Workforce outlook: Industry must consider new strategies to attract, retain next-generation employees

Surveys show that negative perceptions of oil/gas industry is pervasive among younger generations, and companies must adapt to changing workforce needs

By Kelli Ainsworth, Associate Editor

The oil and gas workforce has shrunken considerably as a result of the global downturn. An April 2017 Rystad Energy report found that the top 50 oilfield service companies, including drilling contractors, had eliminated 300,000 upstream jobs worldwide since 2014. This represented a devastating 35% of the total workforce at these 50 companies.

At the same time, it’s believed that increasing energy demand in the coming years will create a critical need to attract, develop and retain talent in the oil and gas industry. Paul de Leeuw, Director of the Oil and Gas Institute at Scotland’s Robert Gordon University, said in a presentation at the 2017 Offshore Europe that an additional 4 million oil and gas workers will be needed globally in the coming years. This will be driven by a need to develop 120 million BOED of new production by 2035, he said. “That’s equivalent to eight Saudi Arabias, 50 TOTALs and 70 North Seas,” he said on 7 September in Aberdeen.

Most of these 4 million workers will be added in three regions where energy demand will rise the most, according to Mr de Leeuw: the Middle East, North America and the Commonwealth of Independent States (CIS). Production in these three regions is expected to increase by 13 million BOED, 10 million BOED and 6 million BOED, respectively, by 2035.   

Mexico represents another area of significant production and job growth in the coming years, as international oil companies begin exploring and producing in the country following the reopening of its energy markets. Mexico currently produces an estimated 2.3 million BOED and will need to grow its production by 3 million BOED by 2035-2040, Mr de Leeuw said. Further, an estimated 90% of this future production will come from developments that are not currently on-stream. “By 2035 to 2040, Mexico is basically going to create another Mexico. That requires a huge amount of new skills and capabilities.” He estimates that the country will need to hire an additional 114,000 people in the oil and gas industry.

At the same that the industry will need to bolster its workforce, many of the people who were laid off during this downturn will likely not return to the industry, according to a survey conducted by Newhouse Consultants and the University of Houston Center for Applied Psychological Research. The survey was conducted from October 2016 to January 2017, and its 530 participants had all lost jobs in the oil and gas industry within the past two years and had a median age of 53.

Among those surveyed, 62% were still unemployed, 13% were reemployed in oil and gas, and 25% were reemployed but in other industries. This means that, of all the respondents who had already found employment again, 66% of them were working outside the oil and gas industry.

Further, 55% of the survey’s respondents reported that they were considering leaving the industry for good within the next 12 months, and 71% reported feeling anxiety or uncertainty about the industry’s future. This anxiety could keep many employees who are now working in other industries from returning to oil and gas when they have the opportunity, Bob Newhouse, President of Newhouse Consultants, said. “You definitely see comments to the effect of ‘I’m done with the industry, this is my second downturn or third downturn.’ At the same time, there were others saying, ‘This is the best-paying industry for me. I really want to get back in.’”

Automation creating new job descriptions

Laid-off employees who do choose to return to the oil and gas industry will doubtlessly need re-training. Within just the past three to four years, the industry has already made significant progress on automation and digitization that has reshaped a multitude of job functions.

In fact, nearly every job that exists on the rig today will be reshaped by automation in the coming years, Mr Newhouse said. “Ten to 15 years ago, if we let a bunch of people go, it would have been an identical environment when we hired them back,” he said. “But now the environment is shifting pretty rapidly with digitization.” Rehired employees will need to learn the skills necessary to work with highly automated rig systems that have become more much common since many of these employees were laid off.

Community colleges will likely play a key role in this process, he continued. “Education partnerships (between the industry and colleges and universities) are critical to get more people developing the right skill sets, and that’s not just handling tongs,” he said. “It’s understanding programmable logic controllers. It’s understanding systems that interact with each other. It’s understanding the data that comes off the new rigs.”

He pointed to the IADC Gateway Program as an example of an industry-community college partnership that is preparing rig employees to work with the latest rig technologies.

As the industry continues to transition away from the older, manual rigs of yesterday to the modern, automated rigs of tomorrow, personnel with skills across the spectrum will be urgently needed. “We’ll need roustabouts and floorhands, but we’re also needing data scientists and software engineers to start making sense of all of the data that’s coming off all of this equipment,” Mr Newhouse said.

Data scientists and software engineers have already become a hot commodity as the world’s digitalization evolution continues, which means multiple industries are in need of their knowledge and skills. In particular, industries like ours are competing with tech companies in Silicon Valley for these talents, often not to our advantage. Tech companies are known for offering financial, cultural and lifestyle benefits that young people desire. They also excel at highlighting the opportunities they provide for young people to design and work with the cutting-edge technology.

Overcoming perceptions

While the oil and gas industry generally recognizes that it has a people problem, a poll conducted by Ernst & Young (EY) this year is putting into perspective exactly how the industry is perceived and how that perception might be affecting its efforts to attract and retain a new generation of employees. The Oil and Gas Perception poll was conducted online in January and February 2017 and sampled 1,204 Americans ages 16 and older. A total 28% of respondents were Millennials – currently ages 20-35 – and 7% were Generation Z – currently ages 16 to 19.

Not surprisingly, the poll revealed that Generation Z and Millennials do not tend to view the oil and gas industry favorably. Overall, 62% of Generation Z and 44% of Millennial respondents found the prospect of a career in the oil and gas industry to be unappealing.

One of the primary reasons for this negative perception is simply because, throughout their early lives, all they’ve known is a growing focus on renewable energy. The need for fuel efficiency and hybrid or electric vehicles are almost taken for granted, not as something new. Further, damage from spills or incidents like Macondo has shaped their view of the industry, said Rachel Everaard, Principal/Partner – People Advisory Services for EY. “Generation Z, in particular, is focused on environmental impacts and clean energy,” she said. According to the survey, 57% of that generation said they believe the oil and gas industry is harmful to society.

To counter this perception, the industry must do more to highlight its investments in environmental protection. For example, the industry has invested in bi-fuel engines that burn natural gas instead of gasoline or diesel on drilling rigs in order to lower emissions, but this is not widely known outside of the industry.

“Companies outline the work they’ve done to minimize their environmental footprint in their sustainability reports, but they just put these reports on their website,” Ms Everaard said. “They could do more to fully inform the public – and their potential talent pool – about the work they’re doing.”

Another finding from the poll was that young people don’t view oil and gas as important to the future energy mix. A total 56% of Generation Z said that they don’t believe fossil fuels will be important when they reach their grandparents’ ages, and 71% of them believe that renewable energy is the fuel of their generation. “Part of this is the renewable and alternative energy mindset that has pervaded much of their lives,” Ms Everaard said. “But also, this generation is much more likely to use public transportation or alternatives like biking to work or ride-sharing services.”

But those within the oil and gas industry know that petrochemicals are used for much more than fueling cars. We know that they’re critical in the manufacture of everyday items, from umbrellas to car dashboards and even life-saving medical equipment like MRI scanners and artificial heart valves. “There are a lot of commercials by chemical companies around plastics being used in hospitals to save lives, but you don’t see that message throughout the oil and gas industry,” Ms Everaard said. “That is an area where they can improve.”

Mr Newhouse pointed to ExxonMobil as one of few oil companies that have aggressively worked to publicize the benefits of oil and gas. Through its “Energy Lives Here” campaign, “they’re talking about innovation and how their engineers are doing things that help society build and create things. The notion that just about anything you touch is made out of petroleum-based products and that oil and gas really drives manufacturing and economic development is something that needs to be out there. But it doesn’t seem as well represented as it should be.”

Last year, IADC also kicked off a campaign to educate the public about the importance of drilling and of oil and gas. The DrillingMatters.org website provides a series of multimedia modules that show and tell, in layman’s terms, the value that oil and gas provide and the work that goes into extracting these resources. The “More than a Fuel” module, in particular, highlights the myriad uses of oil and gas. The goal is to make the public aware of how often they interact with petroleum-based products in their daily lives and how oil and gas products enrich their standards of living and life expectancy.

Another common perception among the Millennial and Z generations is that all oil and gas jobs are dangerous and manual labor. According to the EY survey, 72% of Generation Z and 71% of Millennials believe working in oil and gas is dangerous, while 69% of Generation Z and 70% of Millennials believe the jobs are physically demanding. Additionally, 23% of Generation Z and 25% of Millennials believe that the industry does not pay well, and 37% of Generation Z and 48% of Millennials perceive that industry jobs require little to no education.

These perceptions must all be countered if the industry is to succeed in attracting and recruiting new talent. Ms Everaard suggested, for example, that companies could emphasize images of employees working in labs or with computers, instead of images of a man in a hardhat and coveralls. “When people think about a big oil company, they think of the gas station or of an offshore driller,” she said. “They don’t think of the corporate environment, the people doing engineering or geoscience or data analytics, which is what a lot of the organization actually ends up doing.” Diversifying the images the industry presents to the public is one small step that could be taken to help the shift of perceptions.

Delivering benefits

Besides working to change perceptions, the industry must also deliver the goods if it wants to attract and retain new employees. In the EY survey, Millennials and Generation Z ranked salary, work-life balance and on-the-job happiness as their top three must-haves in a job.

The oil and gas industry typically does pretty well with compensation, but companies should also examine the forms of compensation they’re offering to new talent. Younger workers are far more attracted to cash benefits and stock options than long-term benefits like pensions. This is because they are far less likely than previous generations to stay with a single company for the duration of their career.

Further, 63% of Millennials owe at least $10,000 in student loans, according to a survey by PR and communications agency Padilla. “We know that the younger generations are not necessarily looking for a place to work for the next 30 years,” Ms Everaard said. “So the idea of having something like a pension that they won’t be able to tap into isn’t as attractive.”

The other two of their top three needs – work-life balance and on-the-job happiness – are less tangible but no less important. Some progress has already been made, with companies offering things like flexible work hours, work-from-home days and more generous family leaves. “While oil and gas is still pretty conservative in the type of benefits it offers, we are starting to see a trend in moving more towards what the high-tech companies do, and that is directly as an impact of the ability to recruit Millennials and Gen Z,” Ms Everaard said.

Family leave plans, in particular, are important to young women – a demographic that the industry is still challenged in recruiting. This year, Shell announced a global standard of 16 weeks paid maternity leave for its employees beginning 1 January 2018.

“More substantial family leave policies help recruit the younger generation that’s going to be thinking about starting a family,” Ms Everaard said. “These policies are also more aligned and competitive with the more generous policies of the high-tech industry.”

Some oil and gas companies in the US are also starting to build campus-like environments akin to those offered by tech companies like Google or Facebook, which offer perks like diverse and healthy dining options, gyms and green space. ExxonMobil’s 385-acre campus in the Houston area is one example. In the oil hub of Houston, there’s also been increasing investments in the development of green spaces, public transportation and downtown revitalizations to lure young residents.

Although progress in providing flexibility to next-generation employees can be spotted around the industry, change on a wide scale has proven difficult so far, said Namita Shah, President of People and Social Responsibility for TOTAL, during a panel session focused on the industry’s workforce at Offshore Europe. “As an industry, we struggle with that because our projects are very long term,” she said. “Even though intellectually we understand that flexibility is the key, we struggle with how we’re able to do that in the technical work.”

To overcome this, the industry may have to become more imaginative. Speaking at the same panel as Ms Shah, Bob MacDonald, CEO of Specialist Technical Solutions at Wood Group, said there is no one answer to this challenge. “All employers need to be thinking of flexibility and working with employees to really open up the future,” he said. “As an example, we have a line pipeline engineer who has a great hobby in snowboarding. He happily works long hours during the summer, which is the peak season for the work that he’s involved in, and he disappears and takes all his holidays and quite often unpaid leave and goes away for the snowboarding season. That’s one example. You just have to multiply that by 30,000 and accept flexibility, and you’ll start to get to the point where retention is a little bit easier.”

Besides flexibility, some companies are also focusing on facilitating career growth as a means of retention. At Saudi Aramco, for example, where 50% of its workforce is 30 years old or younger, the company has invested heavily in training and development to ensure that employees remain satisfied with their jobs and choose to remain with the company, Nabil Dabal, General Manager of Learning and Development, said at Offshore Europe.

The company sponsors its top performers for advanced degrees at universities around the world. “We feel that, by doing this, we have students graduate and come back and work for us, but they will be more loyal to the company because they will feel like we’ve taken care of them since they were young,” he said.

Saudi Aramco also has 28 training centers for apprentice and vocational employees. High-performing vocational employees are sponsored for their bachelor degrees, and many have even gone on to receive PhDs with the company’s help, Mr Dabal said.

The company has also created summer programs for school-aged students to work for Aramco during summers, which allows them to gain a feel for the company and for oil and gas in general. “We feel this is a way to get them hooked to the industry and have them be aware of whether this is the career they want to go into,” he said.

In addition to its efforts to invest in employee education and growth, Saudi Aramco has made it a point to listen to its young employees when it comes to making decisions about the company’s future. Company management recognizes that these young employees will be the people who lead the company in the future, Mr Dabal said. Aramco has created a board solely with employees under age 35, who are tasked with challenging the company’s executives about the future of the company. “We think this is healthy and good for the company, and we think this is one way to keep the young generations within the company.” DC

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About the author

Kelli Ainsworth has a bachelor’s degree from Texas A&M University and a master’s degree from the University of Texas. She has been writing for Drilling Contractor since 2014.