The Great Crew Change in the Oil and Gas Industry

The following post is taken from an article by Subsurface Consultants & Associates' Senior V.P. of Operations, Hal Miller. It was originally published in The Correlator, a publication of the Division of Professional Affairs of the American Association of Petroleum Geologists, and later in SCA's GeoLOGIC Q3 2011 newsletter.

With recent reports that the economy is back on the upswing, how do you see that affecting both the availability of experienced, senior-level geoscientists and the demand for their consulting services?

How is your business preparing for the Great Crew Change?

Changing Crews in the Middle of the Global Recession
By Hal Miller

The oil and gas industry has been fretting about the imminent loss of oil finding and producing talent for years now. The generally acknowledged passage of the baby boom demographic bubble, those of us born from 1945 to 1964, into the retirement window is impacting all industries but is especially exaggerated in the oil and gas business due to slow hiring in the 1990s. The resulting dearth of mid-career, up-and-comers available to replace the retiring management teams and to ease the loss of oil finding experience is a continuing source of conversation and concern. Geoscience and engineering consulting service providers are well positioned to be a “finger-on-the-pulse” of the demand for and supply of these skills. Indications are that the current environment has softened the blow that could have occurred had the mass exodus of experience actually occurred as predicted.

Many geoscientists who have recently taken advantage of retirement opportunities remain in the workforce, some entering the consulting ranks for the first time. One could argue that in some respects the global recession came at a good time, as the dramatic shrinkage of retirement accounts has caused many geoscientists to alter or postpone their retirement plans. The reality of full or even semi-retirement at age 55 or 60 does not seem like such a good idea for many when there is a reasonable probability that their suddenly diminished retirement nest-egg will need to last for another 25 years or more. Perhaps those of us now facing the prospect of having to work a little longer should have saved (or lived) a little harder, but from an industry perspective this appears to be a good thing. Beyond the revised retirement plan factor, most geoscientists with oil finding in their blood are not happy sitting on the sidelines for long, especially when the demand for their skills and experience remains reasonably strong. Not as strong as it was in 2006 perhaps but companies are still hiring more than firing. Even the demand for entry level staff appears to continue at a moderate pace; hopefully a sign that the industry and academia are finally approaching the steady state equilibrium that allows geoscience departments to provide an optimal pool of new grads to supply the industry’s needs. At the very least it appears that employment prospects for oil and gas geoscientists are more optimistic than for the US national workforce in general.

In the consulting business, demand for senior geoscientists with specific skills and geographic experience to supplement in-house teams and mentor new employees has remained steady. The positive oil price environment is attracting large amounts of investment funding from within and outside the US, stimulating development of many new start ups and expansion of existing players, all in need of experienced staff. Seasoned consultants who have seen the globe and know where and where not to find hydrocarbons fit nicely into roles with these companies. Many of the majors and large independents significantly reduced or eliminated their consulting staff during 2009-2010 while attempting to preserve and reallocate their internal geoscience resources. The continuing regulatory uncertainties surrounding deepwater exploration in the Gulf of Mexico has resulted in many deepwater exploration teams being sidelined or redirected. But indications are surfacing of resurgence in 2011 as even large companies find the need to plug gaps in their skill base, caused in many cases buy ongoing retirements and repatriations. Additionally, there are clear indications of growth in many non-US companies trying to build their national staff organizations as governments around the world encourage the search for and securing of energy resources for their growing economies (a novel concept!). These companies often have experienced staff concentrated in the management ranks, and an abundance of bright and capable geoscientists in the earlier stages of their careers needing senior, hands-on geoscience consultants for technical guidance and mentoring.

It also appears that the unconventional revolution is having a significant impact on geoscience careers. As advances in horizontal drilling and multi-stage frac technology enhance our ability to make reservoirs out of what were once seals, virtually every source rock in basins around the world is now a candidate for exploration and development. Success has impacted the supply and suppressed the price on the gas side, but the hunt for these plays continues to be aggressive with an emphasis on finding the “sweet spots” and reducing costs to enhance the economics.

All of these factors—heavy investment funding, new company growth, expansion of international players outside the US, bottoming out of large company hiring slumps, and growth of the unconventional resource plays—have steadied the demand for late career geoscientists. The good news for companies large and small is that the supply of well qualified and experienced geoscientists is relatively high. The opportunity to work for a more diverse spectrum of companies, in an expanding array of plays and geographic areas, and under more flexible working arrangements (plus the need to reinforce retirement portfolios) is motivating many to work longer. A large pool of broadly experienced consultants means that companies can find specific skills and knowledge of plays or even specific fields to supplement their internal knowledge bases. There is increasing flexibility in the working relationships between individuals and companies, ranging from short term “quick hit” assignments to long term consulting relationships with the potential to evolve into full time employment. This model is well suited to the handoff from the baby boomers to subsequent generations of oil finders with less likelihood of any significant fumbles. The great crew change is developing into a more traditional transition from one generation to the next.