Advanced technologies like digitization, big data, automation, artificial intelligence, IoT will shape the future of the Oil and Gas industry making it more profitable and stable.
The trepidation for the industry is that the working style, skill requirements, and operation will all be different for the new age of oil and gas industry. The current system of operation will turn obsolete and numerous technological advancements will replace and challenge the traditional setup. The bigger question here is: Is oil and industry equipped to meet the changing needs of the industry? Do they have the required skillset and expertise? The answer is NO.
That’s where the relevance of millennials play a vital role. To bridge this knowledge and skill gap, the industry needs to hire and retain a fair mix of professionals from other industries including software engineers, data scientists, analysts, and other digital savvy staff.
The mindset of millennials towards oil and gas industry
Deloitte surveyed 10,000 millennials born in the year 1983 to1994 and around 2000 Gen Z were surveyed who were born from 1995 to 1999 from across the world. Here are the key findings of the report:
Millennials seek opportunities beyond eventual leadership positions and a fat paycheck. They have immense untapped potential and are ready to contribute more for the greater good. With their tech-savvy mind, they can bring in innovation and advancement at every step.
Amy Chronis, Houston managing partner for Deloitte, draws a conclusion on the survey by stating that, “I think the younger generation represents the New World Order … they represent the viewpoint of today,” “I think [diversity and inclusion] is an acute issue in terms of attracting, fostering and retaining talent. The oil and gas industry is already doing a lot of things talent-wise, but I think the survey illustrates that it needs to find better ways to communicate and engage talent in their efforts.”
How to attract and retain Millennials?
Here are a few initiatives that recruiters can take up to hire and retain millennial workforce:
Studies show that millennials look beyond paychecks. They prefer challenging new age roles and oil and gas industry can provide them the right platform. As every function of oil and gas industry is getting automated today with rapid digitization there is a need for employees who can operate in the dynamic environment. Changing the job description according to the changing needs of the industry is a way to attract the young generation.
The current perception of the oil and gas industry amongst millennials is turning off the interest of the new generation. The recruiters must work on rebranding the image of the industry. Although it is a time-taking process it’s high time the industry starts working on it. Collaboration with community colleges can play a key role in the process by developing a curriculum and imparting the right information about the industry. Additionally, social media can be leveraged to rebrand the industry. The new developments, job roles, benefits, and work expectations can be highlighted along with employee testimonials to improve the perception. The new age job roles like a data scientist, software engineers, analysts can also be advertised. Additionally, the companies can highlight their initiatives that have been taken to reduce environmental footprint to enhance its social appeal.
In a recent survey conducted by EY, millennials and generation Z rank salary, work-life balance and on-the-job happiness as the top 3 priorities in any job. The oil and gas industry ranks well in terms of compensation however it is important to understand what monetary benefits the current generation is seeking? The millennials are more interested in stock options than pensions because millennials do not believe in sticking to one job for long period to avail pension benefit, so they prefer stock options.
Other intangible needs like work-life balance and on-the-job happiness are crucial too. Some companies have recognized this need and have started offering benefits like flexible work hours, relaxed leave policy, work-from-home options and so on. Most of the oil and gas companies are still conservative in this regard but the sign of changes are evident. For instance, beginning 1 January 2018, Shell has announced a global standard of 16 weeks paid maternity leaves for its employees. Additionally, to enhance the job environment, the oil companies are following the trend of healthy dining options, green space, public transportations and even gyms.
Make clear and transparent career growth trajectory so that the millennials are aware of their career progression. When the vision is clear, reliability increases which will eventually lead to talent retention. Companies like Saudi Aramco who have 50% workforce under 30 years of age, has invested handsomely in training and development of the employee. This increases the job satisfaction level. The company also sponsors its top performers for an advanced degree at universities across the world to increase loyalty among employees. Similarly, other oil and gas companies can show clear career progression, skill development, and benefits.
It can be safely concluded that the millennials are seeking opportunities to challenge the status quo and develop innovative solutions in the traditional setup. Their inherent curiosity and initiative will fuel the oil and gas industry with breakthroughs and innovation.
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Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b
Headlines of the week
Midstream & Downstream
Global liquid fuels
Electricity, coal, renewables, and emissions
2018 was a year that started with crude prices at US$62/b and ended at US$46/b. In between those two points, prices had gently risen up to peak of US$80/b as the oil world worried about the impact of new American sanctions on Iran in September before crashing down in the last two months on a rising tide of American production. What did that mean for the financial health of the industry over the last quarter and last year?
Nothing negative, it appears. With the last of the financial results from supermajors released, the world’s largest oil firms reported strong profits for Q418 and blockbuster profits for the full year 2018. Despite the blip in prices, the efforts of the supermajors – along with the rest of the industry – to keep costs in check after being burnt by the 2015 crash has paid off.
ExxonMobil, for example, may have missed analyst expectations for 4Q18 revenue at US$71.9 billion, but reported a better-than-expected net profit of US$6 billion. The latter was down 28% y-o-y, but the Q417 figure included a one-off benefit related to then-implemented US tax reform. Full year net profit was even better – up 5.7% to US$20.8 billion as upstream production rose to 4.01 mmboe/d – allowing ExxonMobil to come close to reclaiming its title of the world’s most profitable oil company.
But for now, that title is still held by Shell, which managed to eclipse ExxonMobil with full year net profits of US$21.4 billion. That’s the best annual results for the Anglo-Dutch firm since 2014; product of the deep and painful cost-cutting measures implemented after. Shell’s gamble in purchasing the BG Group for US$53 billion – which sparked a spat of asset sales to pare down debt – has paid off, with contributions from LNG trading named as a strong contributor to financial performance. Shell’s upstream output for 2018 came in at 3.78 mmb/d and the company is also looking to follow in the footsteps of ExxonMobil, Chevron and BP in the Permian, where it admits its footprint is currently ‘a bit small’.
Shell’s fellow British firm BP also reported its highest profits since 2014, doubling its net profits for the full year 2018 on a 65% jump in 4Q18 profits. It completes a long recovery for the firm, which has struggled since the Deepwater Horizon disaster in 2010, allowing it to focus on the future – specifically US shale through the recent US$10.5 billion purchase of BHP’s Permian assets. Chevron, too, is focusing on onshore shale, as surging Permian output drove full year net profit up by 60.8% and 4Q18 net profit up by 19.9%. Chevron is also increasingly focusing on vertical integration again – to capture the full value of surging Texas crude by expanding its refining facilities in Texas, just as ExxonMobil is doing in Beaumont. French major Total’s figures may have been less impressive in percentage terms – but that it is coming from a higher 2017 base, when it outperformed its bigger supermajor cousins.
So, despite the year ending with crude prices in the doldrums, 2018 seems to be proof of Big Oil’s ability to better weather price downturns after years of discipline. Some of the control is loosening – major upstream investments have either been sanctioned or planned since 2018 – but there is still enough restraint left over to keep the oil industry in the black when trends turn sour.
Supermajor Net Profits for 4Q18 and 2018
- 4Q18 – Net profit US$6 billion (-28%);
- 2018 – Net profit US$20.8 (+5.7%)
- 4Q18 – Net profit US$5.69 billion (+32.3%);
- 2018 – Net profit US$21.4 billion (+36%)
- 4Q18 – Net profit US$3.73 billion (+19.9%);
- 2018 – Net profit US$14.8 billion (+60.8%)
- 4Q18 – Net profit US$3.48 billion (+65%);
- 2018 - Net profit US$12.7 billion (+105%)
- 4Q18 – Net profit US$3.88 billion (+16%);
- 2018 - Net profit US$13.6 billion (+28%)