The theme for my columns this year is Risk and Reward because risk assessment and decision making have fascinated me for my entire career. The most significant risks and rewards in our business are created by the judgments of the people who work here. People and their talent create upstream value. How then do we generate the talent pool to create value in the next upturn?
If you ever doubt the impact that one person can make, let me give two recent examples.
The biggest disaster in our industry—ever—was the Macondo blowout in April 2010. Like the day of the 11 September 2001 attacks in the US, I’ll bet that most of you can remember when you first heard about the fire and crowded around a computer or television in horrified silence. I remember asking: Why didn’t someone use Stop Work Authority? Why didn’t someone say something?
In the recent movie depiction, Deepwater Horizon, actor John Malkovich played the evil manager who pushed forward despite signs of disaster. It was a cartoonish portrayal, but it vividly illustrated the impact that a single individual can have on our operations. The result was a disaster on every level, almost destroying one of the largest companies on Earth.
In contrast, on a positive note, there is the story of Steve Keenan, the experienced explorationist who led the team that discovered Alpine High in the Permian Basin, the largest single discovery in the US in many years. Apache’s management gave Keenan and his team the freedom to think differently, and the results were spectacular. It’s ultimately people who create (or destroy) value in our industry.
Talent will never be more important than in the next upturn. Companies have retired or laid off the most experienced technical workforce in all parts of our industry: exploration and production, oilfield services, and engineering, procurement, and construction. Just a few years ago, projects all over the world were delayed because of a lack of people, not capital constraints. It won’t be long before that will happen again, and we will be looking for talent everywhere.
The “Big Crew Change” has happened. We’ve been talking about it for years and, in my view, it is mostly over. People who, like me, came into the oil industry during the boom years of the late 1970s and early 1980s retired in droves over the past 2 years. I see it when I talk to companies, when I walk around the halls at Chevron, and when I walk around downtown Houston at lunch—there are far fewer gray heads in our business. I’ll make an exception for management; many company management are from that era, but in the technical workforce—mostly retired. So far, we have seen no consequences because we are in a time of such low work activity. But when the upturn occurs—and it will happen—are we ready to move forward with a next-generation workforce?
Management may think that the aged 55+ workforce will come back in an upturn. I disagree. They’ve been through five downturns and worked especially hard over the past 10 years of frenzied activity. They are enjoying their time off, and nearly everyone I have talked to has no desire to return to full-time employment. A minority is interested in part-time or project work, but only on their own terms.
A quick note to all of our valued SPE members who are enjoying their retirement: Please don’t retire from being active in SPE! We have thousands of Young Professionals and students who need your expertise and counsel. Your contributions are vital to the health and longevity of SPE.
So, what will industry leaders do for this next upturn? We need to be ready for the next-generation workforce. The oil and gas industry is everywhere, so we need to find our talent everywhere.
Our business is much more global than it was when I joined. It’s no longer dominated by the “Seven Sisters” and their mostly OECD-based workforce. National oil companies have emerged in the past 40 years, and the top tier are absolutely technically competitive with the old guard. The next tier isn’t far behind. The oil business is also more regional than it was when I joined. Smaller, regional, or niche players have emerged, especially in the last upturn. These players are often technology-driven, but are almost universally more nimble than the old guard. They focus on a regional or technology trend, like the US shale, Canada oil sands, or smaller African basins, and they are successful doing a few things very well.
These two trends—the Big Crew Change and the globalization and regionalization of companies—create opportunities for talent everywhere. First, the next-generation technical workforce will run the show in this next upturn. They think and work differently than my generation. They are “digital natives” and expect to have data instantly available. The digital mindset of the next generation will drive the Big Data revolution that I’ve already predicted, driving change from the bottom up.
The next-generation workforce, both men and women, is very concerned about work/life balance. Next-generation couples expect both men and women to work and have an active role in family life. Dual-career issues make them less globally mobile, especially to transfer anytime, anywhere with a multinational employer. They are less likely to stay with an employer for their whole career, mostly because the industry taught them that we were not loyal to their parents. They also want to continually learn and grow and are not satisfied to just be happy that they have a job—they want to be fulfilled and have meaning in their employment, which I think is a great thing.
The next-generation workforce is also vastly more global than mine. In OECD countries, the oil industry is often not viewed as an attractive employer; young people are attracted to alternative energy companies or the tech industry. However, that isn’t the case elsewhere; the oil industry is a preferred employer in many developing countries. Oil employers offer high-paying jobs and opportunities to work internationally. Leading multinationals already source their workforce globally, and this trend will accelerate as OECD countries don’t keep up with demand for graduates proficient in science, technology, engineering, and mathematics.
I see the beginning of optimism and the likely start of the next cycle. Oil prices are stabilizing, and companies are beginning to feel their feet under them. Activity is increasing in low-cost regions like the Permian Basin and Middle East. Capital expenditures are likely to increase across the board in the 2018 budget cycle. Are we ready? Do we have the talent to make good engineering, project, and investment decisions? This new-generation workforce will have to be developed differently than my generation, and I don’t think current managers or management systems are ready for them.
We can’t ever manage away human judgment risks, but we can use this opportunity for talent from everywhere to cultivate the next generation of oil finders. The younger, more global next-generation workforce will also provide more diverse perspectives that should drive down the risk of poor human judgment. Talent everywhere is a great opportunity for our industry. Are we poised to use it to our advantage?
