It is paradoxical to say that there is a scarcity of talent in the oil and gas industry yet when we look at the jobless rates in the West – particularly the United States, Spain, Italy, France and Portugal – they range from around 7.5 per cent to more than 25 per cent.
In the Middle East, 30 per cent of youths are unemployed. In the GCC, we have had unemployment rates exceeding 10 per cent, although recent government initiatives have slightly reduced them.
So how is that we have a lot of people desperately looking for jobs yet we have a shortage of talent?
Unfortunately for the regional governments, the industry is not labour-intensive (which is fortunate for industry executives), employing only around 4 per cent of the GCC workforce.
The industry is, however, heavily reliant on technology and knowledge, requiring people with specific skills to be productive. Such talents are in short supply, and the universities are not producing enough of them.
According to a study by the oilfield services giant Schlumberger, in the next few years 22,000 such professionals will leave the global oil and gas industry and they will be replaced by only 17,000 people – a looming net loss of 5,000.
Although there is a big shortage of professionals, the lack of capability is even bigger. If we take a snapshot of the size of the workforce of any GCC national oil company, we will find a double-humped curve.
Of the two humps, one represents the influx of a large number of inexperienced employees – mainly the nationals of that country. The other shows the exodus of many experienced employees – mainly expatriates. Between the two, we have a gap of employees with enough capability to smooth out the transition between the two groups.
Is the issue unique to the GCC’s oil and gas industry? It is well documented globally. Regardless of what we use to describe the challenge – for instance, Talent Challenge, Talent Crisis, Talent Shortage or Big Crew Change – it is not solely endemic to the GCC’s hydrocarbons industry. Indeed, the global industry is finding it increasingly difficult to fill the positions vacated by seasoned technicians.
Is this our first time facing this challenge? No, the oil and gas industry experienced a shortage of talent in the 1970s and 1980s when oil prices shot up uncontrollably, mainly because of the Arab-Israeli war in 1973 and the Iranian Revolution in 1979.
They set off alarms among major oil importing countries and triggered panic to find more oil outside the Middle East. Consequently, a flurry of oil exploration and development activities were initiated in the North Sea and the Gulf of Mexico.
Today’s precipitous upsurge in oil and gas activities demands more manpower to manage projects and run operations. Unfortunately, meeting that need is not as easy as opening a water tap to quench our thirst. There has therefore been a scramble for talent, with oil companies poaching staff from one another.
The problem is a continuation of the talent challenge that started at the dawn of the new millennium when the world economy started to pick up again – after a series of economic dampening events such as the 1997 Asian financial crisis, the bursting of the dot-com bubble in the 1990s, and the 2001 September 11 attacks.
Although the recent global financial crisis – and the consequent drop in economic growth, oil demand and prices – acted as a short respite for hydrocarbons companies, the world economy started to revive in 2010.
The growth of energy-intensive economies (such as China and India’s) and the quick economic recovery in the United States caused a fast rebound in oil demand and crude prices, leading to a spike in oil production activities.
With current oil prices hovering around US$110 per barrel and the hydrofracking breakthroughs, production from many previously uneconomic areas has become viable, raising the demand for talent again.
There are differences between the talent challenge of today and those in the late 1970s and early 1980s. In those decades, the world was less globalised and the mobility of talent was more restricted at the regional and local levels.
However, the world is flat now and the war for talent is global. Also, the old reality was that people were willing to give their lifelong loyalty to one company in return for job security. But the new reality is that employees today are seeking meaning and growth, and are not easy to retain.
Furthermore, the demographics are not in the favour of the hydrocarbons industry, especially in the developed world.
The United Nations estimates that by 2025 the number of people aged between 15 and 64 will decrease in Germany (7 per cent), Italy (9 per cent) and Japan (14 per cent).
Although the GCC and other developing regions will have favourable demographics, their challenge will be to produce competent science, technology, engineering and mathematics graduates.
According to the McKinsey Global Institute, although China and India produce large numbers of engineers, only 10 per cent of Chinese engineers and 25 per cent of Indian engineers are employable globally.
The hydrocarbons industry’s talent crisis is real and has been affecting many companies.
Those who manage and develop skilled professionals effectively will be able to meet their long-term strategic objectives.
But those who are still experimenting with talent management or are unsure about its merits will suffer severe consequences.
Ebrahim Hashem is a senior adviser in business strategy and corporate governance at an Abu Dhabi-based company. Contact him via twitter @EbrahimHashem