The energy sector is evolving and accepting best practices from other industries with an overall focus on efficiency and continuous improvements. The Human Resources Department plays a critical role in driving these internal activities as well as the growth and expansion of an organization.
Despite the intrinsic volatile nature of this industry, HR function has a deep implication to steer the overall productivity of the business. Overcoming the various challenges, ensuring sound HR practices and strategies can thus develop strong talent culture and a more resilient organization.
Recruitment: Attracting and retaining Talents in a unique sector
The energy industry is unlike any other. It is primarily a field-based industry, and it requires a mental attitude that cannot be compared to the practice of a regular desk job. The jobs demand a combination of mental skills and physical resilience that would sustain the employees even in most difficult working environments. In spite of fantastic financial incentives, the hostile work environment and the inherent risks of the job might prove to be the key roadblock for the HR team to promote job satisfaction.
One of the trickiest challenges for HR executives would be retaining their top talents and finding suitable replacements in case of attrition. The company makes a considerable investment to train and groom the recruits to become subject matter experts in due course of time. Thus the HR team needs a long-term and sustainable approach towards managing the work-life balance of these employees, provide timely rewards & recognitions, and bring in the sense of empowerment by upskilling them.
Dynamic Industry Requirements
The energy industry is highly competitive and its working depends on many extraneous factors. Therefore, the industry has a dynamic approach inbuilt into its management practices.
The HR executives usually find it difficult to evolve a long-term framework because of the changes being effected in the management strategies of the industry. This not only greatly affects the delivery but also makes them apprehensive about following long-time HR policies.
Information technology has now become an integral part of the industry and has opened up many new job profiles, such as data analysts, automation engineers, software engineers etc. The HR strategy should dynamically change to support the technological advancement in each business groups and develop leaders who can translate business needs into digital solutions.
Diversity: Maintaining gender balance and multi-cultural workforce
Professionals from different corners of the world come to work in foreign countries, sometimes in remote and isolated locations. Working in these locations and away from family for long periods of time has an effect on the motivation levels. Adapting local culture, climate and food sometimes pose a challenge for these employees. Mid-career retirement is not a new thing for employees of both genders.
The HR has to drive interactive sessions, motivational work groups, and discussion forums to enable early detection of demotivation and prompt resolution.
Capacity building at new sites:
Any new oil and gas project is a huge commitment of capital and resources. Human resources managers are under huge pressure to make a project fully operational as the talent search for a new project is even more difficult than the established ones.
Apart from identifying suitable employees, the HR managers are also responsible for creating a suitable work environment for every employee recruited for the new project. This is an absolutely critical factor for the long-term growth and success of the new site.
The HR function is key to helping organizations in the dynamic oil and gas sector survive and even thrive amidst downturns. More importantly, they must ensure that the organizations are well positioned for the turnaround.
While the harsh on-site terrains of oil and gas industry set a huge challenge for the HR executives to keep the employee motivation level high, there are several rewarding experiences for an employee to be lured into this industry.
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The Permian is in desperate need of pipelines. That much is true. There is so much shale liquids sloshing underneath the Permian formation in Texas and New Mexico, that even though it has already upended global crude market and turned the USA into the world’s largest crude producer, there is still so much of it trapped inland, unable to make the 800km journey to the Gulf Coast that would take them to the big wider world.
The stakes are high. Even though the US is poised to reach some 12 mmb/d of crude oil production next year – more than half of that coming from shale oil formations – it could be producing a lot more. This has already caused the Brent-WTI spread to widen to a constant US$10/b since mid-2018 – when the Permian’s pipeline bottlenecks first became critical – from an average of US$4/b prior to that. It is even more dramatic in the Permian itself, where crude is selling at a US$10-16/b discount to Houston WTI, with trends pointing to the spread going as wide as US$20/b soon. Estimates suggest that a record 3,722 wells were drilled in the Permian this year but never opened because the oil could not be brought to market. This is part of the reason why the US active rig count hasn’t increased as much as would have been expected when crude prices were trending towards US$80/b – there’s no point in drilling if you can’t sell.
Assistance is on the way. Between now and 2020, estimates suggest that some 2.6 mmb/d of pipeline capacity across several projects will come onstream, with an additional 1 mmb/d in the planning stages. Add this to the existing 3.1 mmb/d of takeaway capacity (and 300,000 b/d of local refining) and Permian shale oil output currently dammed away by a wall of fixed capacity could double in size when freed to make it to market.
And more pipelines keep getting announced. In the last two weeks, Jupiter Energy Group announced a 90-day open season seeking binding commitments for a planned 1 mmb/d, 1050km long Jupiter Pipeline – which could connect the Permian to all three of Texas’ deepwater ports, Houston, Corpus Christi and Brownsville. Plains All American is launching its 500,000 b/d Sunrise Pipeline, connecting the Permian to Cushing, Oklahoma. Wolf Midstream has also launched an open season, seeking interest for its 120,000 b/d Red Wolf Crude Connector branch, connecting to its existing terminal and infrastructure in Colorado City.
Current estimates suggest that Permian output numbered around 3.5 mmb/d in October. At maximum capacity, that’s still about 100,000 b/d of shale oil trapped inland. As planned pipelines come online over the next two years, that trickle could turn into a flood. Consider this. Even at the current maxing out of Permian infrastructure, the US is already on the cusp on 12 mmb/d crude production. By 2021, it could go as high as 15 mmb/d – crude prices, permitting, of course.
As recently reported in the WSJ; “For years, the companies behind the U.S. oil-and-gas boom, including Noble Energy Inc. and Whiting Petroleum Corp. have promised shareholders they have thousands of prospective wells they can drill profitably even at $40 a barrel. Some have even said they can generate returns on investment of 30%. But most shale drillers haven’t made much, if any, money at those prices. From 2012 to 2017, the 30 biggest shale producers lost more than $50 billion. Last year, when oil prices averaged about $50 a barrel, the group as a whole was barely in the black, with profits of about $1.7 billion, or roughly 1.3% of revenue, according to FactSet.”
The immense growth experienced in the Permian has consequences for the entire oil supply chain, from refining balances – shale oil is more suitable for lighter ends like gasoline, but the world is heading for a gasoline glut and is more interested in cracking gasoil for the IMO’s strict marine fuels sulphur levels coming up in 2020 – to geopolitics, by diminishing OPEC’s power and particularly Saudi Arabia’s role as a swing producer. For now, the walls keeping a Permian flood in are still standing. In two years, they won’t, with new pipeline infrastructure in place. And so the oil world has two years to prepare for the coming tsunami, but only if crude prices stay on course.
Recent Announced Permian Pipeline Projects
Headline crude prices for the week beginning 3 December 2018 – Brent: US$61/b; WTI: US$52/b
Headlines of the week
The engine oil market has grown up around 10 to 12% in the last three years because of various reasons, mostly because of the rise of automobiles.
According to the Bangladesh Road Transport Authority (BRTA), the number of registered petrol and diesel-powered vehicles is 3,663,189 units.
The number of automotive vehicles has increased by 2.5 times in the last eight years.
The demand for engine oils will rise keeping pace with the increasing automotive vehicles, with an expected 3% yearly growths.
Mostly, for this reason, the annual lubricant consumption raised over 14% growth for the last four years. Now its current demand is around 160 million tonnes.
The overall lubricants demand has increased also for the growth of the power sector, which has created a special market for industrial lubricants oil.
The lubricants oil market size for industries has doubled in the last five years due to the establishment of a number of power plants across the country.
The demand for industrial oil will continue to rise at least for the next 15 years, as the quick rental power plants need a huge quantity of lube oil to run.
The industries account for 30% of the total lubricant consumption; however, it is expected to take over 35% of the overall demand in the next 10 years.
Mobil is the market leader with 27% market share; however, market insiders say that around 70% market shares belong to various brands altogether, which is still undefined.
It is already flooded with many global and local brands.