New study examines financial impact of oil and gas industry’s workforce shortage,” goes the headline.
And the numbers are scary. According to “The Workforce Crisis in the Upstream Oil and Gas Sector,” a study co-sponsored by the Houston office of Boyden, a global executive search firm and conducted by the Program for Applied Strategic Finance at the University of Houston’s C.T. Bauer College of Business, an aging workforce, a dwindling number of graduates and negative image have cost oil and gas exploration, production and oilfield services companies billions in escalating salaries, new retention programs, operational inefficiencies, lost and delayed projects and workplace accidents.
Recent engineering graduates may have a different perspective. Among the study’s findings, respondents confirmed the workforce shortage has dramatically re-shaped salaries, signing bonuses and retention incentives for the likes of petroleum engineers, petroleum geologists, field engineers and drillers. According to the study’s findings, the average salary increase for a petroleum engineer in 2006 was 16%. Petroleum geologists witnessed salary increases anywhere from 10 to 25% in 2006, depending on level of experience.
Many believe all this is symptomatic of the impending Great Crew Change. You’ve heard the numbers: 40% of the industry’s skilled professionals are expected to reach retirement age by 2010 (Independent Petroleum Association of America). The petroleum industry lost almost half a million jobs from 1982 to 2000 (American Petroleum Institute). Currently, the average age of an experienced employee in a management or technical position is 48 to 50 years. And so on.
Is help — at least for the US portion of the industry — on the way? No, if you consider frequently cited low graduation rates in the United States in technical fields compared to China and India.
But is this really true? In December 2005, Duke University’s Edmund T. Pratt Jr. School of Engineering published a study that seeks to accurately compare graduation data. According to the study, “Varying, inconsistent reporting of problematic engineering graduation data has been used to fuel fears that America is losing its technological edge. Typical articles have stated that in 2004 the United States graduated roughly 70,000 undergraduate engineers, while China graduated 600,000 and India 350,000. Our study has determined that these are inappropriate comparisons. These massive numbers of Indian and Chinese engineering graduates include not only 4-year degrees, but also 3-year training programs and diploma holders. These numbers have been compared against the annual production of accredited 4-year engineering degrees in the United States. In addition to the lack of nuanced analysis around the type of graduates … and quality of degrees being awarded, these articles also tend not to ground the numbers in the larger demographics of each country. A comparison of like-to-like data suggests that the US produces a highly significant number of engineers, computer scientists and information technology specialists, and remains competitive in global markets.”
In fact, data presented in the study “…imply that per every 1 million citizens, the United States is producing roughly 750 technology specialists, compared with 500 in China and 200 in India.”
Not too shabby. Add all the numbers and it’s a lot of engineers. And they’re mobile. The War of the Studies will no doubt continue, but for now it seems possible that as an event the Great Crew Change won’t be all that great.
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