Offshore Oil Sector Faces Major Skills Shortage Yet Wages Must Fall Say CEOs

offshore europe students
File image (c) Offshore Europe via Flickr

reuters_logo1By Sarah Young and Stephen Eisenhammer

ABERDEEN, Scotland, Sept 6 (Reuters) – At one of the largest oil shows in the world in Scotland’s oil town of Aberdeen, hundreds of companies vie for new recruits, flaunting shiny drill bits and simulators amid free beers and women in tight work overalls.

The global battle for talent in the oil industry is clear at the SPE Offshore Europe conference set on a site bigger than four football pitches.

At a time when oil and gas firms are cutting costs to try to improve profits and save cash for dividends, they face a skills shortage that is leading to runaway wage increases.

A recent survey by Oilcareers.com estimated the UK alone would need to attract 120,000 personnel over the next decade to carry on production in the North Sea and replace a retiring workforce.

Exhibiting at the show, which feels like a giant freshers’ fair, was one way for the companies to attract young people into their ranks.

“Having a stand here is good for raising awareness of the company, particularly among students who might be looking for jobs,” Bruce Ferguson, managing director at equipment maker Hunting, told Reuters.

A group of six students from Perth High School in Scotland, weighed down with branded bags stuffed with brochures, sweets and stress balls, told Reuters they were on the hunt for scholarships to pay their way through university.

Starting salaries, which in oil and gas rank third behind investment banking and law according to Graduates.co.uk, are getting in the way of efforts to lower costs.

The problem is a global phenomenon with hourly earnings in the oil and gas sector in the United States having risen 62 percent over the past decade, according to that country’s Bureau of Labor Statistics. Job site Rigzone puts the global average salary in the sector at $98,000 per year.

Despite graduates struggling to get jobs in most sectors in recent years, oil and gas has bucked the trend with engineers and geologists in hot demand.

WAGES MUST FALL

Bob Keiller, chief executive of oil services firm Wood Group , told the conference in Aberdeen that pay needed to come down to accommodate the now-declining nature of the North Sea, where output has fallen by two-thirds since 2000.

“If we’re going to be truly successful in the second half of the North Sea industry, we really need to re-baseline our cost base, and quite frankly we need to do our business using fewer people and paying them less,” he said during a talk.

But with oil and gas employers telling an industry survey earlier this year that their major concern in the current employment market was a skills shortage, it doesn’t look like there will be room for manoeuvre.

“The money, that’s always got to be a consideration, it’s very good,” Nicholas Dubourg, 23 and studying engineering at Aberdeen University, said as he walked around an exhibition hall, chatting to potential employers.

He said he expected a starting salary of between 25,000 and 30,000 pounds ($39,000 to $46,800).

Lynsey Angus, about to start studying geology at Edinburgh University and at the show to secure summer placements, agreed.

“I’m told everyone wants petroleum geologists right now, so that makes my degree feel useful. Some people study something and then just end up working in a supermarket.”

One longer-term solution to the skills shortage is more automated and remote-controlled equipment, enabling unmanned platforms and cutting significantly the number of workers needed per barrel.

Andrew Gould, chairman of BG Group, said a technological jump was needed to keep North Sea production a viable business option.

“The solution to many of today’s problems with logistics is to use technology to reduce the number of people offshore.”