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Norway - Skills shortage to constrain the oil industry

27 December 2012

A skills shortage, particularly for highly trained engineers, is the biggest constraint for Norway’s booming oil sector, according to a new report by the Boston Consulting Group as reported by Reuters.

Oil and gas investments will soar 17% this year, and then level off to 3.4% annual growth between 2012 and 2016. As new discoveries are brought online, and demand for fixed and floating offshore structures will drive growth according to the report.

"The main constraint is the lack of qualified personnel, particularly experienced engineers," the study said. "Of the surveyed firms, 84% said that a shortage of experienced engineers and project managers is a major challenge."

Norway, Europe's second-biggest gas supplier and the world's eighth-largest oil exporter, has struggled with falling output in recent years and needs to bring new fields online to boost production.

Firms expect that demand for engineers will rise by 40% between 2011 and 2016, and lack of supply could create a shortage of up to 8,000 engineers, the study said.

Still, two-thirds of firms said they are comfortable with their outlook as the industry is importing more foreign labour and companies are sending more of their engineeng work offshore.

Norway has enjoyed rare economic success this year as a booming oil sector, and healthy state finances pushed economic growth above 3%, lifting per capita GDP above $100,000, even as the euro zone struggled with a recession.

Demand for labour is so high that unemployment has hovered at around 3%, even as net immigration swells Norway's population of 5 million by one full percent each year.

To cope with the labour shortage, the oil industry, which makes up a fifth of the economy, is establishing engineering and manufacturing bases overseas and continues to move capacity away from the biggest cities, where unemployment rates are the lowest, the report said.

The ratio of foreign workers in the sector rose to 10% by 2010 from just 6% in 2003 and several sectors are in "fierce" competition to attract labour both from within and overseas, the study said.

Norway's offshore oil industry, with players such as Statoil , BP, Royal Dutch Shell and Exxon Mobil , got a new lease on life in recent years after tax changes, particularly a rebate on drilling, attracted a slew of energy firms back to the mature areas. 

The biggest energy firms had all but written off the area as close to depleted, but vast discoveries, including the Johan Sverdrup field, which could contain up to 3.3 billion barrels of oil, quickly changed the picture.

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