Addressing the Skills Shortage in the Oil and Gas Industry
The International Energy Agency recently predicted that the United States could be the largest producer of oil in the world as soon as next year. This is amazing news, considering that only 40 years ago the U.S. was brought to its knees when the Organization of Arab Petroleum Exporting Countries caused a nationwide gas shortage. Although there are many reasons for this renaissance, it is mostly due to technological advances in hydraulic fracking and horizontal drilling. These innovations have allowed rigs to extract oil from hard-to-reach areas and wells previously thought to have gone dry.
However, it is not all roses in the industry. These innovations have created unique problems, especially centered around labor. Although oil and gas production is expanding at an unprecedented rate, the entire operation could unravel if the industry cannot find enough skilled labor to manage the expanding operations.
Reasons for the Skilled Labor Shortage
It appears that the culprit behind the skills shortage is a matter of simple demographics and management’s desire to expand drilling operations.
According to the Interstate Oil and Gas Compact Commission, the average age of industry employees is between 46 and 49. Although it may appear like they still have a few more years of solid work ahead, the average age for retirement in the industry is 55, not 65 as in other industries. That means that within the next five years, the bulk of senior scientists and engineers could potentially be leaving the field.
A number of retirements wouldn’t be too bad if management wasn’t trying to couple that with an increase in drilling activities as well. According to the Oil and Gas Journal, over 23 additional rigs were established in the U.S. since the beginning of 2014. With an increase in activity comes a need for skilled and experienced workers.
The looming labor shortage crisis and management’s decision to expand operations has created a perfect storm for the labor market. There just aren’t enough skilled workers to go around.
Challenges Expanding the Labor Pool
If the situation weren’t already challenging enough, there is more to consider. Due to the technical nature of the industry today, the current open positions cannot be filled by simple laborers. They need to be filled by an individual with technical expertise.
New hires need to be experienced scientists and engineers who understand the technology, and can make contributions to operations immediately. According to some reports, it can take anywhere from 7 to 10 years to develop a senior engineer or scientist. The challenge then is attracting young technical workers into the industry today, so that they can take over when the older generation retires in the next 5 to 10 years.
The problem that arises with this strategy is that the labor pool for younger, technically trained workers is extremely competitive. As the industry becomes more specialized, it is frequently competing for the same talent pools as computer and aerospace industries and finding itself the ugly duck at the ball. It is difficult for oil and gas companies based in Houston, Texas, to recruit software developers and engineers when the technology giants are offering the glowing lights of Silicon Valley.
Automation: A Stopgap Solution
Companies that are serious about addressing the skills gap issue should consider investing more in automation. Although this is not a silver bullet, it can reduce the need for labor at the lower level, and free up capital to invest in workers or recruiting at the Senior level.
One area that oil and gas companies should consider for automation is the management of their chemical inventories. To illustrate the potential of automation, let me share a story. I was recently touring the receiving docks of a local oil company when I noticed two workers manually recording the contents of chemical inventory into a spreadsheet. The entire process took them well over two hours to complete.
Alternatively, one full-time equivalent could have been saved if the chemicals had been received by a single worker equipped with a barcode scanner and a chemical inventory system. The total amount of time spent on receiving inventory would have been reduced to only half an hour.
Investing in automation will help reduce manual labor costs overall. These savings can then be invested in extending the recruiting pools or investing in educational development programs for current employees.
To continue this trend of increased oil and gas discovery and extraction, companies will need consider several avenues to address the labor shortage. One possible solution is implementing automation. If you would like to learn about automation options available from Accelrys, please visit our website today.