Download - Workforce Survey h1 2014

2014 January - June

W ORKFORCESURVEY

THE PR

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& GAS WORKFORCE SURVEY 2014

Q1

Introduction 1

Survey Findings 2

Summary Overview 6

Africa 7

Americas 9

Asia Pacific 11

Australasia 13

Europe 15

Middle East 17

Industry View 19

Air Energi Overview 20

OilCareers Overview 21

Disclaimer: The Air Energi, OilCareers.com H1 Workforce Survey 2014 is representative of an added value service to clients and candidates. Whilst every care is taken in the collection and compilation of data, the survey report is interpretive and indicative not conclusive. Therefore information should be used as a guideline only.

Contents

Introduction

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Introduction from Mark Guest

At OilCareers.com, we are delighted to introduce the first new look Global Workforce Survey for 2014 in partnership with Air Energi. Before we get to the findings I would like to thank the industry professionals who took the time to participate.

Looking forward, 2014 is set to be another year of high activity across all the main producing regions as global demand continues to increase.

This will have a big impact on the industry’s jobs market, presenting opportunity and challenge in equal measure for the sector in 2014.

Of course the skills gap remains a major issue facing the industry in 2014, with retention, education and local content initiatives likely to be major areas of focus for companies looking to recruit.

To echo the views of OPITO CEO David Doig, 2014 must be the year where we begin to collaborate in our efforts to curb the skills gap and make a conscious effort to retrieve the situation before it becomes too late. Something we can ill afford if we are to continue to meet the world’s energy demands.

As the world’s largest online dedicated oil and gas jobs board, our objective is to provide our candidates with access to a variety of positions spanning the entire oil and gas supply chain. With more than 24,000 new candidate registrations per month and 930,000+ searchable CVs, we in turn help recruiters and organisations in their continued quest to source the best solutions.

Introduction from Duncan Gregson

With increased project activity anticipated in many regions of the world, 2014 is set to be another exciting year of growth and development for the oil and gas industry.

Professionals from across the supply chain expect to see salaries and contractor rates rise as demand increases. At the same time, it is clear that the impact of people-related risk on projects is also on the rise.

People-related risk is having a tangible impact in the form of budget and schedule overruns – whether in the form of increasing labour costs or difficulties with retention, challenges with global mobility and compliance, or the shrinking pool of talent as cuts in training budgets and retirement rates begin to bite.

Certainly, this is the overarching theme to emerge from the findings of the H1 2014 Global Workforce Survey, and is a primary consideration shaping Air Energi’s strategy for delivering a total personnel solution at any scale, at any point in the project lifecycle, and at any location.

On behalf of Air Energi, I would like to take this opportunity to thank everybody that has participated in this survey for their valuable contributions, with special thanks going to David Doig, Group CEO at OPITO, for sharing his thoughts on the collective action needed to ensure our industry retains its position as the most dynamic in the world.

www.airenergi.com - www.oilcareers.com1 © Air Energi/OilCareers.com 2014

Welcome to the H1 2014 Global Workforce Survey, prepared by Air Energi and OilCareers.com. With more than 500 industry professionals participating and representing every region and type of organisation across the supply chain – including EPC (engineering, procurement and construction) and project management contractor (PMC) firms, sub-contractors and energy companies – the aims of the Global Workforce Survey are to:

• Highlight the people-focused issues oil and gas companies will face in 2014• Raise awareness of people-related risk in the oil and gas industry and its impact on projects• Provide an overview of pay rates for contractors across the industry

Key findings

• Half of respondents expect both permanent and contract hiring activity levels to increase in 2014, and more than half (58%) expect rates and salaries to rise• Skills shortages were identified by 44% of respondents as the biggest threat to the oil and gas industry currently, followed by economic instability (28%), capital costs and visa / immigration issues (both 9%)• Engineering was by far the most sought after discipline (58%), followed by project managerment (22%) and drilling (9%) • An overwhelming majority of respondents (80%) felt that the skills shortage is real, based on their experience of filling roles in their organisation over the last 12 months

Survey Findings

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Hiring activity, rates and salaries

The oil and gas industry is powered by highly mobile, career-oriented people. Experienced professionals are extremely sought after, highly remunerated, with excellent benefits packages and training programmes available to them. There has been no change in the way these professionals are treated by the major international oil companies (IOCs) throughout the years.

Increased project activity is anticipated in many regions of the world, driven by shale oil and gas in the USA, oil and gas projects in the Middle East, and the gas

projects in Australia. Many of the world’s leading drilling companies are looking to increase their fleets to meet global demand.

According to the results of the Global Workforce Survey, engineers are highly sought after, with 58% of respondents identifying this as the professional role most in demand at their organisation. This was followed by Project Manager (22%), Drilling (9%), Contract Administrator

(6%) and Geologist (5%).But with demand for talent continuing to outstrip supply in verticals such as subsea, shale, LNG, and downstream, hiring activity and pay rates are on the rise: 48% of survey participants expect their organisation’s hiring activity levels for both permanent and contract positions to increase in 2014. Only 12% anticipate a decrease in permanent hiring activity, while 11% expect a drop in contract hires. More than half of participants (58%) believe that rates and salaries will rise this year, with 36% expecting them to stay the same and just 6% anticipating a fall.

The rise in rates and salaries means that retention is an issue. In the Middle East, increased competition in the EPC / PMC market from Asia in particular and the

“More than half of participants (58%) believe that rates and salaries will

rise this year”

© Air Energi/OilCareers.com 2014

tight margins for such work has presented an issue for companies both in terms of attracting new talent, and retaining existing talent. Although it is difficult to place a figure on the impact that attrition has on a project, this is perhaps becoming one of the key drivers in budgetary over-expenditure and project delays.

Meanwhile, a growing number of experienced professionals are moving from IOCs and national oil companies (NOCs) to smaller, more agile players that have lower overheads and can therefore offer higher salaries. They are also relocating to other regions where better rates and salaries are available. For example, while Australasia is a key player in the global LNG market, there is the added pressure on companies to focus their retention strategies, with Australia being seen as a key talent pool of highly-skilled LNG professionals for future developments in North America and East Africa.

Training and talent

Retention is also becoming more challenging at organisations serving IOCs and NOCs. Mid-tier service companies and EPCs have traditionally found it difficult to attract professionals given that IOCs and NOCs are able to offer more attractive opportunities for training and career development. Although they too have training programmes in place, service companies and EPCs continue to see a natural migration of talent to IOCs and NOCs over time.

Of the more than 550 industry professionals participating in the survey, the majority (75%) confirmed that their organisation offered internal training, although 29% said that there was not a full selection of training available. The other main challenges in employee training were identified as having a lack of quality candidates (28%), a lack of budget (24%), and a lack of skilled trainers (19%).

Nevertheless, IOCs and NOCs expect their suppliers to maintain a certain level of service quality, placing the onus on service companies and EPCs to maintain their


levels of experienced resources and ensure a healthy flow of new talent. Although 59% of survey respondents felt that their company’s training programme was capable of dealing with the anticipated increase in new recruits entering the industry, the majority (69%) said they do not believe the education system does enough to inform and advise young people on careers in oil and gas in their region and globally.

According to OPITO, the oil and gas industry skills body, education is key to unpicking many of the problems faced. OPITO’s David Doig warns that the industry has already gone beyond the skills shortage to a skills crisis and that more companies need to wake up to the fact that cooperation on training is badly needed (turn to page 19 to read more).

Local content

The need to encourage more young people to enter the oil and gas industry and up-skill the local workforce suggests that companies must implement more robust training programmes in each locale, taking in the most promising students each year from the best colleges, and recognising this as a cost of doing business. Local content policies are being enforced rigorously in some countries (and circumvented in others).

In Nigeria for example, 80% of engineering has to be performed in-country. This might be considered a high percentage, but such a policy ensures that companies invest in training and recruiting engineers who live locally.There is little evidence to suggest that local content policies impact on the industry’s ability to fill roles, with more than half of survey participants (61%) confirming this. Ultimately however, retention remains an issue, because once professionals are trained and attain a certain level of experience they

tend to migrate to other markets where salaries are higher.

Certainly, we have seen evidence of this in parts of Asia and West Africa. In Angola for example, a migratory pattern is anticipated as projects in Brazil

Employee Training Issues29% Selection issues

28% Lack of Candidates

24% Budget issues

19% Lack of skilled trainers


gain momentum, given that Portuguese is widely spoken in both these markets. Moreover, professionals returning to their country are paid not as expats but as returning citizens. Thus it is proving difficult to entice expats, back with skills they have received overseas. In Africa, a lot of companies are looking at strategies to attract locals back into the region. This can be expensive as they have to offer them higher rates. Alternatively, there has also been an increase in the level of training and ongoing qualification taking place, so the skills gap won’t be quite as high as it has been in the past.

Pressures in the supply chain

The industry’s persistent failure to act collectively in dealing with the root causes of the skills shortage, combined with typical approaches to recruitment and retention of experienced professionals (i.e. increasing rates of pay) are false economy: increased labour costs drive up project costs, resulting in continued price pressure in the supply chain. For LNG projects in British Columbia for example, the overriding gold rush mentality is being heavily constrained by the number of experienced professionals in Canada with LNG experience.Downward pressure on price also impacts on the level of investment in training, which is one of the first areas to see cuts at service companies lower down the supply chain. If the point of differentiation is price, and business is based on winning scopes of work, those lower down the supply chain are unlikely to be investing in long-term training. In some markets in Asia for example, we have seen direct evidence that smaller and mid-size companies are not spending as much time and money on training as larger companies, which increases risk given future demand.

Of course, contractor pay rates can go up and down according to supply and demand, whereas permanent salaries have historically remained static or followed an upwards trajectory. During 2014 however, survey


respondents said that they expect pay rates to increase across both permanent and contractor roles. This becomes an issue in boom markets such as Australia and Africa, where project development costs can become prohibitive.

High labour costs and low productivity in the construction sector means construction cost per unit capacity in Australia is among the highest in the world. The challenges aren’t limited to the west coast, with all three CSG projects in Queensland delivering announcements of budget overruns and heightened speculation of delayed plans for Arrow LNG. Mainly due to high labour costs, continued productivity challenges and uncertainties caused by the hype around the North America shale boom.

The skills shortages across operations professionals are likely to mirror those faced during the construction ramp up in Australia during 2012/2013, with multiple projects all requiring professionals with the same skill sets at the same time. Significant investments in training and a greater focus on skills development from both industry and government bodies will be seen in an effort to curb skill shortages and meet operational demands, supplemented by continued access to the global markets for skilled personnel.

Risk mitigation

A further trend identified by the Global Workforce Survey has been the continued shift from West to East in respect of the activities of larger companies. Many are moving work to where the available trained workforces are – e.g. China, Malaysia, and India. Not only have labour costs been lower historically in developing markets, there also tends to be a more abundant pool of younger and more qualified talent. Nevertheless, these markets are maturing and rates of pay are increasing.

In Indonesia, there has been a large increase in local

“A further trend identified the

continued shift from West to

East in respect of the activities

of larger companies.”


wages over the last five years. Skilled young nationals are taking jobs outside of Indonesia and when they return, they expect global wages. In addition, the global oil and gas workforce is aging rapidly and there is a short supply of good young professionals and they are tough to keep.

With half of companies participating in the Global Workforce Survey stating that their organisation was prepared for a gradual loss of talent through retirement, several trends provide early warning signs of what the potential impact of exacerbating the skills shortage would be:

• Rising labour costs impacting on the commercial viability of development projects• Developing countries struggling to retain experienced professionals • An inability inherent within the industry to address the need for encouraging the next- generation of talent makes the skills shortage a self-fulfilling prophecy

For 2014, it will be essential for oil and gas firms to adopt a more strategic approach to mitigating people-related risk. Ultimately it is people-related risk that is increasingly resulting in project delays and cost overruns – irrespective of whether oil and gas companies have accurately forecasted the number and types of professionals they need.


W ORKFORCESURVEY

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Q1


Africa18.0%

Russia1.85%

Australia6.1%

Middle East

24.0%

Americas19.65%

APAC18.0%

UK7.95%

Europe7.05%


36%

SAME

58%

RISE

6%

FALL

Contract

H12010

H22010

H12011

H22011

H12012

H22012

H12013

H22013

H12014

100

90

80

70

60

50

40

30

20

10

Perm

H12010

H22010

H12011

H22011

H12012

H22012

H12013

H22013

H12014

100

90

80

70

60

50

40

30

20

10

Global Salary Predictions

Percentage of responses from each geographical region

Perm and Contract Hiring Rates

H1 (2014) Survey Summary

Air Energi and OilCareers.com would like to thank all organizations and participants who took the time to respond to and influence our survey and report. The returns clearly show a substantial response from decision makers and industry insiders across all the oil and gas producing regions. We are pleased to present the findings in this report for our industry partners to utilise in their future decision making.

%Increase %Same % Decrease


AfricaRegional Overview

The continent of Africa can be divided in two with regards to oil and gas development. In West Africa, there are a large number of existing operational assets, including deepwater projects, with the on-going development of future projects and a significant level of drilling and exploration activity also underway. This makes West Africa a relatively mature market.

Meanwhile, East Africa is very much an up and coming market. It is recognised as a region where there is a lot of opportunity, particularly in countries such as Kenya, Tanzania, and Mozambique. A number of oil majors are heavily engaged in East Africa and recognise that there are many fields that are as of yet untapped and ripe for development.

In respect of the verticals, we are seeing that disciplines related to operations and maintenance are increasingly needed for the operating assets in West Africa. These skill sets are required to a lesser extent by the emerging countries in East Africa, such as Tanzania and Mozambique, and instead, there is a high demand for exploration, drilling and appraisal candidates. There are also several large LNG projects underway in East Africa, meaning local candidates and expats with strong LNG experience are in high demand.

Given that the East and West regions of Africa are effectively standalone markets, there are different drivers of workforce demand – both in terms of operational assets, and availability of candidates.

In West Africa, the skill sets of the local candidates have been well developed over a number of years, and oil and gas professionals are well qualified. But for operators, retention of locals is becoming more of an issue, as experienced professionals are looking to emigrate from Africa to regions where they may be better paid. Because local content compliance laws and regulation demand that companies must have a certain percentage of their workforce as local nationals, there are a growing number of initiatives underway to recruit these individuals.

Workforce impacts

Certainly, this is going to be a challenge, and particularly for Angola moving forward. As Brazil develops as an oil producing nation, we are going to see a lot of Angolans moving to Brazil, since they speak Portuguese and can emigrate relatively easily. It is therefore anticipated that the situation for local candidates will worsen in Angola over the coming years.

In East Africa, local candidates are yet to gain significant levels of experience and the skill sets required for the oil and gas sector is not inherent in the local population. For emerging oil and gas producing nations – such as Kenya, Mozambique, Tanzania, and Uganda – where the industry is not as yet established, we will see inward investment from many of the operators on cultural projects, to address the growing training requirement and ensure more people attain the necessary qualifications and experience to work in the oil and gas sector.

Increase 68.75%Decrease 1.95%No Change 29.3%

RATES & SALARIES

BIGGEST THREAT TO INDUSTRY

Capital Costs 6.6% Labour Costs 9.75%Skill Shortages 29.05%Economic Stability 38.45%Safety Regulations 4.95%Visa/Immigration 11.2%

PREDICTED HIRING NUMBERS

63.2% 38.9%6.7% 14.6%30.1% 46.5%

Permanent Contract

Increase Decrease No Change


The migration away from West Africa to more lucrative projects is compounding the skills shortage and although many companies are implementing strategies to attract locals back into the region, this can be expensive as they have to offer them higher salaries and contract rates to do so. Nevertheless, the substantial level of activity around training and sponsored qualifications in the region should mean that the skills gap won’t be quite as wide as it has been in the past.

Moreover, there are candidates coming through the university system to fill the gaps left by professionals that are emigrating. In developing countries however, the skills shortage is going to be an issue. Those approaching graduation currently do not have a great deal of knowledge and experience relevant to the oil and gas industry.

Project impacts

Despite the progress being made in developed markets to increase the level of qualified candidates available, production deadlines are still being impacted by a lack of available local talent. High labour costs are having an impact too. Whereas previously, companies would have anticipated a specific cost associated with having local candidates, the fact that they have to offer higher salaries and rates to attract expats has had an impact in terms of cost, as well as schedule for current development projects.Where there is no local expertise available, it is a case of importing more expensive expats to fill the skills gap while companies bring the local population up to speed over a period of years – especially since there hasn’t been any relaxation of local content laws. There are, however, some initiatives to reduce withholding tax in emerging regions to incentivise foreign companies to invest. In Mozambique, for example, the government has reduced withholding tax to 10% for certain projects.

Although there are going to be significant infrastructure issues and local content difficulties, the outlook for future development projects is extremely positive. East Africa in particular is seen as an untapped resource, and the opportunity in terms of assets is huge. There are major projects planned – particularly LNG projects in Mozambique and Tanzania – and there are major international players involved, so any issues with infrastructure and local content are unlikely to impact on the sanctioning of planned projects.

Historically, Africa has been a volatile region and there are on-going conflicts in Sudan and South Sudan currently. This is having an impact on both the price of oil and the opportunity to develop oil and gas projects. Indeed, oil prices will remain high as those countries that are oil rich but volatile politically will not be attractive to outside investors until there is an improved level of stability. Conversely, Tanzania is proving particularly attractive to foreign investors, due to the ease of doing business and ability to repatriate funds.

Africa


AfricaQuotes from participants of the Survey

“The local content policies have encouraged the availability of skilled manpower. We have taken advantage of this to fill important roles.”

“(Local content policies are) creating an enabling environment for more jobs to be awarded to indigenous firms and thus filling of roles.”

“I’ve been in this business for 35 years and there always has been a perceived shortage of quality personnel. We are no different from any other business in that we need to spend more money on training & attract more young people into our industry.”

“Manpower training and retraining for technology advancement in the oil and gas (industry) is vital.”

Regional Overview

Over the past 12 months the US has experienced its domestic production exceeding imports for the first time in 20 years. In 2014, the momentum continues, led by oil rich shale opportunities, particularly in mega plays such as the Permian Basin, Eagle Ford and Bakken. Investment remains healthy with various authorities across the US offering tax incentives, and the oil and gas sector continues to see job creation as a result.

As the industry’s leading players seek further approvals to construct and upgrade existing LNG facilities (combining world-class production and export capability on some projects) the demand for LNG and liquefaction talent continues. Within the refinery and manufacturing sector it is likely that the strong US talent base will be encouraged by an increase in projects to upgrade existing production refineries. Whilst this is likely to provide job seekers with confidence in 2014, an increase in remuneration is yet to be realised.

Offshore skills continue to be in demand with an increase in Gulf of Mexico activity providing employment and contract opportunities from the small industry players through to the super majors. In particular, deep water drilling experienced candidates remain in high demand, particularly those with a strong background of health and safety.

A market shift is currently underway however, as engineers possessing offshore project experience, such as topsides, move toward major onshore facilities projects. Onshore related skills in high demand relate to Drilling & Completions (Conventional & Unconventional), Project Controls, Geologists, Subsurface and Facilities Engineers. The unconventional market continues to attract talent and those with niche skills will earn a premium.

In Canada, LNG projects on the west coast of British Columbia remain a major story, with several additional export licenses being granted. Development programs continue at pace in the face of a significant battle for talent with LNG experience. With longer timelines, but similarly themed labour challenges, activity in Atlantic Canada continues to build, with new fields expected to be developed across the remainder of the decade. Interest in further exploration in this region is also building.

Workforce impacts

From west to east, the story is a familiar refrain in Canada: more demand for skilled oil and gas professionals than the market can support. This is expected to worsen in the next decade as some 190,000 skilled workers are likely to retire. For LNG projects in British Columbia, the overriding gold rush mentality is being heavily constrained by the number of experienced professionals in Canada with LNG experience. Canada has only had one notable LNG project in the past decade and as such, the talent pool is mostly limited to recent immigrants with LNG experience gained in other markets. To deal with this issue, most companies involved are using a combination of tactics, hiring as much as possible within Canada, but work-sharing to other countries, or outsourcing larger packages.

Permanent Contract


RATES & SALARIES




44.7% 35.9%14.4% 17.2%40.9% 46.9%

Permanent Contract


Americas


In Atlantic Canada, the pool of available and experienced personnel, particularly in Newfoundland, is almost completely utilised, with the movement of personnel between projects depending largely on project timings. Safety personnel, Topsides, Subsea and GBS engineers remain in strong demand, as well as Project Controls personnel, and key discipline engineers – notably civil/structural.

Broadly, pay rates have been under downward pressure in Alberta throughout 2013 with exceptions for specific skill sets. This will change during 2014 as activity increases both in Alberta and across the country. Rates for LNG personnel will escalate more acutely as competition for personnel between projects for Canadians with LNG experience continues to grow. The ability to outsource work to lower cost regions continues, but is seeing signs of abating.

Project impacts

Capital spend is shifting in the US from the upstream sector to midstream (pipelines/LNG) and downstream (refineries – new build and upgrades/petrochemical facilities) sectors. The US begins 2014 in an enviable position, with the majority of work still being awarded to western-based businesses. The demand for talent continues to outstrip supply in specific markets such as shale, LNG and downstream. Whether employers find themselves forced to either increase rates and salaries, or award work outside the US in order to meet demand remains to be seen.

The Canadian oil story has been one of excess supply and lack of capacity to distribute to markets where demand is high and pricing stronger. The capacity constraint has slowed both project pace and interest in new developments, while fostering an increase in oil by rail as a viable alternative. Oil-by-rail safety is an escalating issue and is cited as having a 300% higher spill risk than pipelines. Numerous derailments in North America are increasing the negative pressure on this option, but the expectation is that ultimately, eastern and western Canadian pipeline projects will advance to final sanction. For Alberta, oil projects have changed little, other than a slowly rising tide of overall demand. The current challenge is finding strong Construction Management personnel, Pipeline Engineers, Cost Estimators/Engineers, Drilling Engineers, HSE Advisors, Mechanical/Completions Engineers, and Commissioning Managers and Superintendents.

In Brazil, technological advances, immigration difficulties and the lack of a solid supply chain are all factors limiting investment and the forward movement of projects. Local content regulations have been reviewed with no change, meaning that the very low unemployment rate continues to hamper the resources available. This war for talent covers all disciplines.

Americas


AmericasQuotes from participants of the Survey

“I am in dire need of grass-roots experience. Every one of my contract folks are above 25 year’s experience. Best money I have ever spent and cannot do without them. Most all of their wage agreements are above 200% market value for someone with a fresh graduate diploma and no experience.”

“These (retiring) folks are the lifeline of our success. Its very shortly after they retire we have to buy them back at a huge rate but the increased expense is absolutely justified. Mistakes are much more expensive.”

“There must be further need by government and private institutions to forge ahead with further skills training, not only for the oil and gas industry but also the new energy age that is almost upon us.”

“There must be a global need to further explore what is to be done to generate further exploration and also the need to seek new frontiers of energy.”

Regional Overview

Asia is expecting increased project activity across the region throughout 2014. This will mean high demand for engineering, construction, contract, and project management skill sets.

Oil companies obtaining Final Investment Decision (FID) on some of the world’s largest and most complex onshore/offshore upstream and downstream projects, combined with the possibility of a second wave of liquefied natural gas (LNG) projects coming out of Australia, will see the stretch on demand tighten further, as does the risk of increased workforce costs. In addition, with companies setting up new premises throughout the APAC region, we see a high demand for executive search services.

Core markets on the rise throughout APAC are LNG and Subsea. In Indonesia, we expect to see an increase in onshore drilling in Sumatra and East Java. In Malaysia, oil and gas production is set to grow, thanks to the development of large discoveries. A string of prolific discoveries and major projects are set to come online between 2013 and 2018, which would see gas production continue on an upward trend. Nearly all of these new projects are off the coast of Sarawak, East Malaysia.

In Singapore, orders for Jack-up and floating production storage and offloading (FPSO) are decreasing. Orders made in 2008 are now close to finishing and we do not foresee any major uplift until 2015-2016. Meanwhile, increasing costs and capacity issues at Singapore’s three main shipyards (Sembawang, Keppel, Jurong) have seen construction projects going to South Korea, China, Malaysia, and Indonesia.

Workforce impacts

Increased project activity is placing further strain on workforce retention at companies across the region. Those operating where local content requirements are paramount – namely Malaysia, Indonesia and Thailand – are expecting increased international project activity (e.g. FEED, EPC). At the same time, a number of domestic projects are coming into play – such as Petronas’ $20 billion RAPID project in Malaysia, and BP’s expansion plans on the Tangguh facility in Indonesia.

To help maintain current headcount and attract new talent, companies are offering higher salaries and rates, as well as training the existing workforce to meet demand. Training in general and safety-related issues are critical areas when it comes to using more local workforces where English is not the first language. In some markets, smaller and mid-size companies are not spending as much time and money on training as larger companies, which increases risk given future demand for qualified and competent professionals. In Malaysia, Petronas is starting to play a more influential role by increasing the percentage of local suppliers for its oilfield service needs, and is becoming a conduit for capital, technology, talent and knowhow. Bringing in more local talent drives up pay rates, while competition is fierce as many local companies vie for limited resources. In terms of permanent recruitment, the need for retained search is on the rise, as sourcing and securing talent is proving tougher than ever before.

Permanent Contract


RATES & SALARIES




41.5% 47.9%14% 8.9%44.5% 43.2%

Permanent Contract


Asia Pacific


n Singapore, global companies are turning to manpower suppliers because they have strong processes and quality controls.. Competition from smaller players who have lower overheads has meant that quality may be being compromised where price is the major factor. We believe this to be one of the factors in project delays. However, training has been made a priority, and will be focused primarily on health and safety, high-technology systems, and methodologies.

Project impacts

Due to the Singapore government’s changing of manpower/immigration regulations, the ratio for hiring locals to an expat is now even higher. This has repercussions for the long-term employment strategies of companies engaged in construction, who rely heavily on temporary hiring and foreign nationals. This could see some companies exploring other locations for projects already in the construction and commissioning stages.

These trends heighten the risk of projects running over budget. Failure to attract the required skill-sets risk missing delivery dates, with timelines impacted further in the form of cost overruns and late start-up and operational revenues. We therefore anticipate some ‘loosening’ of local content requirements at certain stages of a project to allow regional or expatriate personnel to be added to the project workforce. Another option is to attract nationals back from overseas locations.

In Malaysia, companies have deployed a variety of channels to mitigate risk, including over-hiring, developing a talent pipeline with graduate programs, or hiring short-term contractors. Companies have now started to run recruitment campaigns in a number of different countries (those located in the Middle East in particular) to try and attract expatriates. This trend is growing as more companies adopt these methods to attract experienced talent.

Local content requirements across certain locations in Asia and the need to maintain lower costs in others have meant the local candidate pool has almost reached saturation point. As a result, the price for locals is reaching similar levels to those that candidates in ASEAN markets are being paid. Rates have not yet reached the levels seen in western markets, but as demand continues to rise, parity in terms of costs will likely follow.

Asia Pacific


Asia PacificQuotes from participants of the Survey

“Asia Pacific region is still expanding and its demand for energy and resources is on the increase. Especially countries like Indonesia with 250M population.”

“Current projects are on the increase and their doesn’t seem to be enough skilled labour.”

“There is currently no established global unique skill measurement standards for each job role & company sector.”

“(Local content policies are) restricting our ability to bring in top technical management and transfer our technology/competency/training to our workforce.”

“Due to shortage of skilled manpower, we should consider and value experience from other industries even it is not related to the oil and gas industry.”

Regional Overview

A significant proportion of Australia’s east coast gas is earmarked for export. Domestic gas supply is therefore high on the agenda with medium-sized operators reaching significant sale agreements with their larger counterparts. Further domestic gas sales will be negotiated throughout 2014/2015 with exploration activity continuing in the Cooper and Surat basins.

Similarly, momentum gathers for Australia’s shale potential with a number of key international operators farming into permits across Queensland and Western Australia. This will see demand for drilling, exploration and geoscience professionals remain steady.

Workforce impacts

Peak construction employment across the region was seen from Q3 of 2013 and will continue through Q2 2014 before ramping down from about Q3 onwards as the transition from a construction phase to operations phase begin. This shift will have a two-fold effect on the Australian oil and gas labour market. The transition will see the construction workforce over the second half of the year soften, while the lack of solid greenfield marked for Final Investment Decision (FID) in the short term will result in the majority of workers being unable to be absorbed by the local market.

Concurrently, the Australian Workforce and Productivity Agency (AWPA) predicts a 57% increase in oil and gas operational jobs in Australia through 2018 with major projects entering production. The skills shortages across operations professionals are likely to mirror those faced during the construction ramp up in 2012/2013 with multiple projects all requiring professionals with the same skill sets at the same time. Consequently, these projects may be plagued by the same labour cost versus productivity burdens felt during construction throughout the operations phase.

Significant investments in training and a greater focus on skills development from both industry and government bodies will be seen in an effort to curb skill shortages and meet operational demands, supplemented by continued access to the global markets for skilled personnel. While Australasia is a key player in the global LNG market, there is the added pressure on companies to focus their retention strategies, with Australia being seen as a key talent pool of highly-skilled LNG professionals for future developments in North America and East Africa.

In Papua New Guinea, the focus for LNG is shifting to operations, meaning construction personnel will add to the saturation of the Australia-based workforce in late 2014/2015 with Brisbane the key demobilisation point. Mid-to-long-term investment with the recent Total and Interoil deal, together with Talisman Energy’s Gas Aggregation Program, will lead to new exploration and development of the Elk and Antelope fields, indicating increased investor confidence.

Permanent Contract


RATES & SALARIES




36.8% 42.6%13% 17.2%50.2% 40.2%

Permanent Contract


Australasia


Project impacts

Production deadlines are looming for the 15 LNG trains currently in construction phase across Australasia, with the majority due for completion throughout 2015 and 2016. Maintaining the projected schedules has not come without challenges for the major operators. The tail end of 2013 saw Chevron’s Gorgon project announce yet another cost blowout with further expected throughout 2014 taking total forecasted CAPEX estimates to $60 Billion, 62% higher than the original project budget.

High labour costs and low productivity in the construction sector means construction cost per unit capacity in Australia is among the highest in the world. The challenges aren’t limited to the west coast, with all three CSG projects in Queensland delivering announcements of budget overruns and heightened speculation of delayed plans for Arrow LNG, mainly due to high labour costs, continued productivity challenges and uncertainties caused by the hype around the North America shale boom.

Capturing the next phase of capital development projects is critical. The likelihood of future investments in the region is dependent on a number of external forces, namely: increasing project competitiveness through the strengthening US$ against the AU$; Henry Hub future gas pricing; Australia LNG commercial linkages to the price of oil; the Australian Government’s proposed implementation of a more efficient regulatory framework, and its associated impacts on the regions oil and gas workforce. The influence that this melting pot of variables will have on the regional outlook is set to transpire over the next 12 to 18 months, ideally with commitment to future greenfield capital development projects to bolster Australasia’s position as a key player in the global oil and gas market.

Australasia


AustraliaQuotes from participants of the Survey

“Media and society pushes white collar professional degrees while the pursuit of blue collar trade professional craftsmanship is demeaned as substandard.”

“Not enough young talent capable of handling the increased responsibilities as they move up. This is a worry.”

“We are seeing mining staff migrate to oil and gas.”


Regional Overview

Unlike other regions, Europe has seen little activity in respect to major new project activity. Nevertheless, workforce requirements have grown consistently over the last 24 months, primarily due to the limited pool of available talent (a trend that is reflected globally).

The largest vertical is safety disciplines. Oil companies and EPCs today are more risk assessed and safety focused than ever before. The majority have made a commitment to health, safety and the environment (HSE) as a core value. This has ensured that demand for experienced HSE professionals has remained buoyant.

Demand across the structural disciplines has also increased, with structural designers and engineers, and subsea engineers being highly sought-after. In addition, Liquified Natural Gas (LNG) has become a hot spot for recruitment for oil companies, EPCs and consultancies alike.

Meanwhile, the UK government’s commitment to optimising reserves in the North Sea has seen a ramp-up in commissioning, decommissioning and construction activity on the continental shelf. Moving forward, there will be bigger scopes of work in these areas as companies look to maintain operational capability and extend the life of ageing assets.

Much of the resultant demand is for project design professionals. Despite the wider trend of off-shoring fabrication to low-cost centres in Asia and the Far East, design projects continue to be managed out of France, Norway and the UK. Similarly, recruitment in corporate disciplines remains a focus, given that three of the largest oil and gas players globally have their headquarters in Europe.

Workforce impacts

Much of Europe’s workforce requirement in the oil and gas sector is being driven by advances in extraction technologies, which have made a greater number of deep water plays viable. The pool of professionals skilled in subsea disciplines was already limited, but the recent introduction of new wellhead technology has meant that even experienced subsea engineers need to be up-skilled.

Technological progression has also been the key factor in driving the upturn in LNG. It has ensured projects are now less costly and much safer to develop, and many of the projects underway currently would have been written off in the past due to cost and HSE concerns. However, the limited pool of talent combined with rising demand for subsea and LNG professionals has driven a significant increase in both permanent salaries and contractor rates. Over the last couple of years, there has been a rise of about 20% in remuneration across these disciplines. Professionals experienced in HSE can command even higher premiums. Permanent Contract


RATES & SALARIES




36.1% 38.9%11.1% 14.6%52.8% 46.5%

Permanent Contract

Europe


Despite the on-going rise in the cost of labour, only the oil majors are investing in internal training programmes. The wider trend is for companies to bolster their existing workforce with external experience as required. The main concern is that the results of internal training programmes take two years or more to filter through to the wider workforce and, given the associated cost, it is much quicker and easier to buy-in the disciplines required to deliver projects.

Project impacts

The longer-term challenge for the oil and gas industry is that workforce requirements tend to be treated as a secondary consideration when projects are scoped. Labour costs are relatively small when compared to the huge capital expenditure required for raw materials such as steel.

Steady demand combined with the dearth in new project activity in Europe means companies have continued to buy-in the skill-sets required. On-going projects might experience delays due to difficulties in attracting professionals with the right skill-sets, but not to the extent that financial penalties are incurred. As a result, the cost of labour continues to rise. Another longer-term concern in respect of the skills shortage will be the impact of increased activity in markets such as Russia and Ukraine. Although the oil and gas industry in these two countries already employs hundreds of thousands of professionals drawn from the indigenous population, technological advances and a need to become more operator and production-focused will require them to import more expertise.

Activity is building in Russia across the board as it prepares to host the 2018 World Cup, and it is opening up to a growing number of international players. Certainly, the larger international oil and gas companies are establishing a bigger footprint in what was 10 years ago a nationalised industry, and the process has accelerated considerably since 2011, with Russia’s ascension to the World Trade Organisation (WTO) seeing it embrace a series of rules and commitments to an open, transparent and non-discriminatory global trading system.

Deploying foreign nationals into projects in Russia and the Ukraine remains a complex and time-consuming undertaking. However, the oil and gas industry in Europe must recognise that the skills shortage could be exacerbated by increased demand in emerging markets and that fierce competition for resources has triggered numerous project delays and even cancellations in market such as Australasia.

Europe


EuropeQuotes from participants of the Survey

“Fuel price continuing (to) increase is strongly impacting on oil company recruitment policies causing money loss in downstream.”

“Our organisation does not comprehend the loss of experience due to retiring personnel and have difficulty filling positions with suitable candidates.”

“In our type of business experience and wisdom are critical to our success, unfortunately these qualities must be personally gained and we struggle to find candidates with the attitude and drive to try and achieve this.”

“Insufficient drive to have apprenticeships and train younger people to fill roles. Too many want workers with 10 years experience.”


Permanent Contract


RATES & SALARIES




49.8% 51.2%13.2% 10.8%37% 38%

Permanent Contract

Regional Overview

2014 will continue in much the same vein of 2013 throughout the Middle East region with a wide raft of major project work underway and a number of large scale projects about to be embarked upon. This will result in a continued high demand for all disciplines across the engineering verticals. The worldwide trend of high demand for Geology and Geophysics disciplines looks set to continue.

Onshore LNG remains a core market with a large number of projects ongoing. There is a steady rise in the number of downstream requirements as the Middle East looks to meet its own local energy demands. With over $200bn of post FID projects currently in play across the Gulf Cooperation Council (GCC) region workforce demand will continue to flourish.

Iraq continues to be an area of substantial growth, while a number of significant new projects in UAE means inter-regional competition will become increasingly fierce. With Qatar continuing its self-imposed moratorium on North Field development, it will be business as usual. Construction of the new $6.5bn Al-Karaana petrochemical complex is underway, as is RasGas’ Barzan, possibly the world’s safest project in terms of commitment for completion given that it is critical to meeting the energy needs of Qatar in its preparations for the World Cup. As such, demand for oil and gas professionals will continue to be reasonably strong.

Workforce impacts

With a number of nationalisation programs in place across the region, a strong focus will remain on the sourcing, training, development and retention of national workforces. In some areas, demographics make this a particularly difficult task, and there will continue to be large investments made in training and development.

Increased competition in the EPC/PMC market from Asia in particular, and the tight margins for such work, have meant salaries have had to become more and more competitive. This is presenting an issue for companies both in terms of attracting new talent, and retaining existing talent. They therefore have to become a little more creative in putting together packages for attraction and retention.

However, the plethora of major project work elsewhere in the world and the burgeoning shale market are increasing competition for affordable talent. Sourcing candidates is becoming that much more difficult.

Middle East


Project impacts

The squeeze being put on rates through highly-competitive tendering has meant that there are concerns regarding the impact this will have on quality, safety and delivery. It is difficult to place a figure on the impact that attrition has on a project, but this is perhaps becoming one of the key drivers in budgetary over-expenditure and project delays. Recruitment Campaigns targeting mass hires from a particular location have an even greater impact as companies struggle to ensure they have enough affordable experience to minimise impact in terms of project overruns and subsequent loss of revenues.

National content policies also continue to have an impact. Significant investment is therefore required in the training and development of local content for the long term benefits of the national oil companies. However, it is imperative that this is implemented correctly.

With labour codes across the region proving incompatible with some of the general trends within the oil and gas communities in respect of standard remuneration expectations, this also has an impact. Day rate payments and rotational assignments not fitting within this structure is another obstacle in attracting the right talent and subsequently resulting in project overruns.

Middle East


Middle EastQuotes from participants of the Survey

“Most companies want people with experience, they don’t want to recruit staff and train them.”

“The industry has been facing the skills shortage for years, yet it has managed to pull along. However, this can’t go on for ever. The industry has to take a leading role in addressing this issue.”

“Pressure to hire/promote nationals who may not have sufficient experience/expertise. Increased demand for contractors/consultants to support these personnel.”

“Graduate and apprentice programmes in place but are not sufficient to replace skills or experience.”

Industry viewDavid Doig, group CEO at OPITO*, the skills organisation for oil and gas, examines the impact of the skills shortage and the need for more collaborative action in response to the findings of the H1 2014 Global Oil & Gas Workforce Survey

The key to unpicking many of the problems we face is education. Get things right in schools, colleges and universities and we will create a big enough pool of people for the future. As it stands though, I believe that the oil and gas sector has already gone beyond the skills shortage to a skills crisis. As a result there is huge cost inflation built into the industry. Companies realise they don’t have the right skills so they buy them in. And in order to attract quality people they have to pay higher salaries, golden hellos, golden handcuffs and generous ‘ex pat’ packages. This high level of remuneration is also creating a more mature workforce. If you put significantly more money on the table people are naturally going to stay longer before retiring. So it’s true to say there isn’t as much young blood coming into the business as needed. The impact of these growing cost pressures is being felt all over the world with projects from the North Sea to Australia being closely examined for cost effectiveness and overall viability. And this is all in the context of a positive business environment. If, and when, things slow down one of the first things that tends to be cut is the training budget. This of course only goes to exacerbate the problem.

More collective actionWhat OPITO would like to see is more collective action. This happened successfully in the North Sea with the Upstream Technician Training Scheme. Running since 1999, the scheme is the oil and gas industry’s response to the need for a competent, stable and flexible technician workforce to meet its current and future needs. Backed by the industry and run by OPITO, it is one of the most successful modern apprenticeship programmes of its kind providing the oil and gas industry with suitably skilled, trained and highly motivated technicians. This sort of collaboration tends to be the exception. It is hard enough to develop interworking between companies on issues like safety let alone training. Short term, insular thinking certainly won’t solve the crisis and more companies need to wake up to the fact cooperation on training is badly needed.

However, this is the greatest industry in the world; it’s certainly the most dynamic, and I am sure we will all rise to the challenge.

*OPITO is an industry-owned organisation aiming to improve safety standards, enhance the

talents of existing staff and remains committed to developing a safe and skilled sector. Visit:

www.opito.com


David Doig, group CEO at OPITO

Air Energi is the trusted supplier to the oil and gas industry. With over 30 years experience in the sector our goal is to become the recognised, foremost provider of trusted expertise to the international oil and gas industry.

The Air Energi Group has ventures in over thirty five countries across the globe and deploys engineering professionals in over fifty countries. Our clients are driven by the need to reduce costs, improve efficiency of recruitment and to concentrate on delivering major projects on time and to budget. Increasingly our clients want to outsource the recruitment, pay rolling and logistical support for a growing percentage of their workforce. Air Energi provides a comprehensive range of services which allow us to deliver a total personnel solution on any scale, at any point in your project life cycle or field development and at all your locations.

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Key Stats• 3000 consultants currently assigned to major projects• Workforce 60% local/regional and 40% Western Ex-Pats• Present in 35 global locations• Experience in a total of 50 countries• Clients include ExxonMobil, ConocoPhillips, Shell & Total• EPC clients include Worley Parsons, Wood Group, AMEC, Bechtel and KBR

AmericasAmericasAir Resources Americas LLC6002 RogerdaleSuite 340, Houston Texas, 77072, USATel: +1 281 983 3464 Fax: +1 281 983 3468 [email protected]

Asia Pacific

APAC RegionAir Energi Group Singapore Pte Ltd1 North Bridge Road#06-03/04 High Street Centre Singapore, 179094 Tel: +65 6511 1060Fax: +65 6511 1050 [email protected]

Australasia

AustralasiaAir Consulting Australia Pty LtdLevel 8, 46 Edward Street Brisbane, QLD, 4000Australia Tel: +61 (0)7 3056 0900 Fax: +61 (0)7 3112 2601 [email protected]

Caspian

Caspian Region/FSUAir Energi Caspian LLP 6 office, 4 floor, 113 Kulmanov st.Atyrau, Kazakhstan 060011 Tel: +7 7122 [email protected] UK, Europe & Africa

EuropeAir Resources Ltd4th floor, Delphian House, RiversideNew Bailey Street, ManchesterM3 5FS United KingdomTel: +44 (0)870 112 [email protected]

Middle East

Middle EastAir Resources Qatar3rd floor, Qatar First Investment Bank Al Jazeera Finance Building, PO BOX 2953C Ring Road, Doha, QatarTel: +974 4462 0886Fax: +974 4462 6675 [email protected]


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