This week, Houston will experience its biggest annual influx of visitors, with over 75,000 people expected to attend the 2011 Offshore Technology Conference. OTC starts today, and attendance and spending are always good gauges of the health of the industry. This week is set to be a record-breaker. Three days of dazzling displays of the latest technology from companies vying for a share of operators’ wallets; then a half day where students can take a free look around the industry’s premier shop window.
Last year’s show (and OTC really is all about the show, not the tech papers) was something of an anomaly. We had a buoyant market, for sure, but in the immediate aftermath of the Deepwater Horizon tragedy the atmosphere was somewhat muted. The Macondo well was spewing thousands of barrels a day into the Gulf of Mexico with no end in sight, speculation was rife but nobody knew what the ramifications of the spill would be.
Now we know that the oilfield has changed forever. With multi-billion lawsuits in the works, risk analysis has taken on a whole new meaning. The industry may not like it, but tighter US regulation is here to stay. Operators will have to find ways to deal with that regulation if they want to fully restart their major deepwater drilling programs, or – crucially – if offshore lease sales are to fully resume.
All of this takes place against the backdrop of an industry that has never been busier, delivering a product for which demand growth seems unstoppable. Despite protestations about the price of gas at the pump in the US, consumer acceptance seems to be the norm. The mild panic that ensued in 2008 when the price hit $4 a gallon for the first time is notably absent. The difference now is a generally stronger economy pulling out of a recession instead of falling into one.
Lots to be done, then. But…who’s going to do the work?
10 years ago, a session at SPE/IADC discussed the Big Crew Change: average age of SPE membership was 53, average retirement age was 57. Nothing much happened, but at least we were talking about it. Five years ago, it finally seemed that the industry was addressing the issue. Thousands of new engineers were being hired (the big three service companies each hired over 20,000 people in 2005), and the Crew Change was apparently underway. But 2008 saw a double-crash, when oil demand dropped nearly as precipitously as retirement portfolio valuations.
Senior engineers who wanted to retire couldn’t afford it, and hung on. Junior engineers were let go almost as quickly as they had been hired a couple of years before. SPE average age continued to creep up. Now the position is reversed. The Dow Jones index has regained its pre-crash value, taking 401(k) valuations with it. Demand for oil continues to climb. With the anticipated growth, are we going to be able to attract the engineering talent that we need? How much damage did the “ramp-up and lay-off” of 2005-2009 do to the industry’s perception in the student body?
The answer may lie in the findings of a recent study by Schlumberger Business Consulting, predicting that the Oil & Gas industry can expect a net loss of 5000 experienced engineers in the next three years, the implications of which are project delays and increased risk. The standard response to mitigating that risk is through technology. The study finds that graduate supply can meet recruitment demand, but those grads will not be coming from the best American universities. Indeed, many won’t be coming from American universities at all. Increasingly, those recruits will be female – another area in which the US has a lot of catching up to do.
It will be interesting to take a stroll around OTC this coming Thursday. Those companies who will have spent the first three days of the show selling their wares hard to the buyers of today should be selling their companies just as hard to the engineers of tomorrow. The organizations that successfully make that sale will be the ones occupying the prime OTC spots in 10 years time.
