Managing the labour force of a boom-and-bust industry is challenging by nature, but critical for maintaining profitability. Capitalizing on the opportunity of increased demand requires finding large numbers of qualified workers in a tight labour market. Shortages can drive up wages, decrease production and, as the North American oil and gas industry is currently experiencing, threaten to constrain a much needed recovery.
Service companies that struggle to staff-up are forced to turn down work, leaving money-making equipment sitting idle. As early as the first quarter of 2017, worker scarcity was reported as the demand for service rigs ramped up. The skills shortage has persisted, and companies are using recruitment fairs, signing bonuses, referral incentives and wage increases to attract qualified people. Going to these great lengths is costly and unfamiliar to industry accustomed to having jobs that were in high-demand and easy to fill.
Where did everyone go?
Where are the workers that fuelled the industry before the downturn? It seems even though oilfield wages remain some of the highest offered to trades and labourers, money isn’t enough to attract people because of other factors at play:
The past ten years have been a wild ride
The 2008 Financial Crisis that knocked the oil and gas industry off record high oil prices was followed by the 2014 downturn, which bottomed out at record lows. Producers spend conservatively as they rebuild and it appears oil patch workers are rethinking their employment strategies as well.
Competing industries are booming, too.
O&G relies on the transportation industry, but it competes with it for talent. The shortage of truck drivers in the Permian Basin is made worse by regulatory changes, pipeline insufficiency, and the skyrocketing volume of proppants and produced water to move. To keep up with rail transport demand, CP Rail is offering a $15k signing bonus to qualified conductors who can start immediately.
The Grey Wave
As baby boomers retire, what was once thought of as an opportunity for young people to enter the industry is emerging as a critical gap to be filled. In Alberta alone, the Department of Labour expects 3000 trades, transport, equipment operators and related occupations to retire every year from 2016 to 2025.
New tech advances puts O&G in competition with Silicon Valley
The innovative tech that has made drilling more efficient requires data analysts and other specialized tech experts to operate. But the digital wave is hitting every industry and the tech labour market hasn’t had time to adjust to the increased demand.
How can we solve it?
The oil and gas industry is in a unique position: the jobs in highest demand need qualified workers like trades people and operators with experience that can’t be taught in a classroom. Even if academic institutions could help the industry solve a skills gap, the time it takes to implement program changes wouldn’t have been responsive enough to address the recent oil price recovery.
Eventually, any skills gap is solved through the forces of supply and demand. Wages rise until enough workers are drawn away from other industries, but only as high as the break-even cost of producing oil will bear. If rising wages doesn’t attract enough workers for full production capacity, the economy won’t reach full potential. Higher wages contribute to rising inflation, as well. Overall, solving a skills gap with money isn’t the best answer.
There are two approaches to recruitment that don’t necessarily involve throwing money at the problem: creating a strong in-house training program to bring less-costly greenhands up-to-speed quickly; and identifying the skills you’re looking for in complementary industries.
Option 1: In-house training
Workers aren’t being trained on-the-job like they used to be. The unions that once offered skills training are in decline and there is speculation that spending time and money on in-house training can be a liability. The risk of losing considerable investment when workers they train leave for another company has outweighed the benefit, until now. Drilling companies like Precision Drilling have invested heavily in their training programs. They run two training centers that are equipped with fully functional rigs for hands-on experience. With a strong retention plan to reduce the risk of losing their investment, Precision is able to increase their workforce quickly with more accessible, less costly new employees.
Option 2: Finding complementary skills in other industries
Royal Bank of Canada recently released a report on what they describe as “The Coming Skills Revolution”. The insights in the report were gained through extensive research and data analysis. While RBC’s intention may have been aimed at helping young workers be agile through the upcoming technological shifts, the underlying concept is valuable for oil and gas service companies: core skills are as valuable as credentials, aka experience. The report groups occupations into skill clusters. Within a cluster, workers can move relatively easily between jobs because their important core competencies are strong. For example, the group labeled ‘crafters’ have high technical skills. Currently, they might be found as bakers or cashiers, but they would likely excel as a well testing helper or survey assistant. It requires a little creative thinking, but the underlying skill that makes a good equipment operator or motorhand is the same talent in a role outside of oil and gas as well.
The recruiting challenge is just one hurdle in a recovery that has been tougher than expected. There are many other challenges that service companies face when it comes to operational efficiency. At Aimsio, we know the pressure on service companies to do it faster and cheaper than ever before. We can help with that - it’s what we do. Click below to check out how we help our clients’ field operations work faster and more efficiently.