Different Approaches Needed To Overcome Imminent Oilpatch Labour Shortage

Canada's oilpatch will struggle to find employees this decade, even in the most pessimistic growth scenario, and service and supply companies which do the bulk of field work for the industry will have the toughest time, according to a new survey.

The survey of future labour demand, conducted by the Petroleum Human Resources Council of Canada (PHRCC), found that more than 100,000 additional workers could be needed in the next 10 years.

"Even in the base scenario, our pessimistic numbers, show the industry heading into a tight labour market as early as 2014, needing 15,000 additional workers by 2020," said Cheryl Knight, the council's executive director and chief executive officer. "That's a lot of people when you consider that it's a scenario where conventional gas and oil production falls and the oilsands only hire what is needed to keep up to today's levels and the projects on the table right now.

"What the report makes abundantly clear is that even if growth stalls the industry will still have a labour shortage due to a lack of supplied workers and retiring workers."

In 2009, industry contracted and shed staff with new hires confined pretty much to replacement staff. This year will see some hiring for expansion but again the majority of hires will be replacement staff. In 2011 and 2012, the survey projects demand for staff will come mainly from expansion plans (under its growth scenario) but between 2013 and 2019 most of the demand will again come from replacement needs as workers retire or leave the oilpatch.

The Supply/Demand Analysis 2009-2020 report projects labour demand for the main parts of the industry and forecasts specific jobs that will be needed into the future. It deals with operational needs only, not construction requirements.

The council ran two scenarios through an economic model that took into account the industry's expected production levels provided by the Canadian Association of Petroleum Producers (CAPP), commodity price forecasts, the value of the Canadian dollar, reinvestment ratios and other variables.

The growth scenario - aligned with CAPP's expected outlook for oil production and its base case for natural gas output -- is much tighter. In it, the need balloons to about 105,000 additional workers. For some occupations demand will be "extremely high," said Knight.

Right now the industry is still in recovery and stabilizing, and some sectors may experience even more layoffs but employment growth is expected to resume in 2011.

Some employers are already reporting problems finding enough people for certain jobs, Knight told a press conference held yesterday to unveil the report.

The services sector will find it toughest, Knight told the DOB. That sector is growing, it is affected by seasonality, has less appeal to some types of workers because it entails working away from home and outdoors, and was hardest hit during this most recent downturn.

Service and drilling companies can't afford to keep people on when they don't have contracts so they are most sensitive to what's going on in the environment, she said.

"Perception and the appeal of that sector may be the most difficult things to overcome, but it's critical."

Elizabeth Aquin, senior vice-president of the Petroleum Services Association of Canada, told the press conference her sector lost 16,000 to 20,000 workers between 2008 and 2009.

The shrinking of Canadian farm worker numbers over the past few years has particularly affected the service sector because that was its traditional labour pool, said Aquin. Trades, engineers, operators and field workers are already in short supply and many companies are already struggling finding people with the right skills, she added.

The study presents good news and bad news, said Janet Annesley, CAPP's vice-president of communications. The good news is that the recovery that's been anticipated in the industry is real; the bad news is that clearly industry is going to be very challenged to find the people it needs, she said.

Several years ago there was talk of a giant shift change about to happen in the industry but during the economic downturn that discussion went away, she said. "To a large degree that discussion is back."

Annesley said CAPP will use information in the study in its dealings with governments and academic institutions to illustrate what the industry needs.

By 2011, all of Canada's growth in the workforce will come from immigrants so they are a hugely important source of supply, she said, suggesting industry needs to change its hiring practices.

"Traditionally our industry has hired predominantly men -- as opposed to women -- fewer aboriginals than one might think, considering where we operate, and not as many immigrants as you might expect given the skills of the immigrants coming to Canada. We already have immigrants in Canada who have skills and training that are needed for the oil and gas industry yet we're not taking advantage of that supply."

While professionals are important to the industry, it needs far more tradespeople but has difficulty attracting young people, said Knight.

Certain parts of the industry have declined due to natural gas supply and a shift in technology, and while the oilsands represent much of the growth, it's important to remember it's still a small piece of the equation compared to conventional oil and gas drilling, she said.

According to the report, over the next decade the petroleum industry will be looking for about 3,500 oil and gas servicing and drilling labourers. It will need: more than 3,000 operators, both steam and non-steam - very essential for the oilsands, noted Knight; 2,500 heavy equipment operators; 2,000 drilling coordinators and production managers; 1,500 petroleum engineers and almost 1,500 geologists and geophysicists.

The supply/demand analysis report projects labour demand for the various sectors within the oil and gas industry and for 37 core occupations in the industry. The information will be updated annually as the industry updates its production forecasts.

The report's survey found:

• 90% of respondents are currently recruiting due to expansion and/or replacement demand;
• Companies are continuing to increase capital spending and 72% of respondents indicated the need to recruit workers to support growth and expansion;
• The most pressing workforce issues facing companies today are: attracting workers to hard-to-recruit locations (50%); aging workforce (36%); employee turnover and retention (36%) and compensation and benefits expectations (36%);
• Key engineering roles, including chemical, mechanical and petroleum engineers, will experience shortages after 2011 through to 2020.
• Key trades occupations will experience shortages starting in 2012.
• Non-steam and steam operators will experience shortages beginning in 2012.
• Geologists and geophysicists will experience shortages beginning in 2011.

Potential solutions for addressing workforce shortages include: working with educational institutions to ensure their programming aligns with meeting petroleum industry's projected need for skilled workers, and developing and implementing outreach strategies.

The study also recommends working with groups such as women, immigrants, youth and aboriginal people to increase attraction of these supply sources. This can be done by providing information and access for entry into the industry, increasing participation of these labour pools and aligning education with future skills needs through labour market information projections.

Kim McCaig, vice-president and chief operating officer of the Canadian Energy Pipeline Association and PHRCC chair, said the pipeline industry has a "serious challenge" ahead.

The pipeline industry's workforce has been fairly stable for the past few years but one-third of its workers are eligible to retire now and probably two-thirds will be eligible in the next five years, said McCaig. Some of them may decide to stay on but the pipeline sector does face some serious trades shortages, he added.

Knight said she anticipates any future environmental regulations will have significant impact on employment and the report does not reflect that but her organization will provide updates as regulations are announced.

According to the report, currently, services, drilling and geophysical contractors comprise 50% of the industry's workforce, exploration and production employment makes up about 40%, oilsands employs seven per cent and pipelines three per cent.