Innovative, Flexible Strategies Needed To Overcome Human Capital Deficit
Authors: Corrigan Mark 
Published: February 2015

With last year representing the fastest annual growth period for world oil demand in 28 years and long-term supply and demand factors establishing a very favorable E&P business climate, the industry has ramped up to activity levels not seen since the late 1970s. While rig and service equipment supplies are strained and much old equipment needs replacing, capital equipment problems such as these can be resolved relatively quickly as investment responds to the strong industry economics. However, a far more daunting problem is the shortage of human capital in the E&P industry, specifically for engineers and other technical professionals needed to find and produce the hydrocarbons the market is demanding.

Between 1983 and 2002, the number of U.S. petroleum engineers declined from 33,000 to 18,000 and the number of industry geologists and geophysicists declined from 65,000 to 48,000, according to the U.S. Bureau of Labor Statistics. Over the same approximate span, the number of U.S. colleges offering petroleum engineering degrees dropped from 34 to 19. This pattern also was reflected in other western countries, though on a smaller scale. While a slight enrollment increase has recently been evident, it is not enough to fuel the current and future needs. The net effect has been today’s dramatic shortage of practiced expertise, and the by-now-infamous “great crew change” on the horizon will soon compound the problem. Lately, the situation has led to a frenzy of industry companies poaching E&P professionals from other companies. Industrywide, this adds no new talent and could well lead to a vicious circle of disruption and inflation, undermining industry health.

In Responding, “How” Is Important

Responding vigorously to the human capital deficit is essential, but how the industry does this is equally important. We must look to the reasons this shortage has developed in order to shape a strong strategy to overcome it. Charles Swanson of Ernst & Young spoke well to this in the February 2005 issue of JPT.

Swanson accurately noted the importance of perceptions about the industry, starting in the mid-1980s, that began influencing collegians and young technical workers to stay away from oil and gas. The highly cyclical nature of the industry, job instability, and misconceptions about the future longevity of the industry and its environmental performance were the major elements of the shifting perception among this group. Other sectors simultaneously were seen as exciting sources of emerging technology.

We desperately need to overturn these perceptions. As an industry, we have a lot to be proud of. We do incredible things with technology. Today we do operate with a high respect for the environment. Our industry will still be thriving for our children’s children. We need to tell this story, not whisper it, and the broader engineering campus—not just the petroleum engineering faculty—is the place to do it. My company is not alone in recognizing the importance of an elevated presence on campus. We have some of our best young engineers dedicated to this to ensure that we can talk to students on their terms.