Saturday, October 06, 2007

Oil Industry Understaffed

Sources: Financial Times, Reuters, AOL Money and Finance, and BBC News

Hydrocarbon projects throughout the Middle East are being delayed due to shortages of skilled labor. Many producers are attempting to take advantage of record oil prices, but will eventually struggle to meet their ambitious goals due to harsh limitations. The shortage is projected to worsen over the next few years. The industry workforce is “dominated by people close to retirement and inexperienced graduates.” This could affect producers worldwide, since the Middle East and Libya account for approximately 20% of production. The Financial Times explained, “The global oil and gas industry is expected to face a 15% shortage of qualified engineers by 2010.” In fact, there are not enough engineers to meet the 2007 expectations of production and demand according to Pritesh Patel of the Cambridge Energy Research Associates (CESA).

The rapidly growing global fuel demand will most likely not be accomplished because of the shortage in specialist personnel. The expansion plans cannot be met without the necessary manpower. As workers began receiving pensions, producers increased investment, which will lead to disaster. Producers need to replace leaving staff and add additional workers to accommodate the increase in demand. The shortage may be a long-term obstacle for the global market. Furthermore, costs of projects have currently skyrocketed due to the shortage of rigs and increased costs of raw materials.

Some production projects have been a complete failure because no producers bid for the work due to the complete lack of resources. The current average age in the oil industry is about 51 years. CERA expects that over 50% of the current workforce will retire by 2015. Even though the industry producers are fervently recruiting, “there will only be a 2% influx of new entrants in 2008, forecast to increase to 5% in 2010 as more graduates gain the experience necessary to work on complex projects.” The results will be increased costs and continued holdups.

In actuality, producers fear that recruitment troubles will “threaten the long-term future of the industry.” One part of the problem is that young staffers are currently finding work overseas rather than their home countries. As a result, producers will be unable to meet the same expectations in the same time frames. Many producers are hiring expert personnel to handle recruiting in order to encourage young employees.

Discussion Questions:
Will younger skilled staff members come through for the Middle East during crunch time?
To keep up with the industry, what new recruiting techniques are possible to get the necessary amount of new employees?

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