2010 situational analysis and short term hr trends

Situational Analysis and Q3/Q4 2010 Short-term HR Trends Report

December 2010

Petroleum Human Resources Council of Canada www.petrohrsc.ca

Presentation Overview

• Current State of the Petroleum Industry and its Employment

• HR Trends within the Petroleum Industry

• Business, Social, Technological and Regulatory Impacts on the Petroleum Industry’s Workforce

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Content Overview

Situational Analysis• Key findings are a culmination of primary and secondary research and analysis about the

current state of the petroleum industry, including where industry is headed and the resulting impact on the Canadian workforce.

Short-term HR Trends • Survey conducted every spring and fall to gather companies’ perspectives on short-term

labour market issues and trends within the Canadian upstream petroleum industry. • Results from the Q3/Q4 2010 Short-term HR Trends Survey are included here.

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Scope

• Exploration and Production (E&P): onshore activity for conventional oil and gas reserves and unconventional reserves excluding oil sands.

• Oil sands: extraction and upgrading of bitumen.

• Offshore: development drilling, production and servicing of offshore oil and gas projects.

• Services: contracted exploration, extraction and production services to the E&P and Oil sands sectors.

o Petroleum services includes well services, oilfield construction and maintenance, production and transportation services.

o Drilling and completions services includes drilling and service rig for onshore activities.

o Geophysical services (also known as seismic) includes survey, permitting and reclamation, line construction, drilling and data acquisition.

• Pipeline: mainline transmission for transporting daily crude oil and natural gas production in Canada.

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How the Information is Organized

Bolded key findings statement.

Key Topic

• Research findings.

• Detailed findings/impact on industry’s workforce.

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Current State of the Petroleum Industry and its Employment

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Current State

Recovery in 2010, but slower than expected.

E&P and Services Sectors

• 2010 capital spending is expected to increase by 24% over 2009 levels.

• CAODC and PSAC both increased drilling activity forecasts through 2010.

• 50% more drilling licenses issued year-to-date than in 2009.

• Increased land sales.

• Many companies in E&P sector held onto workers during downturn.o 70% of E&P companies responding to Short-term HR Trends Survey (Q3/Q4 2010)

indicated they are increasing field staff; 40% are increasing office staff.

• Services sector now adding workers to meet increased industry activity.o 88% of petroleum service companies increasing field staff; 50% office staff.o 78% of drilling and completions companies increasing field staff; 67% office staff.

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Current State


Oil Sands Sector

• Several oil sands projects put on hold in 2008-2009 have been reinstated.

• Forecasted oil sands production is up 18% over the 2009 forecast for “in-operations or under-construction” for both mining and in-situ extraction.

• Narrow price differential between light and heavy crude.o 2010 synthetic crude oil production forecast 19% less than 2009 forecast.

• Oil sands companies hired workers through the economic downturn.

• Hiring continues to ramp up in Oil sands and Services sectors.o Q3/Q4 survey respondents indicating they are currently recruiting:

100% of Oil sands sector; and 88% of Services sector.

• Fewer upgrading jobs than projected in 2009 because of decrease in forecasted SCOproduction to 2020.

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Current State


Pipeline Sector

• Numerous new pipelines in various planning and regulatory stages.

• Pipelines to the west coast key to opening new markets/demand.

• Increase in pipeline workforce and potentially for other petroleum industry sectors as new markets/demand drives additional industry activity.

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Current State


Offshore Sector

• Hebron offshore oil project nearing sanction.

• Production from Deep Panuke gas project expected to come onstream in 2011.

• Current natural gas price does not encourage investment in technology or E&P projects.o ExxonMobil has announced that they will not be extending Sable Offshore Energy

Project.

• Offshore hiring taking place for occupations in development drilling, production, well servicing and marine.

• Onshore support also required.o 67% of Q3/Q4 Short-term HR Survey respondents working in the Offshore sector

indicated they are increasing field and office staff.

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HR Trends Within the Petroleum Industry

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HR Trends

Drivers of HR priorities have shifted in the past year.

Top Workforce Challenges

Q4 2009 Short-term HR Survey Results Q3/Q4 2010 Short-term HR Survey Results

1. Cost cutting/management (63%)

2. Employee engagement and motivation (58%)

3. Managing employee performance (42%)

4. Labour/skills shortages (21%)

5. Attracting and retaining workers to hard-to recruit locations (21%)

1. Labour/skills shortages (60%)

2. Attracting and retaining workers to hard-to-recruit locations (60%)

3. Employee engagement and productivity (40%)

4. Employee turnover/retention (30%)

5. Compensation/benefits expectations (30%)

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HR Trends

There seems to be a chronic shortage of certain occupations.

Chronic Labour Shortage

• Occupations in-demand during recovery in 2010 are the same as those in-demand during the slowed economy in 2009.

• Experienced engineers: exploitation, completions, production, mining; • Plant Operators, Steam Engineers and Power Engineers; • Maintenance trades; • Production Accountants; • Field Operators/Specialists: slickline, snubbing, completions, class 1 drivers; • Rig crews (Derrickhands in particular); and • Environmental and Regulatory Specialists.

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HR Trends

Recovery has also led to increased workforce turnover.

Workforce Turnover

• Stability has created confidence and increased movement of workers between companies.

• Results from Q3/Q4 Short-term HR Survey:o 40% of companies report increasing workforce turnover.o 35% indicate an increase in employee’s intention to retire.

• As expected, increased turnover within entry-level positions and those with 1-3 years experience.

• Turnover of experienced, technical workforce also heating up.o Engineers;o Geoscience professionals;o Plant operations;o Project managers;o Experienced well servicing and drilling personnel; ando Specialists: HR, regulatory, finance and environmental.

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HR Trends Industry recruitment practices still predominantly traditional.

Recruitment Activities

Q4 2009 Short-term HR Survey Results Q3/Q4 2010 Short-term HR Survey Results

• Advertise on company website (84%)• Advertising: Industry/profession-specific

advertising (55%), student career centres (50%), print media (45%)

• Search and placement firms (37%)

• Advertise on company website (81%)• Advertising: Industry/profession-specific

advertising (69%), student career centres (56%), print media (56%)

• Search and placement firms (50%)

• Employee referrals (58%)• New grad/campus recruitment (44%)• Social media (25%)

• Employee referrals (81%)• New grad/campus recruitment (44%)• Social media (37.5%)

• Partnering with programs that target under-represented groups (5%)

• Partnering with programs that target youth (26%)

• Outreach recruitment drives within Canada (10.5%)

• Partnering with programs that target under-represented groups (12.5%)

• Partnering with programs that target youth (6%)

• Outreach recruitment drives within Canada (6%)

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Business, Social, Technological and Regulatory Impacts on the Petroleum Industry’s Workforce

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Business, Social, Technological and Regulatory Impacts

Lower commodity prices have affected industry’s profits and operations.

Cost Management

• Economic downturn curtailed labour, equipment and materials costs, enhancing economics of some projects.

• Material and skills shortages are expected to re-emerge in short-term (2012).

• Oil sands companies recommitted to a number of projects that will result in increased workforce requirements starting 2011.

• Industry will be challenged to keep costs under control, while competing for talent.

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Regulations impact industry from both a labour demand and labour supply perspective.

Regulations Impact Labour Demand

• Canada’s regulatory environment more strict than other jurisdictions.

• Provinces looking to streamline regulatory environment and attract capital investment.

• Environmental regulation:

o Land useo Water useo Tailings ponds

• Requires more workers to produce same amount as countries with fewer regulations.

• Potential impact on productivity.

• Potential increase in industry activity and challenges to addressing labour requirements.

• Increases need for specialized skills and knowledge in these areas.

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Regulations Impact Labour Demand

• Strict safety regulations.

• 82% of respondents to Q3/Q4 Short-term HR Trends Survey indicated increasing training requirements.

o Safety and regulatory compliance cited most often as the reason for increase.

• Management of workplace incidents.o Frequency of recordable incidents trending downward for both land-based drilling

and service rigs.o Need to hire inexperienced workers to meet labour demand could impact the

industry’s safety record in the future, especially within the Services sector.

• Has driven some technological changes such as unmanned rigs.

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Regulations Impact Labour Supply

• Tightened regulations for Temporary Foreign Workers (TFW).

• Western Partnership Agreement.

• Shortened amount of time that TFW can work in Canada.

• Aimed at reducing barriers to labour mobility across BC, AB and SK.

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Changes to Canada’s Immigration Act

• Federal Skilled Worker Program.

o Priority processing of applicants in in-demand occupations.

• Applicants must demonstrate proficiency in English or French.

• Canadian Experience Classo Designed to streamline

immigration for applicants with Canadian work experience (TFW); or graduation from Canadian post-secondary program.

• Opportunity for petroleum industry to access foreign trained workers.

• May help address concerns about language capability.

• Increased employability of immigrant labour supply pool.

• Labour supply for petroleum industry.

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Trend towards unconventional natural gas and in-situ oil sands extraction is driving demand for certain skills and knowledge.

Emerging Skill and Knowledge Requirements

• Tapping into shale gas as much an engineering risk as a geological risk.o Impacts front-end design of field and gathering and analysis of data during drilling.

• Development of software and technology to enhance risk analysis of unconventional fields and decision-making.

• Vast amounts of equipment and materials onsite at the right time.

• Increase demand for: o Software Technologists/Developers;o Geologists and Engineers with knowledge of shale gas reservoirs and well

stimulation and completions; o Measurement While Drilling Specialists;o Fracing Operators;o Completions Specialists;o Drivers/Operators to get equipment and materials to the well site; o Water and Environmental Management Technicians and Specialists; ando Logistics Specialists.

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Environmental performance, social responsibility and stakeholder relations key to industry expansion.

Social License to Operate

• More negative coverage than positive in media.

• Affects all sectors.

• Industry collaboration needed to address public perception issues.

• Growing need to build knowledge and capacity within these areas.

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Services sector workforce most impacted by economic downturn and subsequent recovery.

Downturn and Recovery

• Economic downturn slowed activity. • E&P companies increased capital spending for 2009-2010.

• Services sector lost approximately 13,000 seismic, drilling, oilfield construction and maintenance, and well servicing jobs from 2007-2009.

• Services sector reported issues in attracting and retaining workers needed for increased industry activity.

• Increased hiring of inexperienced workers.o Cost and time associated with

training.o Impact on productivity.

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Services sector workforce impacted significantly by trend towards unconventional natural gas.

Unconventional Natural Gas Activity

• Horizontal drilling requires fewer well pads to be constructed, but requires more labour, materials and equipment onsite.

• Drilling taking place in locations that require significant infrastructure enhancements, including new access roads and pipelines.

• Ability to drill multiple wells from a single well pad means:

o Fewer equipment moves and therefore less impacted by spring breakup; and

o Faster reclamation.

• Attraction and retention of skilled workers to hard-to-recruit locations will be an ongoing challenge.

• Work activity and workers are less impacted by seasonality.

• Fewer reclamation jobs.

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• Shortage of equipment appropriate for shale gas, horizontal and multi-frac drilling has resulted in high demand for these rigs.

• Horizontal and multi-frac drilling being used to enhance recovery from existing wells.

• Drilling workforce is mobile across North America.

• More drilling companies are now assigning a crew to a rig and having them move with that rig to ensure proper operation of high-tech equipment.

• Creating additional demand for workers and equipment.

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• Companies are forcing contractors to provide low-cost service, while driving innovation in multi-well, multi-operation activities.

• Need ability to refine processes, then move ahead in repeatable manner.

• Turnover is costly.o Priority to retain workers, leverage knowledge gained and make process

improvements, as they move from well to well.

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Expansion of in-situ oil sands operations will require growth within Services sector, and will increase demand for certain occupations.

Services Sector Support to In-Situ Oil Sands Operations

• Requires drilling and well services personnel.

• Oil sands companies continue to contract significant portion of maintenance and some operations to services sector.

• In-situ oil sands extraction requires water and steam.

• Increases demand for workers within the Services sector.

• Use of steam for in-situ extraction increases the demand for 1st, 2nd, and 3rd Class Steam-ticketed Operators (or Power Engineers), already in short supply.

• Water recycling and management increases need for specialized skills and knowledge in this area.

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The number of large capital projects and the need to manage costs are driving changes to industry’s skill and knowledge requirements.

Major Capital Projects

• Many projects scheduled to come onstream within a short period of time.

• Cost and schedule management a priority.

• Requires significant construction workforce.

• Workforce planning has become critical.

• Petroleum LMI provides understanding of industry-wide (and sector-specific) labour demand and supply requirements.

• Development of internal EPC and project management capabilities.o Increases demand for

these skill sets.o Required for managing

maintenance and turnarounds as well.

• Growth of petroleum industry tied to industrial construction industry’s ability to attract and retain workers.

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Summary

• Regardless of the pace of economic recovery, the petroleum industry will be challenged to meet its hiring requirements.

• The petroleum industry is already experiencing chronic shortages for some occupations.

• Game changers such as unconventional natural gas, enhanced oil recovery and in-situ oil sands extraction have increased demand for certain occupations and created a need for new skills and knowledge.

• A healthy Services sector workforce is critical to the petroleum industry as a whole.

• Collaboration, communication and effective attraction and retention of workers are factors in industry’s quest to manage the escalation of labour costs.

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2010 situational analysis and short term hr trends

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