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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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
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