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Battered US oil firms scramble to delay looming retirement wave
[NEW YORK] After 20 years in the oil business, Craig Reed, 62, is thinking about winding down his career just as a second downturn in six years rocks the industry.
Mr Reed is part of the baby boomer generation that forms the backbone of the US oil workforce and now weighs retirement as energy firms cut spending and shelve projects. That is a worrying prospect for company executives keen to keep their most experienced workers while they ride out the oil market slump.
"Between the politics and uncertainty and cost cutting, a lot of people of my age are saying that it isn't worth it anymore," says Mr Reed who draws up engineering and construction contracts for major energy projects worldwide. "Many of us could handle the downturn in 2008, but when the volatility comes back so quickly, and in a different form, it is difficult to take."
For him, it is maybe two more projects and then retirement beckons, with a holiday home in Maine that needs work.
The oil industry has been aware for years of a looming exodus of oil workers who joined in the 1970s in a so-called Great Crew Change.
But a sharp drop in oil prices from June to January that triggered spending cuts and limited opportunities for senior technical staff, threatens to speed up their departures.
That further complicates energy firms' balancing act as they cull thousands of field and office jobs to save cash, but try to retain seasoned scientists and engineers essential for oil exploration when prices rebound and drilling resumes.
Industry data show energy firms have cut at least 125,000 jobs worldwide since crude prices headed south from over US$100 a barrel in June 2014 to as low as US$40 last February.
Yet they try to keep specialist staff such as technicians and oil reservoir engineers who in the past slumps may have been encouraged to retire, according to recruitment agents, oil workers and consultants.
"Those with more experience are being retained," says Regina Mayor, an energy consultant at KPMG in Houston. "They are trying to defer retirements." For example, employers offer some more senior workers more flexible work arrangements to make them stay.
What makes the task even more pressing is a big generational gap that looms once Mr Reed's cohort retires - a legacy of a decade-long hiring slump after an oil market crash in 1986.
Out of 93,000 professional members of the Society of Petroleum Engineers worldwide, over 7,000, or 8 per cent, were older than 65, according to its 2014 data. Thirty per cent were under 35.
Oil data provider Drillinginfo estimates that half of the oil industry workforce is set to retire in the next five to seven years. Ninety per cent of oil and gas executives see talent shortage as an issue, it said.
Moreover, the shale oil technology, which allows drillers to respond to market swings faster than in the past, makes retention of core staff more critical than ever.
Federal data offers no breakdown into specific job types.
But when drillers and service giants such as Baker Hughes , Schlumberger and Halliburton started shedding jobs, field workers were the first to go. Then those in logistics, sales, marketing and human resources followed.
Recruiters say those workers account for most of a fivefold increase in the number of job seekers.
To be sure, some engineers and scientists have lost their jobs as new projects become scarce, and some have retired, says Tobias Read, CEO of Swift Worldwide Resources that recruits contract engineers for oil companies.
Yet it is a step companies try to avoid whenever they can, says Jeff Bush, president at CSI Recruiting in Fort Worth, Texas.
"Oil and gas firms learned from the past that you do not cut yourself off at the knees when things get bad by getting rid of higher level staff that might be hard to get back when you need them."
A recovery in crude prices to around $60 a barrel also strengthens energy firms' resolve to hold on to their key workers. "Everybody believes that at US$70 a barrel companies are going to need 80-90 percent of their technical community to still be intact," said Dennis Cassidy, managing director at consulting firm AlixPartners. "They don't want to do anything to dismantle the system."