The E&P marketplace is becoming increasingly volatile. The past several decades have given rise to intensified competition; cost pressures; and increasingly complex projects with associated higher levels of technical, financial and environmental risks. For companies looking to survive in this uncertain business environment, it is critical that they have a skilled workforce in place that can address today’s needs while also building the talent pool they will need to fuel future endeavours. After all, in addition to having the technical experience needed for the job, a skilled workforce also can provide more value-added production and services, in turn increasing a company’s ability to compete.

Yet the oil and gas industry as a whole is facing a serious skilled labor shortage. In one 2014 study of North American energy companies by the Manpower Group, 58% of energy employers said they are challenged to find the right talent, and most (74%) thought the problem would worsen in the next five years. This may prove to be true, as an estimated 5 million oil and gas workers—roughly half of the global workforce—will be eligible to retire this year, according to Dan Heintzelman, CEO of GE Oil & Gas.

Clearly, E&P companies must begin exploring different approaches to talent if they want to remain competitive in the coming years. It is no longer sufficient to assume that the skills required to deliver success are readily accessible. While talent considerations have always been linked to strategy, the need for tighter alignment between the two areas has never been more urgent. The identification, selection, development and retention of talent are an intrinsic part of an E&P company’s decision to operate in certain countries, to position themselves along the value chain and to allocate scarce resources. Projects in a remote and/or hostile environment increasingly demand the use of new technologies and advanced skills to overcome environmental and social challenges, often achieved through collaboration with multiple development partners such as local and international partners and national oil companies.

E&P companies must therefore shape supply and demand for the technical and leadership positions that will define success in the years ahead. To sustain their edge in delivering complex projects on schedule and within budget in an environment of volatile energy prices, the interaction of three talent differentiators will be important:

  • A cadre of highly skilled technical talent will ensure that deep capabilities exist in the core business;
  • Developing the ability to think and act strategically over time will build the pipeline of leadership suited to navigating an ever-changing landscape; and
  • Having resources available in geographic and competency areas where future demand may arise will support operational flexibility by providing a talent base that is better equipped to meet local requirements.

Developing these differentiators over the long term requires attention to four key elements.

Robust talent needs for the future

Historically, cost pressures during bust cycles would be dealt with through layoffs of technical staff. Increased competitive pressure and the growth in complexity of operating environments mean that retaining a critical mass of core skills at each level and across geographies has never been more critical. Traditionally, technical experience was a prerequisite to leadership roles. The long lead times for such development that are characteristic within E&P companies are now challenged due to the exit of the aging baby boomer generation that has dominated leadership roles to date. As a result, the industry is attempting to reduce the time it takes to develop leadership competencies.

For example, at Atlas Copco China, the focus of training in their “Industrial Technique business area” is not merely on technical excellence but on preparing leaders to tackle the demands of a fast-growing market. Their leadership program involves several levels, including coaching, personal development and analysis of the manager’s business plan.

Versatile pathways to success

The ability to make sense of complex situations, to identify and manage resources to deliver results, and to work within and lead diverse teams are indisputable competencies for managers in E&P companies today. Achieving consistent standards across worldwide activities given the diversity of cultural nuances, environmental concerns and commercial partnerships across geographies is more challenging. Yet this diversity presents a significant opportunity for developing deep competencies in core skills over time.

At Shell, one element of its graduate program is charting a path from technical to leadership excellence. Competencies are clearly defined so that as individuals move through their careers, they understand where they stand, where they want to be and how they might get there. Blending traditional professional development training with opportunities to learn on the job in diverse locations supports the process of closing gaps.

Diverse talent pools

The rise of national oil companies has overturned the assumption that predominantly American and European resources can be deployed across the globe. As countries seek to secure their long-term futures, the mandate to invest in local talent pools has never been stronger. In response, diverse partnerships with local industries, other multinationals and research institutions have abounded.

In contrast, Petrobras has established a corporate university to create its own pipeline of talent and has developed more than 50 thematic networks to bring together laboratories from diverse universities and research institutions to share knowledge, experiences and infrastructure. The move has had two important effects at the national level. The first is the reversal of “brain drain” abroad as scientists have access to cutting-edge presalt-related research activity at home. The second is building a lead in technology over the long term, not just in presalt development.

Workforce agility

Increasingly, E&P firms must think like startups before making strategic capital investments. They must be nimble in identifying customer needs, positioning themselves along the value chain and harnessing capabilities within the organization to succeed, using small investments to examine how resources and capabilities may be combined in radically different ways to deliver value to customers.

FastWorks, a product development strike force within GE’s Customer Innovation Centre, was able to challenge huge numbers of talented engineers and researchers at the large company to think and act as if they were working on a shoestring budget in a Silicon Valley startup. They asked the engineers to identify the criteria that would indicate the various phases of oil, water and gas that go through wells during drilling in no more than two pages. They then developed ideas for achieving the criteria and piloted the most cost-efficient ways to make them commercially successful over a period of six months.

E&P requires a huge range of operational, technical and commercial skills, ranging from geological specialties to complex engineering and project management capabilities. These jobs demand the ability to make decisions that are based on deep and varied experience in ambiguous and technically challenging situations. The volatility and complexity of today’s world, in addition to the skilled labor shortage still affecting the industry, make it tempting to prepare only for the short term. However, the reality of such an environment makes it imperative not to view the long term and short term as mutually exclusive. This means the identification, selection and ongoing development of talent cannot be viewed as an after-thought of the strategic path chosen but must form an intrinsic part of the strategic conversation within E&P companies today. If lower energy prices persist, the need for workers at all levels to raise their entrepreneurial game and technical ingenuity in the short term to drive down costs will come into sharper focus. New forms of strategic advantage may emerge from the efficiency push, but the degree and pace of success over time will come down to the talent advantage that some E&P companies have managed to build.

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