TALENT & TECHNOLOGY

Technical Talent Shortage

Could Begin to Limit Growth
Jean-Marie Rousset, Pierre Bismuth, and Olivier Soupa, Schlumberger Business Consulting

How do you transition an industry and gives insights into an often misun- file with its recognizable double-hump
from conservative and slow moving in derstood and underestimated element of young and senior petrotechnicals
terms of human resources (HR) strate- of the global oil and gas industry: tal- surrounding a gap of midcareer profes-
gy to pro-active, responsive, and ready ent requirement. sionals (Fig. 1).
to take risk? This is the quandary fac- The 2010 survey shed light on two The right hump on Fig. 1 is about
ing exploration and production (E&P) important facts for the industry’s supply to disappear and the 2010 benchmark
companies at a time when a “big crew chain of talent: the demographic transi- confirms that this last episode of the
change” is under way. The industry tion or “big crew change” is now taking “big crew change” is happening now
will see a serious shortfall of expe- place, and technical talent has become and will be mostly over in five years.
rienced technical professionals from a true strategic enabler for delivering The detailed demographic statistics
attrition in the coming five years when production and future growth. obtained through the survey provide a
the call on technical expertise will better view of the mechanisms at play.
be greater. An increasingly stringent Demographic Transition From a quantitative perspective, the
post-Macondo regulatory environment More than 25% of petrotechnicals cur- total number of autonomous petrotech-
and new frontier and unconventional rently working for E&P companies nicals will decrease by about 6% or
oil and gas plays will leave companies are older than 50 years of age and the 5,000 professionals. This is a relatively
struggling to maintain current opera- vast majority will retire in the next five small loss that hides a much larger
tions and drive growth. years. This is the generation of profes- outflow of about 27% or 22,000 of the
Schlumberger Business Consulting’s sionals who joined the industry during current pool of experienced petrotech-
(SBC) annual Oil & Gas HR the late 1970s and early 1980s at the nicals and partially offset by the inflow
Benchmark survey provides informa- peak of the oil and gas expansion cycle. of 17,000 younger petrotechnicals who
tion on trends involving petrotechni- The crisis of 1986 marked the brutal are reaching autonomy. E&P com-
cal professionals, namely geoscientists end of that expansion and the begin- panies should already have transfer
and petroleum engineers. Compiled ning of a long period of anemic recruit- provisions in place to ensure that the
from the responses of oil and gas ment that lasted nearly two decades transition between the 22,000 veteran
companies and universities, the study and created an irreversible void in the petrotechnicals and the 17,000 less
has become a reference point for E&P ranks of today’s midcareer profession- experienced petrotechnicals does not
executives seeking to understand als. The vigorous upcycle of 2003 to result in a huge loss of knowledge and
industry trends and develop HR strat- 2008 has provoked a rapid and impor- experience from the industry.
egies that provide a competitive edge tant uptick in graduate recruitment (a On the left side of the demographic
and sustainable business performance. three-fold increase). This has finished profile, we start to see the other chal-
The survey highlights best practices shaping the sector’s demographic pro- lenges facing the industry: finding,
recruiting, and developing a growing
number of young petrotechnicals to
Pierre Bismuth is a senior HR adviser for Schlumberger. He has been with Schlumberger address the need of producing more
for 34 years and was group vice president of HR for 10 years. He also advises interna- complex hydrocarbons. Indeed, most
tional companies on the design and implementation of global HR strategies. energy scenarios predict that oil and
gas will remain a large part of the pri-
Jean-Marie Rousset is a vice president of Schlumberger Business Consulting. He has mary energy mix for at least the first
more than 14 years of management consulting experience in organization, HR, and large half of this century and will continue
transformation programs in the oil and gas, automotive, and technology industries. to grow for many years to meet the
demand of emerging countries and
Olivier Soupa is a senior manager at Schlumberger Business Consulting. He has 10 developing economies.
years of management consulting experience in organization and transformation in the There were some positive signposts
energy sector and oversees publication of the annual SBC Oil & Gas HR Benchmark. from this year’s survey for which
action and planning today would bring

46 JPT • JUNE 2011

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TALENT & TECHNOLOGY Loss of Experienced PTPs

–5,000
82,000
77,000
21 800
21,800
16,800
PTP, %

2009 Flow Flow 2014

Age, years Actual Out In Forecast
Fig. 1—The large turnover of retiring industry personnel to a younger workforce is under way. The graph dis-
plays the percentage of petrotechnical professionals (PTP) per age category on a global basis. The number of
experienced petrotechnicals is expected to drop by 5,000 professionals between 2009 and 2014. Experienced
petrotechnicals refers to those age 35 and older.

sustained success later. First, gradu-
ate recruitment targets are rising. In
the survey, E&P companies reported
recruitment targets for 2011 are up by
15% compared with the same targets
reported in the 2009 survey. This will
not alter the demographic shift from
a senior-centered to a young industry,
nor will it compensate the loss of expe-
rienced petrotechnicals, but it does
mean that over time a new generation
of technical talent will evolve and
develop to face the challenges of new
frontiers such as deep offshore and
unconventional oil and gas.
Second, the global supply of gradu-
ates in both geosciences and petroleum
engineering exceeds the total demand
from companies. Even when remov-
ing the high percentage of the gradu-
ates not intending to join the E&P
sector—more than half of geoscience
graduates in North America—there is
still adequate supply to cover demand.
The difficulty arises when quality is
targeted. The supply of graduates from
the subset of higher-ranked universities
that have traditionally provided the oil
and gas industry with most of its gradu-
ates barely covers demand (Fig. 2).
This apparent global balance of sup-
ply and demand hides alarming regional
imbalances. For example, Angola pro-
duces approximately 100 petrotechni-
cal graduates per year but local demand
is more than 10 times higher. Helping
educational systems and channeling
the best engineers toward the oil sector
should be one of today’s top priorities.

DEMAND AND SUPPLY OF GRADUATES IN DEMAND AND SUPPLY OF GRADUATES IN

GEOSCIENCES PETROLEUM ENGINEERING
Number of graduates
graduates, excluding China Number of graduates
graduates, excluding China
12,000 12,000

10,000 10,000
pp y available for the industry*
Supply y

8,000 8,000

Supply available for the industry* Supply from quality universities**

6,000 6,000
Supply from quality universities**

4,000 4,000

2,000 2,000

0 0
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Global Demand for G&G Graduates Global Demand for PE Graduates

Net Supply of G&G Graduates in Selected and Preferred universities Net Supply of PE Graduates in Selected and Preferred universities
Net
N t Supply
S l off G&G Graduates
G d t in i allll universities
i iti Net
N t Supply
S l off PE G
Graduates
d t in i allll universities
i iti

Fig. 2—World demand and supply of graduates in geosciences and petroleum engineering.

48 JPT • JUNE 2011


EVOLUTION OF PTP INTENSITY 2010–2015
All PTP and Experienced PTP Intensity per peer group
PTP Intensity for All PTPs
2010 2011 2012 2013 2014 2015
Fig. 3—Evolution of petrotechnical intensity from 2010 to 2015 reveals
different stories for Western independents, majors, and national oil
companies (NOCs). While Western independents and majors will have
higher petrotechnical intensities in value, NOCs will experience rapid
petrotechnical intensity growth with a general decline for majors.
Technical Experience
a Strategic Enabler
E&P companies have long felt a lack in
technical talent, yet few have recognized
the issue as a strategic one that would
curb their development ambitions.
Before the recent boom, the oil and
gas industry had undergone 20 years
of rightsizing, and temporary human
resources capacity issues could be easily
resolved by tapping retired profession-
als who could be contracted as needed.
As easy access to a large technical tal-
ent pool diminishes, it will become
increasingly important to develop and
maintain internally the right number
of petrotechnicals to deliver current
production and to enable future growth
plans. What is this right number?
The 2010 SBC survey has explored
the notion of petrotechnical inten-
sity: the ratio between the number
of petrotechnicals and the number of
operated barrels of production. At the
first level, we found that this ratio
reflects a relatively good correlation
between production and petrotechnical
head count. A more interesting find-
JPT • JUNE 2011
Average Operated
Production CAGR 2005-10
Western
6.7%
Independents
Majors 0.7%
NOCs 0.2%
ing is the strong correlation between
petrotechnical intensity and operated
production growth. Faster-growing
companies have a higher petrotechnical
intensity than other companies.
By grouping companies with similar
petrotechnical intensity, one can identi-
fy four segments: (1) Western indepen-
dents with the highest petrotechnical
intensity and the highest growth rate,
(2) majors and (3) international nation-
al oil companies with lower petrotech-
nical intensity and lower growth rates,
and (4) national oil companies with
lowest petrotechnical intensity for a
relatively stable production. A more
careful analysis of these four segments
shows that they share more than just
similar petrotechnical intensity and
growth rates; they also tend to have
similar demographic profiles and simi-
lar HR challenges. The survey pro-
vides a detailed comparison of their
HR practices that is outside the scope
of this article, but demonstrates that
petrotechnical intensity may be used
as a leading indicator of the growth
potential of each segment. We also
have created a workforce model that
forecasts petrotechnical intensity based
on a company’s demographic profile
and other HR parameters including
recruitment and attrition rate. Fig. 3
illustrates the trend for the next five
years suggesting that Western indepen-
dents will be in a position to reinforce
their growth leadership and national
oil companies will regain some growth
capacity, while majors will lose some
growth capacity.
A New Mind-Set
The need for more petrotechnicals,
the ongoing “big crew change,” and
the gap in midcareer professionals are
compounded by a shift toward uncon-
ventional geologies and reservoirs and
a more stringent post-Macondo regu-
latory environment. These issues will
have serious consequences on projects
and production capacity. Two-thirds of
the 2010 survey respondents reported
staffing issues with the potential to
delay projects and increase the level
of risk supported by these projects.
Mitigation steps involve a combination
of technology to boost petrotechnical
productivity, standardize project work-
flows and tools, and the outsourcing of
non-core competencies.
The tight availability of technical
talent will become a limiting factor
for growth and eventually a risk fac-
tor. As experienced in 2006–2008, the
market for experienced petrotechnicals
is expected to become extremely tight
in the foreseeable future, driving up
salaries, and reliance on experienced
hires to mitigate staffing problems
will become a more expensive and
risky proposition. In this context, E&P
companies need to adapt quickly and
improve talent management policies
in planning, recruiting, development,
staffing and attrition. The potential
exists to accelerate people develop-
ment. The SBC benchmark surveys
over the past few years have shown
that focused development programs
supported by a combination of blended
learning and structured coaching tech-
niques can cut by half the time needed
to bring a new graduate to autonomy.
For this to happen, a new mind-set has
to emerge: The supply chain of talent
must be elevated from tactical to stra-
tegic on the management’s agenda and
technical talents have to be recognized
on the same level of importance as
managerial or functional ones. JPT
49