A combination of a growing worldwide demand for power and a shortage of top-level staff has created a highly competitive market for the people with the right talent. “It’s a very good time to be an engineer,” says Tony Ward, a director in the energy, chemicals and utilities group at Ernst & Young. The flip side of the coin, though, is that it is not such a great time for the companies doing their best to retain or recruit suitably qualified staff to drive their projects forward.

The scale of the problem was brought sharply into the spotlight when it was revealed that the global oil and gas industry faces a 15 percent shortage of qualified engineers by 2010 – a shortfall of between 5,500 and 6,000. According to Pritesh Patel, of consultants Cambridge Energy Research Associates (CERA), the industry faces the prospect of leaving up to 15 percent of posts vacant over the next two years.

There are already too few engineers to meet exploration and production project demand and this is perhaps reflected in the way that last year (2007) BP postponed several deepwater developments in the Gulf of Mexico, including Tubular Bells, Dorado and Puma. The company partly blamed “resource constraints” for this delay.

Expert forecasts predict that global output from deepwater projects is due to rise from four million to 11 million barrels of oil per day by 2017. But Pritesh Patel warns that these figures as based on the industry avoiding major delays – and points out that the shortage of engineers has been building up over the past few decades.

The Middle East and Libya accounts for 20 percent of global projects adding productive capacity up to 2011, according to CERA. It is also the region requiring the most manpower during this period, with 35 percent of global projected total. Experts point to a critical bottleneck being the shortage of skilled staff, with an industry workforce dominated by people nearing retirement and inexperienced graduates. Libya, in particular, could suffer more than most through an expected shortage of engineers and other oil personnel, according to CERA.

Conventional and nuclear
The sector’s problems are compounded by the fact that competition for the oil and gas industry’s talent is expected to rise in the next few years as both conventional and nuclear power plants are built. Some companies have responded by opening new training centres in south-east Asia, but their trainees will not gain the skills to manage, much less design, major projects for several years.

Large oil and gas producers have the advantage over smaller rivals through their ability to offer longer contracts and better rates of pay. They are also increasingly aware of the need to add a raft of incentives, so staff stay in their employ and qualified newcomers are drawn in.

At Devon, the largest independent oil and gas producer in America, company president John Richels personally sends birthday cards to each and every one of his 3,478 US-based workers. Devon also hold regular office social gatherings, such as picnics, and host a lavish Christmas party for workers and their partners. Part of the company’s enlightened campaign has involved the appointment of a senior level executive, senior vice-president of human resources Frank Rudolph, to tackle the retirement crunch head-on.

“A lot of little things make the difference,” says Mr Rudolph. These include includes an ongoing kid glove treatment of prospective new recruits. Senior executives escort them on a field trip to a gas field in Texas, and when the students return to university they are kept in touch with the company thanks to emails and phone calls from Devon workers and even care packages of food and drink during final examinations.

The need for this constant PR campaign is apparent when it is considered that about half of Devon’s 5,000 employees will reach retirement age in the next decade. Elsewhere, the picture is equally challenging. CERA predicts that more than a half of today’s engineers, whose average age is 51, will retire by 2015, an erosion rate of six percent per annum.

An influx of new entrants will offset this by five percent by 2010 – but there will be a knowledge gap, says Pritesh Patel. A survey of the industry’s human resource leaders revealed the personnel crisis was a “top five business challenge” for financial growth, according to Dina Pyron, an Ernst & Young partner and HR specialist.

Lost benefits
In the face of this problem, Chevron, the second largest oil company in America, is attempting to retain staff by calculating their retirement benefits every year, so they are constantly aware of the benefits they stand to lose if they switch to another company.

Chevron are also very conscious of the needs of high-performing workers and those nearing retirement age. “We try to scratch the itch,” Jim Schultz, the company’s human resources manager, recently told the Financial Times. “It really is about knowledge retention.” This means offering key employees flexible hours, more pay, phased retirement and the opportunity to work from home.

A typical example is 66-year-old geologist Susan Longacre, who retired from Chevron six years ago but still works up to eight weeks a year for her old bosses. The reason is that the company has only about 15 other geologists with Susan’s experience of reading samples drawn from deep underground to predict potential volumes of hydrocarbon resources. “It’s a process that takes time,” says Ms Longacre. “You learn it, elbow to elbow, over the core sample.”

Royal Dutch Shell is one oil company that has been aware of recruiting issues for some time. For the last decade, bosses have operated a business challenge reminiscent of Sir Alan’s Sugar’s TV show, The Apprentice, allowing 50 go-getting university students to spend a week working for Shell on a fictitious desert island. They are judged on everything from refining and exploration to finance and marketing, as company chiefs pose business challenges that could crop up during a five-year business strategy.

This year, Shell have doubled their recruiting efforts by holding two of these business challenges – and hiring up to half of all the contestants. Despite efforts such as these, Dina Pyron says there may still be a recruiting void in the near future. “This is going to become a critical issue,” she adds. “Companies are going to have to come out with something more creative. This is not an industry that moves at a rapid, innovative pace. It’s an open door for the company that says, ‘We need to do something more innovative to distinguish ourselves.’”

Some companies have already taken the hint. In Venezuela, the national oil company Citgo offers staff a range of unusual perks and incentives. They include an inter-office baseball tournament which involves jetting employees in style from Houston to Caracas to play.

At Texas-based Stress Engineering, the president, Joe Fowler, has made the company employee-owned – and held staff turnover down to two percent.

At Arthur D. Little, the world’s first management consultancy (founded in 1886), bosses are not resting on their laurels. Company director Priscilla McLeroy says the global consultancy is filling jobs once reserved for professionals trained in oil and gas by signing up PhDs from other sectors.

Attracting talent
They recently recruited a postgraduate in microbiology to help on an enhanced oil recovery programme that would normally be undertaken by a reservoir engineer. Ms McLeroy believes that one way to attract talent could lie in characterising projects as “energy”, which conjures up sexy images of sustainable business, instead of ‘oil and gas,’ which is usually associated with visions of undesirable hydrocarbons.

“Demand for all sorts of energy continues to rise,” says Bruce Williamson, chief executive of Dynegy, a leading Texas-based power company once known as “The Natural Gas Clearinghouse” which has two new plants under construction. A boom in power plants is expected in the wake of new laws governing carbon output and will almost certainly run parallel to the building of new nuclear plants.

Last September (2007), American power generator NRG Energy applied for official permission to build a new nuclear plant in the United States – the first in almost 30 years. The Bush administration now expects this move to spark up to 30 similar applications from other power corporations that are encouraged by the gradual acceptance of nuclear energy as the popular choice through its low carbon footprint and less detrimental effect on global warming.

And it seems almost inevitable that the demands of these expanding companies will only add further to the staff recruiting and retention problems of the oil and gas industry.