting giants like PricewaterhouseCooper (PwC) and IHS Markit Consulting Service were touting the unconventional oil, gas and chemicals sectors as a major U.S. job creator, supporting hundreds of thousands of new jobs.
A decade ago, Helms’ North Dakota had the nation’s lowest unemployment rate and fastest growing worker income. PwC and others were predicting that America’s shale natural gas reserve could add more than a million manufacturing jobs by 2025.
Today, the global view of the oil, gas and chemical sector’s job market is mixed at best with no shortage of studies and opinions coming from academia, energy employers and a host of business consulting firms.
Volatility Concerns
There are studies and analyses from trade associations, such as the Marcellus Shale Coalition and Western States Petroleum Association (WSPA), think tanks like RAND Corp., consultants like Deloitte and global workforce specialists like privately held, Houston-based Airswift, which regularly surveys the globe through more than 70 offices, 700 professionals and 7,000 contractors worldwide.
Market volatility remains at the forefront of employees’ minds, leading to impacts on the uncertainty of employment conditions and locations, returns on major capital projects and future health scare implications, according to Callum Donaldson, oil and gas North American sales director at Airswift.
“Oil and gas companies continue to face challenges,” Donaldson said. “What might worry oil and gas companies is that emerging markets are now competing for the same talent, and these new industries are advertising [or promising] more stable conditions.”
With more than 15 years of experience in sales and recruitment, the last nine focused on the energy sector, Donaldson sees the U.S. job market today as “very busy.” In oil and gas there has been a “dramatic swing” over the last few years with the flipping of a stagnant market, when layoffs and pay decreases were commonplace, into one where candidates have “multiple job offers at the same time, are being actively canvassed while in employment and are getting pay raises across the board.”
Based on Airswift’s 2022 Global Energy Talent Index (GETI) report, 61% of people in hiring manager roles expect salaries to increase by more than 5% in the coming year.
Major North American pipeline companies, such as Calgary-based TC Energy and Dallas-based Energy Transfer Corp., don’t often talk publicly about their recruiting challenges, but both express confidence that they have a first-class workforce even with the current demographic and economic challenges.
TC Energy runs a Total Rewards program to attract and retain employees, offering what a Canadian-based corporate spokesperson calls “competitive total rewards,” including challenging projects, the ability to make a difference and an environment “where you can dress casually and comfortably and support a high-performance workplace.”
TC Energy’s ongoing efforts seek what the spokesperson calls “a wide range of candidates for all positions, including diverse backgrounds, opinions and skills to strengthen our teams and drive innovation.”
TC Energy emphasizes that it operates five corporate offices, employing thousands of people in Calgary and Toronto, Canada; Houston; Charleston, West Virginia; and Mexico City.
In addition, its field operations provide opportunities in hundreds of communities across seven Canadian provinces, 34 U.S. states and seven Mexican states. “Whatever the role, or the location, employees have the opportunity to develop their careers, and make what they do matter,” says the spokesperson.
Energy Transfer does some of the same things, but is more circumspect about its programs, according to Texas-based spokesperson Vicki Granado, who says Energy Transfer is always on the lookout for recruiting and retaining top people in the pipeline space.
“We don’t provide a lot of information,” Granado said. “We do conduct employee surveys to help guide our workplace policies, benefits, and leadership development programs and other programs aimed at attracting and retaining quality employees.”
In California, Sacramento-based WSPA spokesperson Kevin Slagle noted that despite efforts by Gov. Gavin Newsom and other policymakers to de-emphasize oil and gas use, industry workers are generally “bullish” about the job market in the state and throughout the West.
“We need, and are attracting to our industry, hard-working innovators who want to be a part of the important energy evolution,” Slagle said. “The work to produce affordable, reliable energy – in all its forms – will provide great careers for a long time to come.”
As the GETI results and other analytical work in the industry have shown, the recent years of unprecedented upheaval have modified behavior and expectations in the workforce generally, and companies have reacted with a mixed bag of programs, leaving more questions than answers at this point.
GETI survey officials have questioned whether company brands, values and priorities are still aligned with their workers. And what relevance does this question have for oil and gas employers in particular? In the ongoing transformation of energy, where can the biggest gaps and overlaps in skills be expected? At this point there are no clear, widely accepted answers.
Based on feedback from nearly 10,000 professionals in 161 countries, GETI underscored the oil and gas sector’s ongoing challenges from its digital transformation and energy source transition. This has spawned a “more mobile, multiskilled workforce,” making the age-old challenge of attracting and retaining the best talent increasingly more complex.
“The prevalence of changing ways of working and digital skills also echo what we hear from candidates in the market,” said Airswift CEO Janette Marx. “Professionals want to feel they’re in the right place to make a difference and it seems like now many do.”
The survey showed that 42% of respondents indicated their companies were changing direction, and of those, 82% agreed with the shift to meet the global energy transition.
These are among the major challenges that the GETI and other studies are amplifying. While professional human resource experts say oil and gas companies have some inherent advantages in the current tight, very competitive job market, they also face challenges in levels of compensation, stability of the workplace, need for more skilled college graduates, regional talent shortages and growing shortages of candidates with “major project delivery skills.”
High-Priority Jobs
In 2017, California-based RAND Corp. examined workforce challenges in the prolific dry gas Appalachian region of the Marcellus and Utica shale plays in Ohio, Pennsylvania and West Virginia.
An offshore construction worker heating up line pipe prior to welding.
RAND’s four-person team aimed to document knowledge and skills required in jobs that are rapidly changing from technology advancements while assessing the readiness of colleges in the three Appalachian states to provide needed oil and gas industry workers and identify collaborative opportunities between academia and the industry. Nonpartisan RAND and the National Science Foundation produced the report for the Appalachian operators, “Developing a Skilled Workforce for the Oil and Natural Gas Industry.”
RAND analysts focused on what they called “high-priority occupations” or jobs in high demand and critical to companies’ bottom-line performance. They surveyed and analyzed data from 67 oil and gas employers, followed up with in-depth interviews with a half-dozen of these employers and surveyed 87 heads of postsecondary education departments. The study found a gap between the industry and the postsecondary educational organizations. The recommendation was clear — more and better collaboration between the two sectors.
“In addition to community colleges and private training institutes, four-year colleges and universities and other stakeholders, such as workforce investment boards and industry trade associations, need to be included in strategies for workforce development and planning,” the RAND study authors recommended.
They acknowledged that the boom–bust volatility of oil and gas creates uncertainty for prospective and existing employees, but colleges are urged to adjust their programming so it fits better with what RAND called “the agile, flexible and nonlinear nature of workforce development.”
Colleges need to provide more work-based learning opportunities with more hands-on experiential learning, according to the authors, Robert Bozick, Gabriella Gonzalez, Cordaye Ogletree, and Diana Gehlhaus Carew.
Among a trio of conclusions, the RAND analysts noted that “there is a clear lack of collaboration and partnerships between oil and gas companies and education providers,” and the education providers tend not to emphasize basic cross-over skills such as time management, speaking and writing. “Employers report these are essential for their workers to perform competently in high-priority jobs.”
Finally, a “sizable number” of the priority jobs require bachelor’s degrees, long-term training and more than five years of work experience, according to RAND.
In the pre-pandemic (2019) period, researchers at the University of Houston (UH) and the Environmental Defense Fund (EDF) conducted a survey among oil and gas workers divulging that existing and potential workers in the industry take seriously corporate social responsibility (CSR) and environmental stewardship.
“The findings suggest that environmental stewardship plays an important role in job choices,” according to highlights from 608 respondents in the study released by the Hobby School of Public Affairs and UH Energy in 2018.
More than four of five survey respondents (83.5%) view a company’s CSR standards as either “very important” or “important” in their employment decisions, and more than half (54.6%) indicated a company’s environmental stewardship practices were “top priority.”
Respondents were more likely to take a drilling company job with a company that is a leader in environmental impact mitigation than to take a similar, higher-paying job with a competitor that is criticized for not meeting mitigation standards.
“More than nine out of 10 (93.7%) respondents think the United States should use either ‘much more’ or ‘somewhat more’ renewable energy,” the UH-EDF survey found.
Rebuilding Phase
Oil and gas operators are still in a rebuilding phase. During the pandemic (March to August 2020), a Deloitte study showed the industry slashed 107,000 jobs, and sinking global oil prices meant that for every $1/barrel drop in price, 3,000 upstream jobs were lost.
Current prices topping $100/bbl, however, have helped accelerate job recovery beyond what Deloitte was predicting only 18 months earlier. In May, the U.S. Energy Information Administration (EIA) Short-Term Energy Outlook called for U.S. oil production to continue to climb and prices to stay above $100/bbl in 2022, meaning job demands should stay strong.
A welder at the construction site of a pipeline project.
Nevertheless, in its “The Future of Work in Oil, Gas, and Chemicals,” Deloitte noted that “the industry’s reputation as a reliable employer has been challenged following big layoffs and heightened cyclicality in employment triggered by recent subsequent downturns and the pandemic.”
Deloitte analysts offered optimism that the oil and gas/chemicals sectors would eventually “reboot and revitalize” based on their historic fostering of “human ingenuity, innovation and grit.”
Sources like Deloitte and the global GETI studies underscore that there may be a misalignment between the speed of the global transformation in oil and gas and chemicals and companies’ shifts to catch up with the transition.
Deloitte cited examples of this — small amounts (1% to 2%) of oil and gas capital expenditures went to green energy projects in 2019 and less than 15% of industry job postings were looking for analytical/mathematics majors in an era of digitalization throughout U.S. industries.
It also concluded that nearly half (45%) of the oil and gas personnel are tenured and targeted to retire in the next five to seven years, during a time when the numbers of petroleum engineering college majors have dropped 15% to 20%, according to Deloitte’s study.
These gaps come at a time when GETI’s work this year showed oil and gas companies badly in need of more qualified, highly skilled college graduates, at a time when the industry counts those type workers as only 4% of its current overall workforce.
“That’s a gap that needs to be filled,” said Airswift’s Donaldson. “We are experiencing a significant talent shortage in the Permian Basin region. This has always been a boom–bust region, but we now expect to see rotation packages offered [to workers] to shuffle in talent from neighboring states.”
Based on years of experience in analyzing oil and gas and other workforce environments globally, Airswift officials see the latest results of GETI as indicating that the best recruitment and management replacement programs develop when operating companies allow third-party consultants to “build a close relationship” with line management, to obtain a more realistic understanding of the organizational culture.
“Culture makes a big difference in gaining that edge in recruitment,” Donaldson said.
Examples often cite exemplary workforce programs in the energy industry at companies like ENI, XTO, Occidental Petroleum Corp. and Shell plc. Elsewhere there are models found in firms like Nutrien, eVanik, Rohm and Brightmark.
Deloitte executives mirrored these thoughts in their 2022 study that called for more “organizational agility” going forward, challenging traditional ways of functioning and working with partners. Deloitte sees the current tumult as an opportunity for companies to reposition themselves.
“This is the time for strategists to make bold choices that affect the work of tomorrow, and to adopt redesigned, cyber-physical teams and embrace a digital workplace culture as a basis for future innovation,” said Kate Hardin, executive director of Deloitte’s Research Center for Energy and Industrials.
‘Massive Demand’
In 2022’s tight labor markets, oil and gas companies hold some inherent advantages in attracting new technical talent given the companies’ experience in regularly delivering multimillion-dollar and billion-dollar projects on time, on budget and with the appropriate environmental impact mitigation measures.
“As the oil and gas companies transition to carbon neutrality, I believe they have the track record to show that multibillion-dollar projects will be delivered, giving them a strong reputation in the market for candidates who want to make a difference,” Donaldson said.
The GETI report revealed that more than half of the energy transition workforce is younger than 35, and Donaldson notes that Airswift has seen what he calls “massive demand” for transitioning oil and gas workers into these emerging U.S. markets, “since many of the skills these workers possess are transferable, such as engineering, construction, safety and project control.”
He said with the offshore wind market picking up in the United States, these projects are looking at the oil and gas offshore workforce as “their main pool of talent.”
GETI examined 25 different permanent and contract positions from accountants and administrators to reservoir and welding engineers, tracking their average pay across all the continents. More than North America, Europe or Asia, what the researchers classify as “Australiasia” by far holds the highest salaries for the 25 different jobs, which may be an offshoot of the fact that survey respondents still favor Europe, the Middle East and Asia, in that order, as places to work.
“Looking at salaries [in 2022], one thing is immediately obvious versus last year – the oil and gas sector is back,” the GETI survey authors noted. “Nearly a third of professionals reported an increase in pay, compared to a fifth (21%) reporting pay cuts currently.”
Oil and gas companies are on the right track in terms of workforce issues, but “the job isn’t done yet in terms of rebuilding that faith in the sector’s ability to reward its professionals,” said Airswift’s Marx. Reacting to the GETI’s finding that 58% of hiring managers see engineering skills as among the most critical in sourcing talent, Marx sees this as “another demonstration of the current status of the sector and the [ongoing] energy transition. Respondents [to the survey] recognize this great state of flux, and therefore, emphasize the skills that make an individual or team resilient and flexible in the face of change.”
