International, Location, Markets, Opinion

It looks gloomy, but is it? Emerging workforce needs for Australian gas

There are at least two differences between this latest bust and earlier ones. First, oil and gas companies used to offer early retirement packages to entice some of their “˜mature’ people to get off the payroll, but this practice has largely ended. During the last price recovery, companies found themselves severely short of experienced talent after so many had left with early retirement packages, so they were unable to take advantage of the resurgence. So this time around, the “˜grey gold’ is staying inside.

Second, oil and gas companies largely reconfigured themselves after the last bust to rely more on services companies and less on internal talent, hence the disproportionate level of losses in the services sector. This isn’t likely to change.

So it looks gloomy. But is it? There’s actually still lots of demand for talent in Australia’s LNG sector, but it’s shifted away from the construction and build phase.

To understand what’s driving job demand, it helps to step back and look at the broader Australian gas landscape and give some thought to the big drivers.

GROWTH IN LNG OPERATIONS

Australia is going to progressively turn on 13 LNG and FLNG production trains by 2017, each of which will manufacture about four million tonnes of annual production. This is in addition to the eight trains already operating on the North West Shelf and in the Northern Territory and Queensland. So we’re going from a boom-bust cycle in constructing these plants to a new boom in operating and maintaining them. This will create a mini-boom in demand for related jobs and services.

STICKIER ROLES

The operations boom will feel different, in that it won’t be so “˜all-at-once’ and won’t attract the eye watering salaries commanded in the construction boom. But it is far more sustainable, as the jobs are more permanent and local. The work is more predictable, since the plants will need constant operations supervision, gas will need to be found to feed the big fridges and maintenance will be required to keep the kit running to meet delivery commitments.

MORE AND DIFFERENT SKILLS

Skills are required across most areas, including management, professional, technicians, trades, operators, drivers, labourers, and clerical and administration. This will be to the tune of at least 13,000 new jobs, with less growth in demand for labourers and more for operators.

DIFFERENT EMPLOYERS

The employers are going to be different too. The LNG operators may well bulk up given they can project employment needs for the 20-plus year life of the projects (but only where there is absolutely steady full-time work). Just about everything else will get shifted off to a supplier and, in many cases, not the original builder of the LNG plants, pipelines and gas plants. And the low gas price environment will push the projects to obtain services from smaller, more nimble and potentially non-unionised workforces.

SHRINKING COMPENSATION

For the time being, until oil demand overshoots supply, salaries and wages in the industry are going to be under pressure. Australia was already saddled with some of the highest cost labour in the oil and gas world. That’s going to change as the industry ratchets down compensation.

SMALL LABOUR POOL

Australia isn’t blessed with a huge labour pool from which to draw. Indeed, while employment in the LNG sector has already doubled between 2006 and 2014 to 37,000 jobs, the workforce is generally young and inexperienced as a consequence of the industry growing so rapidly (hence the need to retain older, more experienced workers).

STRONG INTERNATIONAL DEMAND

There’s already evidence of a pull on Australians with LNG experience to work overseas. Some 30 per cent of Australians with experience in oil and gas already work outside Australia, and the latest draw looks to be coming from the US. The gas from US projects, like in Australia, has largely been contracted. So they are highly unlikely to alter course, and they will need people. And there are projects looming in Canada as well as Africa. These large projects tend to feature robust salaries to compensate for short-term employment duration, which makes them attractive to experienced and mobile senior resources.

IMPLICATIONS ON INDUSTRY EMPLOYMENT

This downturn has sent a strong signal to employment markets that the sector is not where you will find stable long-term jobs. As a result, we should expect to see university admissions to geology, petroleum and some engineering disciplines decline, sowing the seeds for skills shortages in just a few years’ time. We saw this pattern play out following the dotcom bubble.

With no early retirement packages on offer, and layoffs concentrated among less experienced staff, the age profile of oil companies will also take a step up – today, 25 per cent of oil and gas workers globally are over 50. Company HR leaders will become alarmed about this, and we should expect recruitment to pick up again in a year or so.

Services companies are the new “˜risky’ employers. They’re going to have to work very hard in the years ahead to attract and recruit talent to their organisations. Expect them to have to make many painful changes to their culture and employment models to get back into growth mode.

Finally, there are jobs, but they’re in operations and maintenance, not construction and commissioning. This is where they can be found.

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