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Where Oil Experts Come From

THE WALL STREET JOURNAL: Where Oil Experts Come From

By SPENCER SWARTZ
April 9, 2008; Page B5A

LONDON — A large, steady supply of petroleum graduates from resource-rich and developing nations is helping to ease an industrywide labor shortage, while at the same time chipping away at the advantage in skills traditionally enjoyed by U.S. and European firms.

In the 1970s and 1980s, Texas A&M University and other top U.S. and European universities provided most of the world’s petroleum graduates.

The tables have turned. Today, schools in Azerbaijan, Brazil and other nations with state energy firms that manage vast hydrocarbon resources are expected to produce more than 12,000 petroleum-engineering and geoscience graduates in 2008, double the roughly 6,000 in the U.S., Canada and Europe, according to recent data from Schlumberger Ltd., the world’s biggest oil-services firm by revenue.

The gap has widened considerably in recent years. In 2000, the U.S., Canada and Europe produced almost 4,000 energy-related graduates compared with a total of about 6,000 in other nations.

Some of the new petroleum graduates are signing on to work for Western oil companies, but many are joining their national firms, building the skills and knowledge base of state corporations that already control more than 80% of the world’s proven crude reserves.

Over time, the abundance of trained national talent is likely to blunt the know-how bargaining chips U.S. and European firms have long employed to cut deals with governments, some analysts say.

The national oil companies will continue to have a reservoir of graduates and be able to cherry-pick the best ones, says Fariborz Ghadar, who has studied the issue as director of the Center for Global Business Studies at Pennsylvania State University. “Over the longer term, this will challenge Western oil companies in the knowledge department,” he says, citing skills like the latest drilling techniques and methods for recovering hard-to-get oil at existing fields.

“We have seen a big rise in the number of graduates coming from [non-U.S. and non-European], resource-rich nations,” says Antoine Rostand, global managing director at Schlumberger Business Consulting. “One of the reasons for this is many of these countries continued investing in new talent despite past years when oil prices were lower.”

Companies play down the competitive threat from the rising skill base of national oil companies and say the increasing number of petroleum graduates globally is an opportunity. Analysts say it is also cheaper in many cases for U.S. and European companies to hire locally rather taking on new recruits in their home markets and posting them in other countries.

Mr. Rostand of Houston-based Schlumberger says his company is hiring more graduates in some of the roughly 80 countries where it operates.

Chevron Corp., like other big oil companies with an aging work force and many big projects in development, says it is doing likewise. “[Chevron] plans to hire in excess of 6,000 employees globally this year, triple the number just two years ago,” says company spokesman Alex Yelland.

More than half of Chevron’s 59,000 employees are from outside the U.S., up from less than one-third in 1999, and that percentage is steadily rising, Mr. Yelland says. California-based Chevron has started partnerships with several universities in places such as India, Indonesia and Kazakhstan.

Young people outside the U.S. and Europe often have a relatively positive image of the energy industry, especially in the Middle East, where rising crude prices the past seven years have boosted living standards for most people.

“Working at Saudi Aramco for most Saudi kids is a dream job. Our enrollment numbers continue to rise,” said Sidqi Abu-Khamsin, who runs the petroleum-engineering department at King Fahd University in Saudi Arabia. The petroleum-and-minerals school has been a pipeline for talent to Aramco, which for decades has been the world’s biggest oil company by reserves.

By contrast, many young people in the U.S., Canada and Europe — where concerns about global warming are rife — often have less favorable views of the oil sector and usually have plenty of other professional opportunities in areas such as retail and technology.

To be sure, Western oil companies have increased recruitment, which is helping deliver more graduates — though shortages are seen persisting for a number of years as many workers go into retirement. Texas A&M graduated 180 petroleum students in 2007, compared with 60 in 2004, according to Schlumberger.

But those numbers are overwhelmed by the big strides being made elsewhere in the world.

Although privately funded, the University of Petroleum & Energy Studies in India was launched in 2003 after lengthy consultations with U.S. and European petroleum schools to supply engineers to state industry, which procures most of India’s fast-growing oil needs from abroad.

The school — accredited by the Energy Institute, a United Kingdom industry body whose members include BP PLC and Royal Dutch Shell PLC — has gone from graduating around 250 students in 2005 to more than 800 in 2007, according to Vice Chancellor Parag Diwan. More than 1,000 a year are expected to graduate over the next few years and the school will soon start campuses in Qatar, the United Arab Emirates and Vietnam.

Still, some professionals question the quality of the high number of graduates being pumped out around the world. “Universities in oil-producing countries are challenged to develop programs that produce more energy professionals quickly and efficiently and ensure international standards for academic excellence,” said Margaret Watson, a spokeswoman for the Society of Petroleum Engineers, whose membership includes professionals from many Western and state-run oil companies.

Those concerns, however, so far haven’t diminished the appetite to hire globally. “There are quality issues from time to time. There are longer-term competitive issues we face from state-run companies, but the universities in countries where we operate are helping fill a big need,” said one recruiter, who wished to remain unnamed, from a top U.S. oil company at a recent industry education and training conference in London.

Write to Spencer Swartz at [email protected]

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