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Australia – Ongoing caution in Oil & Gas job market

04 March 2014

The Hays Oil & Gas Global Job Index for the fourth quarter of 2013 showed that operators are becoming more cautious about spending due to cost escalation and the financial viability of certain projects in Australia.

The Index charts the number of jobs posted on nine oil and gas portals across the world. In Australasia the Index stood at 1.05 at the end of December, down from 1.6 three months prior, putting a damper on this year’s outlook and therefore hiring plans.

Paula Kirwan, Regional Director of Hays Oil & Gas, commented: “It was expected that the much anticipated change of government in Australia in September 2013 would lift the uncertainty that had been stifling business confidence throughout 2013. However, this process has proven to be slow.”

“While the new regime has begun processes to both remove red tape and facilitate acreage releases, the real term effects won’t be felt until the House of Representatives ‘catches up’ with the change of government on July 1st, 2014,” she added.

According to the Index, labour prices in Australia remain the highest globally. The anticipated future cost-to-profit returns are causing operators to show increased caution in spending. This has started to cause delays in internationally backed projects across Australia.

Ms Kirwan explained: “Examples are emerging across Australia where companies have taken (sometimes) dramatic steps to reduce costs. For offshore projects, the focus remains on increasing production and use of cost-effective floating LNG (Liquefied Natural Gas) platforms, or FLNG (Floating Liquefied Natural Gas) technology. For onshore projects, associated costs are being constantly squeezed and in some instances, contracts have been delayed.”

“For example, a major Queensland based project was delayed owing to the [joint venture] company demanding a rationalisation program. This has caused delays in finalising contracts, impacting multiple contractor companies in the project chain,” she added.

The current strength of the Australian dollar is exacerbating the issues caused by a very well paid labour force. A weakening of the dollar would ease this pressure and help push major projects forward across the country, according to the report.

“In the meantime, companies took a proactive stance at the start of last quarter and are being very cautious with all future recruitment in regards to pay increases and associated costs in the salary packages. For example, many companies are amending their policies with regard to FIFO (First In, First Out) costs to site and a growing number of employers are spending time benchmarking salaries in an effort to limit yearly increases in staff costs,” Ms Kirwan concluded.

Globally the Index stood at 1.3 in December, which was down 1.7 at the end of the third quarter.

As well as an Australasian perspective, the Hays Oil & Gas Global Job Index also provides a measure of month-to-month jobs posted by region. The figures from October to December 2013 (Q4) reveal:

The Asia Job Index has demonstrated a consistently high level of vacancies and continues to grow in comparison to global markets. The year ahead looks to be an exciting time with a resource rich area of exploration in the APAC region which is likely to continue with a particular interest in shale gas and shale oil deposits in China. Malaysia, Indonesia, and Vietnam are pushing this market forward as existing and new fields of both conventional and non-conventional reserves drive growth.

The fourth quarter in North America saw a slight upswing in recruitment activity. In Canada this increase can most likely be attributed to the eventual, and much anticipated approval for a number of major projects. With the Northern Gateway pipeline project also receiving a positive recommendation, many companies have returned to hiring mode after having been in a holding pattern for the majority of the year. The US market has continued a steady climb in recruitment activity throughout the year, with most activity focused on onshore non-conventional projects. This is a good indication that the offshore market will flourish in 2014.

Despite an upturn midway through the quarter in Europe, the year ended with a relatively low volume of vacancies. This is the first time the Job Index dipped below 2011 levels since Hays’ annual Job Index began. Business activity has remained stable in the region, with European companies continuing to play an important global role in oil and gas development and joint ventures. Nonetheless, there is still uncertainty around the development of unconventional resources, specifically with the political debate and controversies surrounding shale gas and fracking. The outlook for 2014 is promising as the economic climate is expected to improve.

There were no significant changes to wages in Latin America during the fourth quarter. However, the release of environmental licences and new investments led to increased hiring in business development, crude trading, social and environmental areas in late 2013. New investment projects in onshore and offshore exploration phases led to continued hiring of specialised technical staff earning salaries at the top of the pay scale. In response to expected industry growth in coming months, companies are preparing to increase staff levels in order to accommodate this increased business activity.

The fourth quarter of 2013 proved to be slightly stronger than quarter four in 2012, with more oil and gas professionals in demand in Africa. Demand for candidates has been consistently high since May; it reached its second highest peak of the year in November at 1.76, higher than the Global Job Index score. Demand dropped considerably in December following a similar trend in 2012.

Over the fourth quarter of 2013 in Russia, there has been a burst in activity for oil and gas companies, which is typical for this time of year in the region. This is because Russian climate conditions allow for main construction work on onshore sites to start when the soil is frozen and therefore service companies are able to deliver construction materials and equipment on-site. Activity is being observed in the Caspian basin as a result of a number of major projects associated with the construction of a pipeline.

Whilst the Job Index in the Middle East decreased in the last quarter, its latest position is only marginally below the high of the last two years. Moreover, there has already been a major increase in vacancies in early 2014. Currently, Polymer and Plastic projects are in high demand across Oman and Saudi Arabia. Highly skilled chemical engineering graduates with key experience related to FEED (Front End Engineering Design) and EPC (Engineering, Procurement, & Construction) phases with OPCO (Operating Company) experience will be in high demand for the foreseeable future.

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