E&P industry in major transition, human resources the main driver of production growth
Schlumberger Business Consulting (SBC), the management consultancy arm of Schlumberger, today released the 2011 Oil & Gas Human Resources (HR) Benchmark Survey – the annual review of trends and developments in technical staffing within the exploration and production (E&P) industry. The latest report highlights the diverging forces within talent management in the oil and gas industry resulting from changes in demographics, the increasing technical complexity of resource exploitation, and the challenges of developing pools of talent with the required experience and competencies.
Now in its eighth year, the Oil & Gas HR Benchmark Survey demonstrates that upstream companies, regardless of size, should consider human resources policy and competency management as key objectives. High-growth companies have more technical resources proportionately and more pragmatic HR policies than low growth companies. This year’s survey attracted a record number of respondents with 37 participating upstream companies accounting for approximately 37% of global oil and gas production.
The E&P industry is going through a major transition
The global surge in interest and activity in unconventional oil and gas resources and the growth of deepwater exploration and development have raised the complexity of technical challenges, both in geosciences and in petroleum engineering, and have increased the difficulty of hydrocarbon exploitation.
In parallel, the E&P industry is going through the ‘big crew change’ in which the generations of geoscientists and petroleum engineers, or petrotechnical professionals1 (PTPs), hired before the sweeping recruitment cuts of the mid-1980s are now approaching retirement. The 2011 survey estimates an outflow of more than 22,000 senior key PTPs by 2015. This equates to a net loss of more than 5,500 experienced PTPs in the same timeframe. The recruitment of new graduates will compensate this loss in total net numbers of PTPs, but will not fill the experience gap.
These pressures on the industry’s technical workforce threaten the timely completion of projects. Of the respondents in the 2011 survey, up to 70% of national oil companies (NOCs), 60% of major international oil companies (IOCs), and 45% of independent companies acknowledged project delays due to staffing difficulties.
Participating companies reported mid-career recruitment targets significantly higher in 2011 than in 2010 with an increase of more than 60% by the majors, which are being severely hit by the retirement of senior PTPs. The imbalance in supply and demand of experienced PTPs has resulted in an increase in attrition rates. Attrition in the geosciences now varies from 4% to 5% on average versus 2.6% to 4% in 2010. For petroleum engineers, turnover ranges from 4.5% to 7% in 2011 versus 3.5% to 6% a year earlier.
Oil-rich developing countries have become increasingly ambitious in their targets for national recruitment by local subsidiaries of foreign operating companies. This trend towards nationalization of talent within the E&P industry is a major challenge in many countries where there is often a lack of experienced local staff, especially in emerging oil and gas producing nations. Today, it is not unusual for regulatory bodies to set recruitment targets for nationals at 80% to 90% of middle management positions.
Although NOCs, IOCs and independent operators are slowly building national workforces, the acceleration of requirements by governments and state agencies is stretching companies’ capabilities. Competency development programs require time for education, but there is also a need for a shift in culture and people management. Even though many companies are international in terms of operations personnel, the top executives of major IOCs remain almost exclusively from the home country.
HR is the main driver of long-term production growth
Human resource polices have a measurable impact on production growth. First, high-growth companies tend to have a higher ratio of PTPs per unit of operated production, known as PTP Intensity*, than lower-growth companies. PTP Intensity is a concept developed by SBC showing the correlation between number of technical people in the company (PTP intensity) and organic growth of operated production. Second, in terms of management, high-growth companies show more diversity and flexibility in developing their talent pool.
The 2011 HR Benchmark survey shows that high-growth companies, whose portfolios often contain unconventional or deepwater assets, employ more technical people than their lower-growth peers. The lower-growth companies with complex portfolios and fewer PTPs may only demonstrate production growth of 0.5% to 2% per annum. Complex hydrocarbon exploitation coupled with a high number of PTPs show a statistical correlation to higher growth.
This year’s survey found that high-growth companies tend to foster diversity in the workforce, implement innovative competency development programs, and demonstrate flexibility in career management.
• High-growth companies have more women in their technical talent pool. In the geosciences, 27% of PTPs were female in the high-growth survey participants versus 18% in lower-growth companies. Among petroleum engineers, the female ratio was 19% for high-growth companies versus 11% for lower growth.
• The same segmentation applies for HR policies. For example, high-growth companies tend to have a faster recruitment process; they frequently employ retired staff on a consultancy basis to serve as mentors, coaches or experts; they typically have fewer barriers to promotion; and training is more often on the job than in classrooms.
For all companies, whatever size or growth rate, the development of key capabilities remains the biggest hurdle in talent management. The concept of ‘time to autonomy,’ developed by SBC in 2006, has become a key indicator that companies seek to reduce. Faced with the prospect of steadily rising demand for oil and gas in the next two decades, and increasing technical challenges to meet that demand, the most successful E&P companies should consider HR as the main driver for long-term production growth, both in terms of PTP Intensity and talent management practices.
For more information, visit www.sbc.slb.com.