Manpower still critical to O&G business

Offshore staff

KUALA LUMPUR, Malaysia -- The global hydrocarbon industry is suffering from chronic shortage of manpower. The shortage, according to J.P. Chevriere, president of the Houston-based Transmar Consult Inc., is not cyclical, but structural. Top management has failed to pay sufficient attention to human resource development, he says.

Chevriere told participants at the second annual Offshore Asia Conference & Exhibition that the manpower shortage will lead to a massive gap in engineering and construction man-hours that are needed to continue an increasing number of projects.

"There is no magic bullet to cover this manpower shortage in the industry," Chevriere said, pointing out that fewer engineers and science students are opting for a career in the oil and gas sector in the midst of already declining number of engineers graduating from universities.

The global industry is set to invest $280-$290 billion this year, up from $260 billion last year and $215 billion in 2005. This translates into 400 million engineering man-hours for this year and 360 million man-hours last year, when the estimated global engineering man-hours available for this year were about 250 million, Chevriere said.

This has created a gap of between 5% and 40% in every segment of the oil and gas industry, already facing cost overruns due to shortage of plants, equipment, and materials, he said.

Cost of plants, equipment, and materials as well as day rates of rigs and floating units have been increasing significantly, putting pressures on every project.

One short-term solution is to retain the professionals who were in the retiring stage and to determine a line of succession. Chevriere explained how the valuable years of experience of older employees could be shared through a mentoring process with a newcomer engineer. Chevriere said a number of major oil companies were already working out such arrangements with their professionals in executive positions but close to retirements.

Top executives are often able to comfortably retire at 60-65 years of age, Chevriere said, but he encouraged companies to retain them by making preferential terms and attractive remuneration.

The payoff is not only in information sharing, it is in winning contracts, Chevriere said. He noted that international oil and gas companies are awarding larger long-term contracts to contractors that can provided an experienced team to manage the projects.

1/17/2007