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Financial Times: Oil production schemes likely to be hit by skills shortage

By Sheila McNulty in Houston
Published: October 4 2007 03:00 | Last updated: October 4 2007 03:00

Big oil and gas production projects are likely to suffer delays with the industry expected to face up to a 15 per cent shortage of qualified engineers by 2010.

The shortfall in the industry is already taking hold with insufficient engineers to meet 2007 exploration and production project demand, according to Pritesh Patel of consultants Cambridge En-ergy Research Associates and co-author of a report into the skills shortage.

By 2010 the industry is likely to face a shortfall of 5,500 to 6,000, leaving between 10 and 15 per cent of posts unfilled.

Cera declined to give examples of the impact on current projects but the FT reported last month that BP had indefinitely postponed several deepwater developments in the Gulf of Mexico, including Tubular Bells, Dorado, and Puma.

BP said at the time that “like other operators, we are adjusting our future project plans in the face of resource constraints and significant inflation in the oilfield service sector”.

Current forecasts expect output globally from such deepwater projects to rise from 4m to 11m barrels of oil per day by 2017.

But Mr Patel warns these projections are based on “the assumption the industry will be able to avoid major delays, which is becoming more unlikely – not to say impossible – every day”.

He said the shortage of engineers has been building over the past few decades, with the collapse in oil prices in the 1980s and 1990s, improved efficiencies in technologies and the attraction of suitable candidates of other sectors, such as information technology.

Mr Patel said the current shortage affecting the industry began four years ago as a number of sectors, ranging from mining to petrochemicals and exploration and production, started hiring engineers at the same time.

This hiring frenzy was fuelled by strong global economic growth, led by India and China. It could not have come at a worse time for the oil and gas industry.

With shrinking access to conventional oil and gas resources, the oil industry has been tapping unconventional resources, such as tar sands. These projects take exceptionally bright and experienced engineers to develop the technology to make them work efficiently.

Yet such people are leaving the industry in unprecedented fashion, as experienced engineers reach retirement age.

“That pool is just shrinking by the day,” Mr Patel said.

Oil companies are responding to this labour crisis by recruiting talent in Asia through design houses, though the required mentors are retiring, and it will take time to train the new engineers.

With an average age of 51 years, Cera expects that more than 50 per cent of today’s workforce will have retired by 2015, an attrition rate of 6 per cent per year.

Copyright The Financial Times Limited 2007

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