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Industry survey reveals the full scale of opportunities facing the UK oil and gas sector

17 March 2011

A new study has revealed a boom in oil and gas activity is on the horizon with more than 80% of North Sea companies surveyed expecting to grow their business over the next five years – almost half of which expect growth to be significant.

Pan-industry research commissioned by OPITO and supplemented by a parallel study undertaken by the Engineering Construction Industry Training Board (ECITB), the leading skills and training bodies to the UK oil and gas sector, found that 90% of companies are anticipating a rise in international activity.

A further 67% expect to see growth as a result of decommissioning and 63% anticipate a rise activity in relation to wind power.

However, more than 50% said attracting appropriately skilled staff was the number one challenge to their ability to deliver their project opportunities.

Conducted by Robert Gordon University in Aberdeen, the study found that demand for appropriately skilled or experienced staff continues to outstrip supply however with vacancies for engineers (graduate and chartered) and managers the hardest to fill.

More than 110 companies spanning the construction, drilling, engineering, geoscience, marine, science, inspection and operations sectors contributed. The majority are anticipating growth in the workforce in the next 5 years, with 12% expecting to take on more than 50 people in the next 12 months and 5% looking to recruit more than 200 in the same period.

It is the first time that OPITO and the ECITB have embarked on such a major piece of research.

Managing director David Binnie said: “Capital spend on existing sanctioned projects will increase to £22 billion over the next five years, potentially rising to £40billion. This expenditure is targeted around 33 new platforms, 12 major asset modifications and 40 subsea tie-backs.

“This is without a doubt a startling set of opportunities and our estimates suggest that over 15,000 new posts will be required over the next five years to deliver these project plans. Meeting that challenge and increasing the supply pool of experienced talent is critical if we are to avoid inter-company competition, costs inflation and the delay or cancellation of projects.

“This study will help us to better aggregate skills demand, identify common clusters of needs and articulate these more clearly to academia and funding agencies.”

David Edwards, chief executive of ECITB said: “The UK needs more technicians, apprentices and engineers to transform our energy infrastructure. A good start has been made, but the rate of recruitment and training needs to double within the next 5 year to meet the strategic demand.

“The ECITB and OPITO are working together to make the industry as desirable as possible for appropriately skilled and experienced staff. A strong engineering construction industry is essential for delivering the transformation our energy infrastructure needs; from oil and gas to renewable energy, securing our energy future.”

The results were unveiled during twin seminars in Aberdeen and London.

The Aberdeen event included speakers Angela Constance MSP, the Scottish Minister for Skills and Lifelong Learning Angela Constance; Andrew Reid, managing director of Douglas Westwood; and chaired by Bob Keiller, CEO of PSN (UK) Ltd.

The London briefing, which took place at Church House Conference Centre, Westminster, was chaired by Martyn Fletcher of Doosan Babcock Energy Ltd.

The aim is to share the research with all stakeholders so that government and industry can engage in meaningful dialogue with OPITO and ECITB to develop radical solutions for the short and long-term challenges in order to achieve a step-change in the development of the skills necessary for the industry and UK PLC.

The key findings of the survey are:

The future looks optimistic. 81% of company’s respondents expect to grow their business over the next five years and 44% forecast significant growth in 2011.

During 2010 and under considerable economic downturn the respondents (144 companies) offered over 2000 vacancies. Given that the sample represents 1/6 of the industry’s total workforce the vacant demand across the industry is likely to be significantly higher. This indicates that in aggregate the industry is preparing for growth and replenishing skills.

At the time of conducting the survey (2nd half 2010) the majority of respondents anticipated further growth in the workforce - 12 per cent of companies expecting to grow by more than 50 people in the next twelve months, and 5 per cent of companies expect growth of over 200 people in the same period.

Although many parts of the industry sought to recruit in 2010 a third of the respondents cut their workforce numbers. Drilling, manufacturing and fabrication sectors suffered most from this. Reduced exploration activity and lack of visibility of future project development for those sectors could explain a short-term reactive approach.

Not surprisingly, growth and hence skills demand is being lead by operators, contractors and the subsea sector, which reflects the nature of project development in the North Sea. However, short-term growth is seen as most likely in companies employing less than 500 people. Growth in the medium-term is seen as most likely in companies employing over 500 people. This could illustrate their (companies employing less/more than 500 people) respective abilities to react to market demand and provides a lens through which to prioritise effort to address the skills needs.

The demand for appropriately skilled or experienced staff continues to outstrip supply. Attracting appropriately skilled and experienced staff and the resulting cost of employing such staff were the principal challenges facing virtually every sector of the industry. Over 50 % of respondents identified attracting appropriately skilled staff as the number one challenge. This indicates a general preference across industry to pay a premium to recruit experience rather than developing new entrant skills over the longer term and in-house.

Respondents provided clear evidence that inter-company competition for skilled, experienced workers is increasing. Historically this has resulted in a culture of wage inflation and loss of skills continuity. With increasing demand for experienced skills in the short and medium term this clearly points to an urgent need to increase the experienced talent pool through mechanisms such as bespoke training provision, transformation programmes and attraction of relevant skills from other energy sectors.

Competition from other industry sectors is increasing, in particular other energy sectors. Over the next five years, respondents are expecting a considerable increase in activity in international work and to a lesser extent decommissioning and wind power respectively. Indeed evidence shows that the wind and nuclear power sectors are already attracting talent from the oil and gas industry.

The most difficult vacancies to fill are those for engineers, graduate and chartered, and managers:
In general the number of graduate engineers available is sufficient across disciplines, however, direct relevance of technical and behavioural skills is lacking in many areas.
As mentioned above, there is a significant lack of available experienced engineers and managers. For these disciplines this is exacerbated by a higher age profile than the industry average.

With the exception of engineers and managers, mentioned above, the industry appears to have taken steps to address the problems it previously faced in relation to an ageing workforce. In some workforce areas, a sizeable proportion of employees are aged 16-25. Whilst this injection of younger talent has redressed the age profile it could explain the increased need for experience. This is particularly important as the industry gears up for growth. Given the difficulties of attracting experience into the industry, a renewed focus on skills development to improve the capability, and hence productivity, of the younger talent seems critical.

With the exception of administration and secretarial functions women are under represented throughout the industry compared with many other UK private sector companies (50% across the UK’s private sector companies and almost 66% in the UK’s public sector workforce). Whilst this does not provide a comparison with other engineering dominated industries it does indicate that other industries are better able to tap into the increased talent pool.

Most respondents provide their employees with 1-5 days training per year. Respondents were generally satisfied with most aspects of training provision. However, access to funding, more cost effective, tailored and local provision would encourage companies to take up more training.

There is a very high level of satisfaction with the current portfolio of oil and gas related qualifications. Few companies report a shortage of any relevant qualifications. However issues relating to the appropriateness of the content emphasises the need for improved technical and behavioural skills from education and academia and supports again the supply gap predominating in skills and experience.

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