The cyclical nature of the oil and gas industry, and its image as a dirty, dangerous and deeply unsexy industry, has led to a severe shortage of skills in the sector – estimated at 15% worldwide. At the same time, despite recent setbacks due to the dramatic decrease in the oil price, the industry has experienced unprecedented growth in many parts of the world, including South Africa. If we want to take advantage of the tremendous opportunities both offshore and onshore exploration is revealing, we will urgently need to address this dearth of skills and invest in training and drawing fresh talent to the industry.
The oil price has risen slightly over the last two months, but it is still under $60 a barrel. Although no-one knows what will happen next, it is unlikely to rise significantly any time soon. World-wide, oil companies have laid off thousands, with many more job cuts expected in the sector over the next few years. The rig count in the Caribbean and the North Sea has dropped dramatically over the last six months, which has led to hundreds of highly skilled petroleum engineers and geoscientists leaving the industry.
This volatility and uncertainty has resulted in young people losing interest in the oil and gas sector as a career option and choosing more ‘stable’ industries instead. The number of university students taking petroleum engineering courses has declined over the past few years. And let’s face it, sitting on an oil rig in sub-zero temperatures for weeks at a time is not a particularly appealing prospect, especially when you’re not sure when the next oil price tumble will take place.
The challenge facing the industry right now is avoiding a repeat of the 1980s and 90s, when plummeting oil prices also led to thousands of jobs being shed and fewer young people obtaining industry-relevant qualifications. The industry never caught up and the impact is still being felt today: there is a lack of suitably qualified candidates in the 30- to 45-year-old age range, from which most senior management and executive leaders are drawn. The experienced employees, now in their 50s and 60s, are starting to retire, but there are not enough skilled and seasoned individuals moving in to replace them.
There are three main areas within the oil and gas industry in South Africa where the skills shortage is likely to be felt most severely:
- Offshore oil and gas exploration. Some of the world’s top oil and gas multinationals have been bidding for licences to explore gas fields north west of Saldanha, off northern KwaZulu-Natal, and south east of Mossel Bay.
- Exploration for shale gas in the Karoo. Exploratory drilling is expected to start this year – the South African government is set to grant licences to successful bidders in the next few months.
- Oil field services. Given the country’s geographic position, South Africa is in a unique position to provide expertise and services for oil and gas projects across Africa. For example, the Saldanha Industrial Development Zone (IDZ) has been designated to provide services to the around 120 oil rigs that currently sail past our harbours. Each rig coming in is estimated to provide employment to 5 000 people.
In the short term, South Africa’s exploratory activities in the oil and gas sector will rely heavily on importing skills from elsewhere in the world. But this is not a long-term solution. We need to get ahead of the curve now and ensure we have the right skills to meet the needs of the industry going forward. While South African universities do produce excellent geologists and petroleum engineers, we urgently need to support them to continue training the future leaders of the oil and gas sector, and encourage young people from all over Africa to think about the industry as a career choice.
We can certainly learn from the lessons of other countries – Scotland, for example, set a large-scale petroleum engineering training programme in motion after oil and gas were discovered in the North Sea in the 1970s. How did Scotland convince university candidates to choose a career that would mean living on an oil rig in the freezing North Sea? How can we replicate their success in our own country?
Importantly, we need to change the negative perceptions of the industry resulting from the current low oil prices. Young people making career choices need to understand that what goes down will eventually go up again. Despite short-term cyclical volatility, there will always be opportunities in this exciting industry over the long term.
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By Paul Butterworth MNI, Global Head of the Maritime & Shipping Practice at Odgers Berndtson