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Opinion: The next 50 years in oil and gas – where will the balance of power lie?

Dean Hunter
Dean Hunter

Aberdeen needed to attract around 120,000 new recruits by 2022 if it was to remain a global energy capital and capitalise on opportunities, according to PWC in 2013.

But more recently, industry reports tell us that oil and gas sector employment could fall by as much as 35,000 over the next five years, partly driven by an anticipated 50 per cent fall in UK capital spending.

However, research by EY into employment trends, commissioned by industry bodies and the Department for Business, Innovation and Skills (BIS), estimated that 12,000 new jobs would be created in the sector over the same period.

One thing is certain: over the next 50 years our planning could be improved.

One of the most common challenges listed by employers in the sector is the inability to effectively forecast and plan for resources, in terms of numbers and timing – let alone skill sets. To some extent, this has hampered our ability to grow our own talent.

What will be interesting is where the balance of power will lie. More often than not the individual employees and workers have had a clear opportunity to negotiate their deal. You only have to leave the sector for a few days and peer into others to see just how competitive it is in terms of reward and development.

There are very few UK industries where employees and workers can dictate terms. There are even fewer industries where an individual can leave a company one day, and have several offers on the table within a matter of hours.

So what happens to the balance of power when we require less people than we need today? In principle, companies start to call the shots. They look for the all rounder. Being technically competent is no longer sufficient.

People in the market feel this shift of power move to the company as vacancy listings shrink to accommodate cost cutting regimes. Employees and workers have to ‘sell’ themselves directly, as opposed to the third party agent who would have done this for them in the past – like an online auction on rate or salary.

But before we create too much of a reaction, that is ‘in principle’. What we must take into account is our industry’s inability to engage and retain its people.

There is a potential $26billion GDP available in the UK if we could engage our workforce. According to Engage for Success, as few as a third of workers are engaged. Engagement is defined as belief in the organisation, a desire to work to make things better and willingness to go ‘the extra mile’.

From an informal straw poll with our clients, the average employment lifespan for a company is around 4.5 years. Employee turnover of greater than 30 per cent is not uncommon. So this creates movement even when markets are supposed to be ‘in recession’. Whilst we continue to fail to engage staff, they will have the opportunity to pick their deal – perhaps less than in peak times – but will have options nonetheless.

The best employers will always determine ‘the deal’, and some of the best companies in the market are the lowest in terms of pay and reward. Yet, there will be a waiting list to join these companies rather than a vacancy listing. People will compromise on factors because they want to be part of that company’s story.

In an ideal world, the workers and companies would meet half way. Staff would be flexible, adaptable and understanding of commercial challenges. To deliver some of the challenges that the industry faces, for example late-life operating and decommissioning, we’re going to have to be innovative, creative and essentially engaged.

We’ve demonstrated for years that this is a people-driven industry. The need may reduce but it is still apparent in the thousands of hires we see annually.

In the same ideal world, leaders would communicate effectively, plan ahead, engage their people and develop them. But we’re not in an ideal world, so the next 50 years will see the market dictate the balance of power and who calls the shots.

But as recent market events have shown, we have to remember the tables can turn – and very quickly.

Dean Hunter is the managing director of Hunter Adams

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