Ready to Drill
Staffing ﬁrms that can cater
By Chris Sutton
The U.S. oil and gas industry is booming due to the global stabilization of commodity prices and new technologies that have made unconventional resource plays economically viable. Although the industry is expected to add 600,000 jobs by 2020 based on a recent study by Citigroup, oil and gas companies are still faced with a severe workforce shortage. This shortage is the direct result of a skills gap known as the “Great Crew Change.” As older workers retire, there is a shortage of younger, mid-level professionals with skills to replace the retirees.
Bridging this age and skills gap is one of the greatest challenges facing the industry today. And it’s turning to staffing ﬁrms for help. Opportunity notwithstanding, the oil and gas industry poses unique challenges for the staffing industry.
Opportunities. New technology has made previously inaccessible shale plays not only accessible but economically viable. Consider Bakken in North Dakota. According to the North Dakota Department of Mineral Resources, there are currently 7,000 producing wells in this shale play, with up to 2,000 new wells expected to be drilled per year for the next 25 years. With one to three production workers required and an estimated lifespan of 30 to 40 years per well, Bakken alone is estimated to create thousands of jobs through 2050.
Meanwhile, the infrastructure to take production from shale plays to reﬁneries or end users is currently underdeveloped or nonexistent, consequently workers are in tremendous demand for the transportation of crude via rail and truck (more than 2,000 trucks are needed to support just one well). In addition, the gradual construction of pipelines and highways over the next ﬁve to 10 years will require a significant workforce to accommodate these types of major capital projects.
Finally, reﬁneries need to be upgraded. Oil can be sour or sweet, depending on the amount of sulfur; and heavy or light, depending on how thick it is. The product coming from shale production is referred to as light oil. Investments in the reﬁning sector over the last 15 years have been dedicated to processing heavy, sour oil. Consequently, there’s a mismatch in what’s coming out of the ground and what has typically been processed in the past. This will require workers for facility upgrades and the construction of new reﬁneries.
Criteria for success. Staffing ﬁrms entering the industry should identify a niche where the company can be competitive and must understand there are many diﬀerent ways staffing providers are vetted and engaged, including a competitive bidding process, via reverse auction or through a vendor management system. Each of these can result in a diﬀerent pricing model as well as other unique requirements process that must be satisﬁed.
Challenges. The unique nature of operating environments in the oil and gas industry (onshore, oﬀshore, pipeline, plant, and reﬁnery) means staffing providers need to build expertise in a speciﬁc area.
Further, the industry relies heavily on independent contractors (IC), and staffing ﬁrms must ensure that all ICs they supply are compliant with state and federal requirements to avoid a misclassiﬁcation ruling.
Safety is also a primary concern. Staffing providers must verify that their workers have the safety training and certiﬁcations required based on their job role and work location, which can vary greatly.
Funding is another concern in this industry, as market demand and ultraspecialization has driven up pay rates dramatically. Some contractors can command pay of $900 to $1,500 per day. With typical days sales outstanding in the industry of 45 to 60 days, that’s a lot of cash for the staffing ﬁrm to ﬂoat.
Finally, there is a lack of standardization with respect to roles and job titles in the industry. Staffing ﬁrms serving this industry must be able to recognize diﬀerences between client requirements across a common body of skills, competencies and experience.
Staffing ﬁrms that fully comprehend the nature of doing business within the oil and gas industry and gain the expertise can be richly rewarded, if they can meet these challenges. Those that cannot meet the rigorous requirements on their own can still meet some level of success by partnering with ﬁrm(s) that can meet these requirements and are already serving the oil and gas industry.
Chris Sutton is partner at Clover Global Solutions. He can be reached at email@example.com.