Oil & Gas Investor - Skills Shortage Concerns US Oil & Gas Industry

September 16, 2013

Oil and gas companies in the US are being squeezed by skills shortages and a lack of young professionals entering the labor force threatening short and long term growth prospects for an industry that is otherwise optimistic about its future.

According to the 2013 Oil and Gas Global Salary Guide produced annually by expert recruiters Hays Oil & Gas and leading jobsite, Oil and Gas Job Search, almost half (43%) of US oil and gas employers cite “skills shortages” as a significant issue, and yet two-thirds (66%) expect to increase hiring in the next 12 months.

Furthermore, fewer and fewer young American professionals are entering the oil and gas labor force, a trend that is at odds with the rest of the world. Only 12% of the current American labor force is under 35 years old, while that same age group makes up 33% of the world’s oil and gas labor market. The US is heavily reliant on its older professionals and almost two-thirds (59%) are 50 years old and over creating a worker replacement ratio of 0.25. That means that there is only one young professional for every four approaching retirement.

“The American oil and gas industry is watching its talent supply dry up, and without a watershed moment Americans will miss out on the contributions this sector makes to the overall economy,” said John Faraguna, Hays' global managing director, in the release. “The industry is taking great strides to attract young professionals and has increased graduate salaries by more than 17% since 2012. However, flexible immigration policy will also be needed to bring in much needed imported talent, or US companies may choose to relocate work to where sufficient skills exist.”

Some job types are more affected by skills shortages than others. Experienced professionals with advanced degrees in subsea engineering, reservoir engineering and the Geosciences, particularly with non-conventional experience, are in greater demand and can expect higher salaries as a result. Lower skilled workers, primarily in field positions can expect salaries to stay flat or decrease.

The good news is that there is a high degree of market optimism in the US, and compensation packages are competitive. The 2013 Oil and Gas Global Salary Guide found that:

• Market optimism: almost two-thirds (63%) of survey respondents are positive to very positive in confidence of the current market.

• Local professionals working in the US earn on average US $121,400 per annum. This is slightly behind neighboring Canada at US $123,000 equivalent by a narrow margin. Australia is now leading the way globally with an average industry salary of US $163,600 per annum.

• Big rise in graduate salaries: 2012 = $66,095 – 17.6% increase.

• Over the next 12 months:

o 33% of employers expect to increase salaries by up to 5%

o 25% of employers expect to increase salaries between 5 – 10%

o 9% of employers expect to increase salaries by more than 10%

o 30% of employers expect to keep salaries at the same level