When Barack Obama's term expires, he could consider becoming a cook on an Australian offshore oil platform. At up to US$445,000 a year, that lucky chef earns $45,000 more than the US president.
Soaring pay packages have become a serious concern for the oil industry, not just in Australia but across the world. In Canada, a senior project manager earns 52 per cent more in the oil industry than in other businesses.
This means not only high salaries for direct employees, but also soaring bills to engineering contractors, who are having the same problems. Of course, companies can find people – at a cost – but are they the right people?
The giant Kashagan field in Kazakhstan has so far cost $50 billion to develop. But after briefly starting production last September, its pipelines began leaking because of corrosion – a simple technical issue which should have been anticipated. It may not restart until the end of next year.
The $10bn Angola liquefied natural gas project has similarly been plagued by problems that will keep it idle until the middle of 2015 – fires, leaks, a broken cable and a capsized rig.
Many of the industry’s recent budget overruns, project delays and technical failings may not be due to the simplistic notion of the “end of easy oil” – but to overstretched or inadequately qualified personnel.
Oil companies have long been talking about the “great crew change”, when the generation of engineers, technicians and geologists trained in the last oil boom, now in their fifties and sixties, come to retirement. The slump in recruitment and repeated layoffs that followed means that, for all the talented young people now attracted to it, the industry is badly short of experienced staff.
The simple response is to raise salaries and poach employees from other companies. Mercer, a human resources consultancy, found that oil companies fill 66 per cent of positions with hires from competing companies; just 10 per cent from universities.
At a time when the Middle East is suffering an unemployment crisis among educated young people, the oil industry offers exciting, well-paid careers, the chance to travel and tackle some of the world’s great energy, engineering and environmental challenges. But companies need to give people more responsibility at a younger age, and fast-track their training.
This all has to be done without compromising on safety and reliability. In the age of Twitter, traditional management systems may need to be jettisoned in favour of virtual teams knit together across continents. Oil companies – whether western, Russian or Arab – need to adapt to the different working cultures in areas rich in engineering talent such as India, the Philippines and China.
If the industry cannot find or create enough experienced people, it will need to change its ways of working. That means more automation and remotely controlled operations – maybe robotic cooks. Companies will have to adopt simpler, streamlined engineering solutions rather than labour-intensive tailored designs. Floating systems will be built in places such as South Korea and sailed to Australia to save on labour costs.
Governments and state companies also have to play their part. When I met leading Middle East-based engineering contractors recently, they bemoaned UK immigration restrictions that make it almost impossible to recruit some nationalities. Some Middle East national oil companies restrict outsourcing of engineering work to certain countries – a clumsy blanket restriction, better replaced with more thorough quality control.
If the industry can’t move beyond the short-sighted hire-and-fire policies of yesteryear, then that means more delays and budget blow-outs, more environmental accidents – and more expensive energy for everyone.
Robin Mills is the head of consulting at Manaar Energy, and author of The Myth of the Oil Crisis
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