Saturday, October 3, 2009

Oil Industry: Wanted: Engineers, Geologists

Elizabeth Souder’s intriguing article in The Dallas Morning News suggested that “This is a great time to look for a job in the oil industry.” She reports that the current high oil prices have and aging industry workforce have increased enrollment in petroleum engineering and geology programs.

Before applying to petrotechnical programs or sending resumes to oil companies, prospective industry employees would be well-advised to heed the advice of Lauren Welker who said that “her peers don’t base career choices on commodity markets.”

Missing from Souder’s article were interviews with current and former oil industry employees whose opinions should be an important component to any career decision. Business dynamics and employer ethics suggest that loving what you do should not be the sole criterion in a choice of occupation.

As a forty-year veteran of the oil industry, allow me to offer the following suggestions:

1. Match Your Skills with Those Required by the Industry – Strengths in science and mathematics are a must for anyone considering petroleum engineering and geology careers. If you don’t have the “right stuff” you should consider other options.

2. Overseas Opportunities Don’t Translate into Overseas Jobs – Exxon Mobil may have jobs in London, Melbourne, Indonesia and Nigeria but that doesn’t mean that you will be working there. Increasingly, companies are hiring local talent to lower costs, reduce cultural adjustment and comply with government regulations. You should also consider the hazards associated with international positions such as those in Iraq, Nigeria and Indonesia. The glamour of an international job will dim when faced with hostile citizens and compound living. The leader of Iraq's oil workers said Iraq could be producing more oil by investing its own money, without an oil law or large scale foreign oil company involvement. [Source: Interview: Leading Iraq's oil workers, United Press International]

3. Understand the Long-Term Industry Perspective - Too often careers are advocated by guidance counselors and the media based on the current situation. This short-term perspective is also held by public-companies whose merits arte judged by annual performance. Such perspectives are extremely dangerous in a long-term business such as the oil industry. The short-term perspective and hiring freezes by most oil companies has helped to create today’s worker shortage. According to the U.S. Department of Labor “overall U.S. wage and salary employment in the oil and gas extraction industry is expected to decline by 6% percent through the year 2014, compared to an employment increase of 14% in all industries combined.” [Source: Oil and Gas Extraction, U.S. Department of Labor]

4. Recognize Business Trends – Thousands of American workers have lost jobs to lower cost foreign workers through outsourcing. This is an ongoing trend that students need to recognize. Graduates are not only competing with U.S. classmates they are also in a race with Indian, Chinese and Russian graduates. The lower cost and excellent technical skills put U.S. graduates at a disadvantage. Oil Industry consolidation is ongoing and usually includes layoffs of redundant staff positions.

5. Prepare to Work for a Long, Long Time – Today’s new entrants to the workforce will be working will into their 70s. During your work lifetime, you will experience a number of career changes. Your ability to make these changes depends on the core knowledge you have obtained during your formal and work training. Petroleum engineering and geology skills may not be easily transferred to other industries. During the layoffs in the mid-80s, many oil industry employees went back to school to obtain MBAs so they could get jobs.

6. Beware the Commodity Business – Oil prices can increase and decrease. In a commodity business like the oil industry, the pressure is always on costs. These cost reductions have come from technical innovation and efficiency improvements. The result is that fewer workers are required to produce a barrel of oil. The need to meet financial targets in times of falling oil prices has often been translated into layoffs.

7. Watch What the Industry Does Not What It Says - A recent article in the Financial Times stated that the “Big Five international oil companies have cut exploration spending in real terms between 1998 and 2006, failing to respond to the incentive of high prices.” ExxonMobil, BP, Chevron, Royal Dutch Shell and ConocoPhillips used 56% of their increased operating cash flow to buyback shares and pay dividends instead of exploration. According, to Amy Myers-Jaffe of the James A. Baker III Institute for Public Policy: "The oil majors are not replacing reserves and, therefore, are seemingly slowly liquidating their long-term asset base." If this is true, should you invest in an oil and gas industry career? [Source: Investors put ahead of hunt for reserves by Big Five, FT.com]

8. Does the Industry Invest in Research and Development and Training? – The oil industry has historically been at the low end of spending on research and development and training. According to U.S. Government statistics, the petroleum industry spends about a third of what all manufacturing industries do on R&D. [Source: R&D Funds in R&D Performing Manufacturing and Non-manufacturing Companies by Industry: 1999-2003, U.S. Census] Training expenditures are also among the lowest. In fact, when the industry boasts of its expenditures on training they often omit the fact that much of this training is mandated by international operating agreements. [Source: ExxonMobil 2006 Corporate Citizenship Report]. On the positive side a number of majors including ExxonMobil are investing in extensive worldwide training facilities.

While students may want to consider the oil and gas industry as a possible career choice, they should make their decision based on the factors above. They should ask current and former industry employees if they would recommend an oil and gas career for their children.

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