Oil Prices Recover, But Hiring Lags
Jobs for geologists and similar roles have not returned even as rigs have come back online.
By Alan Neuhauser, Staff Writer May 8, 2018
OIL PRICES FOR THE PAST two weeks have hovered near a four-year high, more than a hundred rigs have come back online in recent months, and oil services firms have posted big revenue gains through the first quarter of 2018.
But tens of thousands of jobs the sector shed during the three years in which prices were in the doldrums have yet to return.
By one count, of the roughly 60,000 jobs lost since a worldwide glut caused oil prices to slide in 2014, only 6,000 jobs have returned.
Industry analysts say that, as benchmark crude oil prices dove from a peak of more than $110 in June 2014 to a nadir of less than $30 in January 2016, investors became more interested in seeing returns instead of growth. That spurred oil and gas firms to take their operations offline and slash their budgets for further exploration. Since 2014, spending on exploration has plummeted by 60 percent, analysts say.
"Operators are focusing on less risky exploration projects. They're focusing on near-field exploration or infrastructure-led exploration as opposed to true frontier exploration," says Aleek Datta, a managing director in the Accenture Strategy energy practice. "If I have an asset or rig in the Gulf of Mexico, I'd rather explore something adjacent to that versus going somewhere in the middle of nowhere … and having to recreate all the infrastructure."
The drop in oil prices also forced oil and gas firms to become more efficient – far more than when oil was fetching over $100 a barrel: The average break-even price for shale oil and gas plays – often referred to as hydraulic fracturing, or fracking – fell by more than 40 percent between 2013 and 2017, from over $70 per barrel to less than $40 per barrel, according to the World Bank.
Those strides allowed U.S. firms to bring oil and gas rigs back online sooner as prices recovered – with fewer workers required.
"They learned how to do the same job with fewer workers, leaner budgets, became brutally efficient at negotiating contracts for services and supplies – everything from drilling rigs to casing and tubing," says Brad Burton, chairman of the petroleum geology program at Western State Colorado University. "Industry is being very selective in who they hire, and they've learned to live on a leaner staffing."
That's particularly hurt petroleum geologists, geophysicists and others in the industry responsible for helping companies interpret seismic data and information from underground sensors to find and develop new wells.
Roughly 40 percent of the industry's geologists work in exploration. In the past four years, that head count has dropped by about 35 percent, according to industry analysts.
There's been a marked shift in who the industry is seeking to hire, too: New geologists, for example, are expected to be well-versed in data science and analytics, able to harness software, develop models and use other tools that can comb through the mountains of data generated by surveys, sensors and other operations and devices. Tasks that were once tedious become not only faster and more efficient, but also more accurate:
"If you get data points from hundreds of thousands of examples, you're much more consistent and you're able to get a better read on what some of those measurements may be to help synthesize and
train new [computer] models," says Stephanie Rogers, a managing director in Accenture's resources operating group.
For oil and gas firms, where one bad investment in a well can cost millions or tens of millions of dollars – especially offshore – those skills are now sharply in demand, industry analysts and scholars say.
"The skill set in demand is changing," says Eric van Oort, a professor in the petroleum and geosystems engineering department at the University of Texas. "They're primarily interested right now in people that have automation and data analytics skills, and I think those people are in big demand."
The industry, he says, may have overcorrected after the downturn in prices – after working 25 years at Shell Oil Co., he says, he senses demand for geologists and other high-level workers may soon accelerate, even if it doesn't quite match the demand of a few years ago.
"They've cut way too deep and they haven't realized that," van Oort says. "But I think we're right on the cusp of that, especially if oil prices stay at this level or increase even further. There's a sign that demand is going to exceed supply, especially because of the limited investment in new production growth that's happened over the recent years.
"This industry overreacted," he says, "and it always seems to do that."