Has the Oil Industry Learnt from the Past?

Has the Oil Industry Learnt from the Past?

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Sam Fletcher, Research Team Leader

The year 1986 is one that for veterans of the oil industry and people with an eye on economic history know all too well and many similarities have been drawn between the dive in oil price then and the current state of the market today.

Following the down-cycle, it took close to two decades before we saw prices return to the previous peak. The long-term damage to the industry over that time however is something that was still felt by businesses up until very recently in the form of project delays and significant cost overruns due to a lack of skilled staff.

After the drop in the price of oil in 1986, companies responded very much in the same way that they have over the last two years with large-scale redundancies, hiring freezes and drastically reducing and in some cases eliminating entry level hiring.
As the price of oil increased so did the investment in projects, increasing the need for technical expertise and staff with the right competencies to bring fields on-stream.

Most companies were so focussed on short-term cost savings that by the time the industry picked back up, they were unable to capitalise on the immediate opportunities available to them.

Those who do not learn from history are doomed to repeat it…

The advances in technology and the infrastructure available today has significantly reduced investment cycle times for projects compared to the industry in the 1980s. When the price of oil rebounded the last time around companies had a longer lead-time to ensure they had the right staff with the right level of experience. Operators this time around will not have that luxury.

Despite the current industry climate, companies should still be considerate of how they will address skills shortages when demand increases so as not to face the same problems all over again. Companies can still keep shareholders and analysts happy through restructuring to cut overheads in the short-term whilst ensuring they are best-placed among the competition to capitalise on future opportunities.

An additional benefit of longer-term strategic workforce planning in the energy industry will mitigate the inherent risk of having to rely on a contractor-heavy workforce or high use of recruitment agencies, ensuring the business can run with a lean workforce and avoiding spiralling staffing overheads.

Capitalising on Opportunities
Identifying the current competencies of the workforce, modelling potential future requirements based on different recovery and project scenarios and conducting a skills gap analysis will help businesses understand potential skills-based company risk.

This approach will also identify the short-term work that can be completed in succession planning and developing the competencies of current staff through mentoring and the transfer of experience to mitigate risk in a future talent shortage.

With an in-depth understanding of the actions required to be ready for different industry scenarios, businesses can both mitigate the high cost associated with reactive staffing and understand their ability and readiness to capitalise on opportunities.

If you’d like to learn more about how you can implement a strategic approach to future staffing demands in a budget-restrained environment, get in touch.

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