The oil and gas industry is currently facing a talent crisis on both ends: while recruitment and hiring is suffering from the prolonged talent shortage, companies are also being tasked with cost cutting, restructuring, and layoffs.
We asked oil and gas expert Mark LaCour, Director of modalpoint, LLC to join us for a webinar in which we discussed the talent challenges facing the oil and gas industry—and how we can begin to solve them.
Mark offered up incredible insight on oil and gas talent in this Q&A. Read Part One here.
RiseSmart: Where do you think crude will bottom out?
Mark LaCour: We predicted last year that it would get below $50 a barrel. I’m going to go out on a limb and say that it’s bottomed out now. I think it’s only going to go up. Let me caveat that by saying that Texas production will continue to go up, even though drilling has curtailed. Texas production may affect something like West Texas Intermediary, where we may have a blip, a price differential, but if we look at global crude prices, I think we’ve hit the bottom.
RS: How do you feel the message of oil and gas can be taken to high schools—this includes both employment and the future needs of fossil fuels?
ML: I live this. I’m there half a day every Friday. The problem is: they’re high school students. You bring something new and exciting to them, and you put it out in front of them in a way that they appreciate—no lecture, just conversations and showing them the benefits, but ten minutes later they’re talking about the next pop star or what their friends are doing. So my approach is steady but true—sort of like the tortoise in the race. I don’t think I’m going to convince any kids to go work in the oil and gas industry, but I hope that they’ll have a favorable impression of the industry when they enter college.
RS: Do you see the same talent shortage happening in downstream and midstream?
ML: For 2015, downstream—what’s called craft labor: these are pipe-fitters, welders, machinists, etc. In just the Gulf Coast region in the US, there’s going to be 119 million man hours of demand. There’s only 109 million man hours of capacity. That’s 113 thousand jobs that need to be created from bodies that don’t exist. That’s only going to get bigger in 2016 and bigger in 2017. That’s going to drive some very interesting dynamics. We’ve recently had strikes at refineries, and the reason we’ve had strikes by the workers at the refineries is because they know that the refineries are making money, and they want more of it. You don’t want to see them go on strike, but it shows you that the economy of downstream is on a roar.
RS: What are some of the strategies that upstream organizations are going to take to poach talent when crude does go back up and they need that talent back?
ML: Let me tell you what I wish would happen, and what I think is going to happen. What I wish would happen is that they would put systems in place so that when the employee has to exit, he exits under a favorable umbrella. Where he understands what’s going on, he has no hard feelings towards his company, and his company stays in touch with him. Then, when they go in to rehire him, it’s going to be much easier for them to do that. That’s what I wish would happen. What I think’s going to happen is the same thing that the oil and gas industry always does: it’s going to be a price war. You’re going to see people that are going to exit at $150,000 a year, and in six months, the same company’s going to hire them and offer them $200. And the next company’s going to offer them $225. We got to that just two years ago and it drove prices through the roof. I don’t want to see that happen again, because what happens is those high-dollar employees are at risk the next time the industry slows down. But this industry hates change, so I suspect that’s the reality of what’s going to happen: we’re getting to another price war.
RS: Are you seeing the same trends in the shortage of talent and overall trends that you shared today happening on a global perspective?
ML: Yes, this is a global industry. Everything that happens in the oil and gas industry, even though I’m talking about Houston or the US it somehow reflects the global industry. Now, there are nuances: A lot of the world has nationalized oil companies (NOCs), and so the NOCs control a lot of what goes on. But when their crude hits the global market, it’s a global commodity. I talked a little about what OPEC was doing in the Middle East, but what I didn’t mention is that OPEC, even though they make a lot of money, they spend a lot of money on these big social programs to keep their youth working. If they don’t keep their youth working, those are the ones that radicalize and want to overthrow the monarchy. So these big social programs cost a lot of money. Right now, while crude prices are low, OPEC is basically dipping into its savings account to pay for all these social programs. And you can only do that for so long. That’s how we know the price of crude is going to go back up. It absolutely affects global industry.
RS: How can you transform your HR function to align with changes in business strategy your company is executing? How do we effectively link HR and corporate strategy?
ML: That’s a good question. And the reason that’s a good question is that I see that disconnect. I’ve seen it for years. The bottom line is that the business needs to understand the value that HR brings to the table. I’ve seen companies where HR was not seen as a business partner, in some cases where HR was seen as a hindrance. The business tried to work around HR. And they brought in a strong HR leader who understood the business and formed those partnerships, and five years later, HR is a business partner, is brought to the table, is seen as somebody vital to the business success. You have to figure out where the disconnect is between business and HR, and you have to be brave enough to bring it up and to fix the problem. And once that’s done, it’s smooth sailing and everybody benefits.
RS: How do we challenge the industry mindset and get people to think different?
ML: As long as I’ve been in the industry, HR has always been a shared service. It’s an afterthought. But think about it: with this talent shortage going on and the low crude prices, it’s the perfect time if you work for a company where HR is not seen as a business partner to stand up and fix what’s wrong and bring the skeletons out of the closet and get it done—and make yourself a business partner. 2015 is a time for HR to shine in oil and gas. It’s just a matter of: do you have the courage to make it happen?
What questions do you still have about talent challenges in the oil and gas industry? Join us for our next oil and gas webinar: