Canada's oil and gas industry is running on empty. There is plenty of fuel left in the ground, just not enough people to harvest it and send it to market.
Labour shortages, already severe in recent years across all areas of the sector, will only get worse if the industry doesn’t make some fundamental changes in the way human resources are managed, said Roger Soucy, president of Petroleum Services Association of Canada (PSAC).
Sooner or later the oil companies are going to hit the wall, he said. The call will be made to start up a new rig somewhere and there just won’t be anyone to do it.
Since the first oil discovery in Leduc, Alberta in 1947, a ready supply of farm workers flowed to the rigs in the winter months, the peak drilling time, to earn some extra money before returning to the farm in the spring. Though the work was tough, cold and isolated, the pay was good.
But family farms across the prairies are disappearing and increasingly even high-school students are looking for careers rather than temporary work on an oil rig. Add to that the challenges of an aging workforce, it’s clear that recruitment and retention and HR practices had to be modernized. The industry as a whole had to look long and hard at the way it operated and question some of its most basic principals, said Soucy.
“It is absolutely the most difficult time to find people, experienced people, in some time,” said Duane Mather, president and CEO of Calgary-based drilling contractor Nabors Canada.
In the past few years, employers in the oil patch were doing everything they could to lure experienced workers from across the country but they have essentially drained that supply too, he said. Nabors is now working to bring in qualified people from some of its other oil fields around the world.
But while that may be a solution to immediately fill some vacancies, the industry has to make changes to make it more attractive to people looking to start a career, he said.
The industry has been saddled with the negative image of low-skill jobs with little future or opportunity for development. But it is an increasingly sophisticated industry with its own degree of professionalism, he said. It’s important to provide clear career paths for people entering the industry and part of that comes from doing a better job of defining what careers exist and what each occupation and job consists of, he said.
The Petroleum Services Association of Canada has been working to create a new image of the industry as a place for rich and rewarding careers rather than short-term contract work. Since 1995 it has been involved with the Petroleum Services Competency Program to create industry standards for occupations.
Without industry standards, job titles become virtually meaningless. When it came time to hire someone, employers were never sure what they were going to get. So far competence standards have been created for 28 positions.
By doing a better job of defining the competencies and the occupations, training programs can be improved and it will be easier to move people from one job to the next, said Soucy.
More recently PSAC created what it calls a virtual career fair, www.careersinoilandgas.com, which promotes career opportunities in the industry with job listings, training offerings, general information about the industry and day-in-the-life tours of several different positions.
The Petroleum Human Resources Council (PHRC) of Canada was formed in 2001 with the singular objective of improving the supply of skilled human resources to the industry and has just begun a comprehensive new study to identify key HR challenges for the decade ahead and ultimately develop an action plan to meet those challenges.
“It will be an industry-wide human resources plan which was unheard of before this,” said Cheryl Knight, executive director and CEO of the PHRC. “It should make the industry a more attractive place to work and improve retention.”
Outdated notions
There are some positive human resource management changes in the industry, said Bob Henderson, HR manager for Nabors Production Services. For example, much more training and development is being offered and safety is bigger issue than even a few years ago, said Henderson.
Last year, Nabors conducted a study and determined that from the time someone joins the organization until about the sixth month, when the employee is effectively self sufficient, it costs the company nearly $10,000. “That is pretty much exclusively training costs,” he said. For example, a new training program introduced 18 months ago sees every new employee spend four to six weeks as an extra hand rather than a contributing team member.
Extra training is good in that it is a starting point for convincing people the company is dedicated to employee development and safety, but other structural problems in the industry continue to drive high turnover rates.
“One of the biggest challenges is that we are so cyclical,” he said. Most of the drilling in the oil patch happens in the winter months because frozen ground makes it easier to send heavy equipment into remote areas across rugged terrain. For a large part of the year, most drilling contractors are only running a small part of their fleet and staffing levels fluctuate dramatically. People leave the job in March and April and just never come back.
In 2001 Nabors Production Services lost 1,029 of its 1,200 workers. In other words, based on the costs of training, turnover is costing the organization about $10 million a year.
“We need to do things radically different,” he said. “It’s got to be a whole industry-wide initiative though, it can’t just be one company,” he said.
Both Henderson and Soucy said to some degree the dependence on winter drilling is outdated. Year-round drilling is possible, but it has always just been considered too expensive. The time has come, they say, to look at building a business case for investing in more year-round drilling if it means it will improve the supply of labour.
Shortages everywhere
Worker shortages are also being felt on the exploration side of the business, said Tom Diamond, director of HR for Petro-Canada. There are new opportunities in the oil sands in northern Alberta, on the East Coast of Canada and around the world. But those opportunities will not be realized if the company can’t find and hold onto the highly educated, highly skilled people who identify and assess those opportunities for the company.
In the early to mid-’90s the industry wasn’t looking for the geologists and geophysicists who specialize in locating oil and gas deposits. As a consequence, universities stopped producing those grads. In 1996, the University of Calgary only graduated five geology grads, said Diamond. Not surprisingly, in the current robust market, geologists with six or seven years’ experience are in very high demand.
In the last few years at Petro-Canada, a new focus was put on attracting grads through more co-op programs and offers are regularly being made before graduation. It is also important to get a better sense of what is needed to hold onto grads once they come on board. “First and foremost is to provide interesting and challenging work and career opportunities. That is the best thing you can offer,” said Diamond. “Second thing is a really good work environment. And thirdly you have to use the compensation lever,” he said. Incentives like stock options are being offered to employees sooner than was the case in the past. “You have to get the golden handcuffs on them earlier,” said Diamond.
Labour shortages, already severe in recent years across all areas of the sector, will only get worse if the industry doesn’t make some fundamental changes in the way human resources are managed, said Roger Soucy, president of Petroleum Services Association of Canada (PSAC).
Sooner or later the oil companies are going to hit the wall, he said. The call will be made to start up a new rig somewhere and there just won’t be anyone to do it.
Since the first oil discovery in Leduc, Alberta in 1947, a ready supply of farm workers flowed to the rigs in the winter months, the peak drilling time, to earn some extra money before returning to the farm in the spring. Though the work was tough, cold and isolated, the pay was good.
But family farms across the prairies are disappearing and increasingly even high-school students are looking for careers rather than temporary work on an oil rig. Add to that the challenges of an aging workforce, it’s clear that recruitment and retention and HR practices had to be modernized. The industry as a whole had to look long and hard at the way it operated and question some of its most basic principals, said Soucy.
“It is absolutely the most difficult time to find people, experienced people, in some time,” said Duane Mather, president and CEO of Calgary-based drilling contractor Nabors Canada.
In the past few years, employers in the oil patch were doing everything they could to lure experienced workers from across the country but they have essentially drained that supply too, he said. Nabors is now working to bring in qualified people from some of its other oil fields around the world.
But while that may be a solution to immediately fill some vacancies, the industry has to make changes to make it more attractive to people looking to start a career, he said.
The industry has been saddled with the negative image of low-skill jobs with little future or opportunity for development. But it is an increasingly sophisticated industry with its own degree of professionalism, he said. It’s important to provide clear career paths for people entering the industry and part of that comes from doing a better job of defining what careers exist and what each occupation and job consists of, he said.
The Petroleum Services Association of Canada has been working to create a new image of the industry as a place for rich and rewarding careers rather than short-term contract work. Since 1995 it has been involved with the Petroleum Services Competency Program to create industry standards for occupations.
Without industry standards, job titles become virtually meaningless. When it came time to hire someone, employers were never sure what they were going to get. So far competence standards have been created for 28 positions.
By doing a better job of defining the competencies and the occupations, training programs can be improved and it will be easier to move people from one job to the next, said Soucy.
More recently PSAC created what it calls a virtual career fair, www.careersinoilandgas.com, which promotes career opportunities in the industry with job listings, training offerings, general information about the industry and day-in-the-life tours of several different positions.
The Petroleum Human Resources Council (PHRC) of Canada was formed in 2001 with the singular objective of improving the supply of skilled human resources to the industry and has just begun a comprehensive new study to identify key HR challenges for the decade ahead and ultimately develop an action plan to meet those challenges.
“It will be an industry-wide human resources plan which was unheard of before this,” said Cheryl Knight, executive director and CEO of the PHRC. “It should make the industry a more attractive place to work and improve retention.”
Outdated notions
There are some positive human resource management changes in the industry, said Bob Henderson, HR manager for Nabors Production Services. For example, much more training and development is being offered and safety is bigger issue than even a few years ago, said Henderson.
Last year, Nabors conducted a study and determined that from the time someone joins the organization until about the sixth month, when the employee is effectively self sufficient, it costs the company nearly $10,000. “That is pretty much exclusively training costs,” he said. For example, a new training program introduced 18 months ago sees every new employee spend four to six weeks as an extra hand rather than a contributing team member.
Extra training is good in that it is a starting point for convincing people the company is dedicated to employee development and safety, but other structural problems in the industry continue to drive high turnover rates.
“One of the biggest challenges is that we are so cyclical,” he said. Most of the drilling in the oil patch happens in the winter months because frozen ground makes it easier to send heavy equipment into remote areas across rugged terrain. For a large part of the year, most drilling contractors are only running a small part of their fleet and staffing levels fluctuate dramatically. People leave the job in March and April and just never come back.
In 2001 Nabors Production Services lost 1,029 of its 1,200 workers. In other words, based on the costs of training, turnover is costing the organization about $10 million a year.
“We need to do things radically different,” he said. “It’s got to be a whole industry-wide initiative though, it can’t just be one company,” he said.
Both Henderson and Soucy said to some degree the dependence on winter drilling is outdated. Year-round drilling is possible, but it has always just been considered too expensive. The time has come, they say, to look at building a business case for investing in more year-round drilling if it means it will improve the supply of labour.
Shortages everywhere
Worker shortages are also being felt on the exploration side of the business, said Tom Diamond, director of HR for Petro-Canada. There are new opportunities in the oil sands in northern Alberta, on the East Coast of Canada and around the world. But those opportunities will not be realized if the company can’t find and hold onto the highly educated, highly skilled people who identify and assess those opportunities for the company.
In the early to mid-’90s the industry wasn’t looking for the geologists and geophysicists who specialize in locating oil and gas deposits. As a consequence, universities stopped producing those grads. In 1996, the University of Calgary only graduated five geology grads, said Diamond. Not surprisingly, in the current robust market, geologists with six or seven years’ experience are in very high demand.
In the last few years at Petro-Canada, a new focus was put on attracting grads through more co-op programs and offers are regularly being made before graduation. It is also important to get a better sense of what is needed to hold onto grads once they come on board. “First and foremost is to provide interesting and challenging work and career opportunities. That is the best thing you can offer,” said Diamond. “Second thing is a really good work environment. And thirdly you have to use the compensation lever,” he said. Incentives like stock options are being offered to employees sooner than was the case in the past. “You have to get the golden handcuffs on them earlier,” said Diamond.
