This sentiment is particularly appropriate for the oil and gas industry which today is facing a significant talent and knowledge gap that actually began in the 1980s resulting in many potential engineers and geophysicists looking elsewhere for careers. The ones who remained are spread throughout the world and are in high demand as the oil and gas sector rebounds at an astounding rate. As you recall, the price of a barrel went from $35 to $10 in the 1980s, resulting in massive layoffs throughout all segments of the energy industry.  It resulted in one of the largest downsizings of a highly capitalized, labor intensive industry ever known.  Once concentrated in western countries, the talent has now been spread thin as major companies throughout the world are competing for talent that can deliver oil and gas products.

China, for example, has oil and gas interests in Kazakhstan, Iran, Iraq, the Sudan, Venezuela, Peru, and Azerbaijan. It clearly illustrates how committed China is in developing an energy pipeline that will feed the growth of its economy.

Like the “Law of Raspberry Jam”, the talent is out there but it is spread thin throughout the world, among countries which view oil and gas as the next gold rush that will lead them to prosperity and a position of leadership in a world in desperate need of energy.

So, what happened to the talent pool?

It actually began shrinking in the 1980s when roughly 25 percent of engineers and geologists left the industry.  At the same time in the 80’s, college enrollment for petroleum engineer and geology students dropped significantly, thereby starting a “perfect storm” that has resulted in the talent gap of today. During that decade, oil reserves were hard to find, there was the initial talk of our planet running out of oil, and the notion of a world relying on alternative sources of power. The trend is likely to continue, according to one study indicating that approximately 22,000 engineers and geoscientists will retire the industry by 2015.

The components of this perfect storm include:

• Colleges saw a decrease in those pursuing these degrees
• As exploration techniques became more sophisticated, there is a recognition that oil and gas is plentiful
• There has been a proliferation of national oil companies (NOCs) throughout the Middle East and Africa, increasing the demand and competition for qualified energy professionals.
• There has been a proliferation of independent oil and gas companies that also are expanding from their traditional regional operations into international exploration efforts
• China and India are desperately seeking out reserves for huge populations that have become increasingly consumer-based, requiring more and more energy

It is compounded by the retirement of Baby Boomers (born between 1954-64) from C-level positions, resulting in a glaring absence of talent available to move into these vacant and projected positions of leadership. In the oil and gas industry, it is known as the “Great Crew Change.” Statistically, there are few 40-50 year olds capable of running these companies. And while universities are pumping out engineers and geologists, it will be decades before they are ready to run these companies.

The scenario is really very similar to the technology boom in the 1990s which resulted in companies aggressively identifying, recruiting, and ultimately compensating these individuals. The executive talent, albeit scarce, is available. It’s just a matter of locating, enticing, and securing these individuals.

And, there is a growing awareness in the industry that these companies have a responsibility to run environmentally safe and efficient operations. The recent Deepwater Horizon disaster was in part due to people who had years of experience in the industry, but were new to their positions on this ship.

So, it’s not all gloom and doom but today’s companies must develop a strategy that reaches out across borders while also grooming and retaining younger executives who can move into leadership positions in 15-20 years.

One of the first steps is to fill this gap for the near-term future. The bad news is that the investment portfolios of the recently retired C-level executives took a hit. But, the good news is that the investment portfolios of the recently retired C-level executives took a hit.

From a personal level, it’s not a good scenario but from an industry perspective it comes at a good time. These former hi-level executives are going back to work as high-priced consultants. They are supplementing in-house teams and mentoring the younger stars being groomed for future leadership positions.

This is a temporary and willing workforce, so oil and gas companies of  all sizes must develop a strategy for bringing these valuable resources into the fold. They must:

• Locate these individuals
• Develop an attractive package that will give these retirees flexibility along with appropriate compensation
• Allow flex time, involving activity on-site and from home

Another source of talent comes from the military. Many officers are leaving the armed forces due to the withdrawals from Iraq and Afghanistan. These trained leaders can be attractive to oil and gas companies. For example:

• Many military specialties are transferable such as accounting/administrative, mechanics, technicians, quality assurance/quality control, etc.
• Veterans with direct, prior petro-experience and/or education
• Drilling rig or rig service jobs

These veterans also have quality leadership skills which transfer directly to managing large groups of people on drilling sites or at corporate headquarters.

Another source of talent is among expats who migrated from the United States to NOCs in Saudi Arabia, Ghana, and Nigeria. Others are with firms in China, South America, the United Kingdom, and India. The one common denominator is that they are all seeking assets and reserves as a road to profitability and energy self-sufficiency. There is significant cross-border activity and the demand for this talent is global.

The stakes are clearly high as new methods of exploration have identified  reserves offshore and throughout the world. Talent has always come at a high price and today’s oil and gas companies must be willing to develop strategies to identify talent for the short term and cultivate executives for the future.

RICK DAVIS | Stanton Chase International Executive Search

Global Practice Leader, Natural Resources & Energy

Davis-StantoChaseRick Davis is the Global Practice Leader for Stanton Chase International Executive Search Natural Resource and Energy practice. He is a Director of the firm’s Dallas office and has more than 25 years of senior level executive search experience within the oil and gas industry and related financial services sectors. Stanton Chase is a global retained executive search firm with 72 offices in 46 countries.

Energy efficiency must play an integral part of the energy matrix not only because it is prudent, proven and practical, but because there are many strategic drivers and value-added benefits and advantages that our industrial — and cyber/information age — society can (and should) benefit from in terms of the supply side management (“SSM”) as well as from the demand side management (“DSM”) platforms. While the mathematical formula/algorithm on quantifying the cost-benefit ratio of energy efficiency can be a bit abstract and esoteric, for purposes of this article, energy efficiency can be qualitatively defined as producing more output with the same input. At its core, it is the best and most effective utilization of technologies, systems, procedures, practices and processes designed to maximize the output of a particular product. Energy efficiency can produce concrete benefits not only in terms of carbon emission mitigation, but concomitantly, it also achieves the following strategic drivers:

Reduction in consumption rates and preservation of precious (and scarce) hydrocarbon fuels and related natural resources (such as water and related commodities).

• Reduction of overall production and generation costs of energy (in kilowatt-hour of consumption per capita).
• Enhancement/optimization in thermal/load efficiency, reliability and sustainability of power plants and related T&D infrastructure (e.g., the latter by the “smart grid” method/mechanism).
• Reduction in overall energy costs to consumers (fixed and variable electrical and thermal energy expenditures).
• Provision for enhanced economic development and job creation. 

The DSM dynamic of the energy efficiency model represents an opportunity for the consumer/end-user (whether residential, commercial or industrial) to play a key role in controlling his consumption profile. In essence, the consumer takes stock and control of his daily consumption rate by ensuring the use of less energy during peak hours and/or to move the time of energy use to off-peak times such as night-time and weekends (a concept called “peak-shaving”). He can also utilize more energy efficient appliances (such as air conditioners, water heaters and pumps, dish washers, and other electrical devices, instrumentation and controls). Thus, the consumer achieves cost-savings so that he has a quantifiable incentive to employ energy efficiency from a DSM standpoint. With a multiplier effect from the DSM model (i.e., this “one” consumer times potentially “millions” of consumers like him in every country and region of the planet) translates to less energy (and fuel) consumption and thereby less pollution (i.e., carbon emissions, etc.) that would otherwise be emitted into the atmosphere.

 Therefore, the ability/willingness of electricity consumers to adjust to prices by altering the “elasticity” of the demand curve (i.e., during peak demand periods) plays an enormous contributing factor in reducing power consumption. However, peak demand management does not necessarily always decrease total energy consumption, but it is expected to reduce the overall need for large (and expensive) investments in new power plant applications (and, hence, less pollution).       

On the supply side of the energy efficiency paradigm, the application which requires the most attention and focus by government agencies and multinational corporations is co-generation, or combined heat and power (“CHP”). CHP has historical roots in “captive” or “inside-the-fence” energy provision to heavy industries (such as auto factories, steel mills, aluminum smelters, petrochems and refineries and related manufacturing industries) as well as in countries which employ municipal district heating.

The innovative aspect of the CHP model is that, in addition to electrical and thermal energy (such as steam, heating and/or hot water), many CHP plants today also utilize chilled water (tri-generation); and a few of the CHP’s capture CO₂ for industrial purposes. This latter concept is called “quad-generation”. The benefits, including for the environment, are enormously substantial. Some quad-generation applications can achieve thermal efficiencies in excess of 80%. In addition to the CHP’s being a key driver to its corporate “social responsibility” under-taking, this SSM application will produce energy cost savings and increased energy reliability, security and sustainability. Many CHP quad-gens will also result in a reduction in emissions of at least 40% per power plant.

In view of the environmental and cost benefits, it is clear that our global community should have more CHP plants (especially tri-gen and quad-gen facilities) from an SSM standpoint. However, this is not always obvious from an investment perspective. The operation, and hence long-term economic viability of the CHPs, is driven by heat demand (due primarily to the high initial capital cost structure). Therefore, from a life-cycle analysis standpoint, long-term thermal energy (e.g., steam, heating/hot water, chilled water, carbon capture, etc.) demand/consumption by off-takers/end-users is required. There is often a requirement to sell “over-the fence” (or “spill” or “wheel”) a substantial amount of electricity onto the power grid. If the tariff to be received by a generator is not sufficiently high enough (to produce reasonable returns), there is a significant disincentive to CHP development and thus a degradation in energy efficiency.

In recognition of this, several countries have incentive frameworks and programs to encourage co-generation, tri-generation and quad-generation. However, such benefits are often difficult to demonstrate in practice, invariably because the qualification criteria are unclear and very complex, the application process is quite cumbersome, there is lack of viable and credible incentive formulae/regime, the requirements for permitting and grid connection are extremely archaic and bureaucratic, and monopolistic utilities are unwilling to provide network access – especially where there may be questions over who is responsible for the costs of connection and new substation/switchyard synchronization.

The critical factor to easier and more efficient CHP development around the world is greater focus on the practicality of getting these schemes and applications on-line as rapidly as possible. Of most importance are simple permitting, straightforward procedures for obtaining feed-in tariffs and other incentives, and directing incumbent utilities and transmission/distribution firms to connect CHPs and facilitate ease of network access.

Implementation of these measures, from an SSM and DSM standpoint, would greatly encourage CHP development and application and constitute the quickest, easiest and most cost-effective means to achieving energy efficiency and emissions reduction: i.e., optimizing energy use and ensuring carbon footprint mitigation.