Finding qualified employees to complete projects is a hurdle facing some companies. But hope may be forthcoming as the number of petroleum engineering majors increases.

Hydrocarbon finds and technology improvements are helping fuel growth of various sectors of the oil and gas industry.

But finding qualified employees is a problem facing some companies’ operations.

With new discoveries being made frequently, the fundamental problem in E&P is there aren’t enough people with technical expertise to move some of these projects forward, according to Ron Nickelson, director of global recruitment for Clover Global Solutions. Speaking during the Understanding Staffing Challenges in the Energy Industry webinar Aug. 7, Nickelson shed light on key areas he believes are essential to successful workforce management and reversing a trend that started decades ago.

Called “The Great Crew Change,” spanning from about the 1980s to the mid-90s, the industry witnessed a migration of potential employees amid depressed oil prices, Nickelson said. No longer were top students at universities majoring in science or math, seeking entry into the oil and gas field. Instead, they were opting for dot.coms and health care among other fields.

“We lost about a generation and a half of extremely talented individuals that simply went other places,” Nickelson said. That change coupled with aging Baby Boomers, expected to transition out of the industry by 2018, could have a significant impact on the industry.  “The bottom line is we’ve got more people transitioning out of the industry than we have coming into the industry.”

Facts presented to Hart Energy by Clover Global Solutions following the webinar showed:

• Between 1986 and 2000, the American petroleum industry slashed its workforce 60%, according to a report by the Interstate Oil & Gas Compact Commission.

• Enrollment in petroleum-engineering programs cratered to 1,387 students nationwide in 1990 from a high of 11,014 students in 1983, according to data collected by Texas Tech University in Lubbock. For the next 14 years, enrollment remained under 2,000.

• Of the remaining oil and natural gas industry workforce, half are now between the ages of 50 and 60, while only 15% are in their early 20s to mid-30s. The average age in the industry is 48, with some major and super-major companies reporting an average age in the mid-50s.

It could be 2020-25 before there is a true balance of the technical professionals needed versus the technical professionals that exist, Nickelson said during the webinar.

The consequences of staffing issues vary, depending on the type of company – independent, fully-integrated, or national oil companies.

Though companies in all three categories are not likely to abandon projects because of staffing issues, all are likely to delay projects. Data presented during the webinar showed 33% of the large, independent companies would delay projects because of staffing compared to 100% of full-integrated businesses and 67% of the national oil companies.

The independents also will begin to accelerate junior managers into senior managers and consider hiring people with fewer years of experience, which sometimes creates risks for the company and the firms supplying the employees, Nickelson said. The full-integrated companies, or super majors, and national oil companies will take non-operator roles in projects, 33% each, unlike the independents.

But all three types of companies will take more risks because of tight staffing – 67%, independents; 67%, full-integrated; and 83%, national oil companies.

Addressing such deficiencies involve using new technology to increase productivity, standardizing projects to staff more junior people, and outsourcing non-core competencies, according to Nickelson’s presentation.

He also pointed out that, in any given business situation, approximately 80% of the results are produced by 20% of the people, capital, or time – the “20/80 effect.” Petrotechnical professionals such as petroleum engineers, drillers, and geologists can represent up to 20% of the workforce supporting an E&P project. And the same 20% can represent up to 80% of the total third party staff augmentation costs, according to the presentation.

When filling vacancies, this group of people is this most difficult to find, he said, adding “They are the rock stars. They are the guys who make E&P work.”

Staffing agencies must be aware of these issues while also knowing how to interact with key players in the industry, understanding their job duties and how companies manage the process. Successful staffing vendors also must be able to understand and recognize the difference in job descriptions, considering companies use different terms for the same positions, Nickelson said. Discrepancies in pay for the same work performed could lead to employees leaving one company for another for better pay.

“There are incredible opportunities out there,” Nickelson said. “We see that for at least the next 10 years there are major deficiencies in the staffing requirements of these companies.” However, if company officials understand the situation and act on solutions, they will do well, he said.

The employment trend, however, is showing some signs of improvement. The number of petroleum engineers in the US is on the rise. There are approximately 28,000 petroleum engineers in the US, according to the most recent estimate from the Bureau of Labor Statistics, taken in May 2010. That number is up from less than 15,000 six years ago.

Contact the author, Velda Addison, at vaddison@hartenergy.com.