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  • A shotgun solution to reversing the hollowing out of the oil and gas industry

A shotgun solution to reversing the hollowing out of the oil and gas industry

April 11, 2016 Jon Allwood

Pre-2014 the oil and gas industry had a growing skill gap as a result of not attracting enough young talent in the 1980s and 1990s. The computer and digital age were too attractive, and engineering in basic industries was perceived to be too dull. The recent downturn has, of course, made this worse in hollowing out the skills further, even if that was not the target of the 20% cuts that are common. The same can be said for some of the other traditional science and engineering sectors such as aerospace and defense, which are facing recessionary pressure from major defense spending cuts.

So, how can the industry solve this long term trend reinforced by the short term downturn? There is no silver bullet here, but there is a need for a program of at least four actions that can assist in that turnaround:

  • Create new skill and training centers in the growth regions where assets are being built and operated. It is essential that the large NOCs and IOCs operating in the growth regions such as MENA, India, China and parts of Africa invest in serious new operational excellence academies. They still have the ability to attract young talent as a result of their country demographics. This trend has started, but our observation is that it is not yet powerful enough to replace the hollowing out from the Western retirement program.
  • Be ruthless in de-layering the organization and use the saved money on “management” to build the new talent, pay them more, and invest in technology. There is no room for excess layers of management. We have said before that 5 layers of management from CEO to field operator is the absolute minimum that a large global organization can achieve realistically (see Roman Catholic Church). But it is true that many successful companies in this sector still have 9 (or more) layers of management from CEO to operator. This is no longer needed in the information age.
  • Focus on the big skill gap at the core of asset operations. We have identified a major gap in training and people development in the middle ranks of the operating companies. They often have excellent technical training programs and they spend a lot of money on basic management courses, sending more senior management to LBS, Yale, Harvard, Stanford and the like. However, there is a missing program for the supervisory management in the heart of the oil and gas operations. On-site and close-to-home management training and skill building, a much cheaper version of skill building, is too thin.
  • Spend much more effort implementing the use of technology. Companies buy a lot of software and systems but their usage can often be below 50% in reality. We have observed technology usage at much lower levels even. The industry also needs to spend more on AI, deep learning and machine learning to capture skills in the future.

More of a shotgun approach to solving the problem rather than searching for a silver bullet.

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