With declining oil prices causing companies to pull back on activity in the North Sea, is it the wrong time to consider a career in the oil and gas sector? Evelyn Adams reports
The current oil and gas slump is the worst in post-war history. Excess supply has pushed onshore reserves to record levels, causing prices to crash to around £19.60 from a high of £80 a barrel in the summer of 2014. And things could be about to get worse. Analysts are predicting that oil prices could fall to between £17.60 and £7 a barrel, before they make any kind of recovery.
Declining oil prices may be good for the consumer, but they have hit the industry hard, particularly in areas like the North Sea where activity is at a low ebb. A report out in September by industry group, Oil & Gas UK, predicted North Sea spending will be cut from a record £14.8 billion in 2014 to £7 billion or less within three years. It estimates that 65,000 jobs have been axed in the North Sea oil sector since 2014 as a result, leaving a workforce of around 375,000.
So is it a terrible time to consider a career in the oil and gas industry? ‘I think the important fact to remember is that all markets suffer with similar periodic declines following periods of unsustainable growth, and like other sectors, the oil and gas industry will recover,’ said Grant Hutchinson, divisional manager of oil and gas at Capp Group, which is part of Matchtech. ‘Individuals shouldn’t be put off the oil and gas industry, as there will always be opportunities for skilled professionals in such a resource-hungry market.’
Alix Thom, Oil and Gas UK’s employment and skills issues manager, believes that while the sustained drop is making life hard for the UK oil and gas industry, this won’t last. ‘The industry, regulator and governments are all working hard to ensure that when the price does recover,’ he said. ‘The sector is in the best condition possible for activity and employment to be restored.’ With up to 20 billion barrels of oil and gas remaining to be recovered from the UK Continental Shelf, and government forecasting that our oil and gas needs will not diminish until 2030, Thom says this is very much an industry with a future.
Both Thom and Hutchison are confident that these vast reserves could once again be lucrative. Thanks to a flood of investment while the oil price was high, the North Sea has huge infrastructure in place. Like Oil and Gas UK, BP estimates that around 15 to 20 billion barrels of oil may be waiting to be discovered in the region. With better technology, companies are aiming to increase the percentage of oil they can get from reservoirs. And because their production costs have come down following a drop in demand, a number of firms are investing in major projects in anticipation of a recovery.
‘The current oil price has provided a cost-effective opportunity for operators to develop and revamp current processing plants,’ said Hutchinson. ‘With reduced manpower costs and the lower cost of feedstock reducing the amount of revenue lost through standard shutdowns, a number of operators are taking the opportunity to invest. This investment naturally provides a demand for a variety of skilled oil and gas workers…With an aging workforce, particularly within processing plants, there is certainly room for new talent to enter the market.
Oil and Gas UK estimates that output from the UK Continental Shelf last year rose between seven per cent and eight per cent compared with the previous year. Government data for production from the North Sea for the first 10 months of last year revealed that liquid output rose 10.6 per cent and gas was 6.1 per cent higher. These figures are partly down to new facilities coming on stream such as Taqa’s Cladhan field off Shetland.
BP, Maersk Oil and JX Nippon are also working together to develop the Culzean gas field at a cost of $3 billion. This is expected to support up to 6,000 UK jobs and create more than 400. The Culzean gas field is the largest new field discovered in the UK North Sea for a decade. It was discovered in 2008 and is expected to produce enough gas to meet 5 per cent of total UK demand at peak production in 2020 to 2021. ‘It will provide significant economic benefits to both the region and the rest of the UK for many years to come,’ the government claims.
Some argue that trend won’t last. For instance, Shell has already cut down on some of its investment in the region. But Elmer Schaap, the company’s graduate recruitment manager, says there remain a variety of roles for talented engineers, particularly in mechanical and marine engineering. ‘In Europe, attractive opportunities for graduates exist across our organisation, in particular in the Netherlands and the UK, in our Upstream and Downstream operations and our global Projects and Technology division,’ he said. ‘We need core engineering skills…We also look for evidence of leadership potential, particularly in graduates.’
Andrew Duffy, a recruitment consultant at Petroplan, says that while oil prices are low, the market has a track record of rebounding. He advises engineers who want a career in the industry to carefully plan their career path, get the relevant qualifications and build relationships with industry specialists. ‘The most sought after skills are always related to the most technical positions,’ he said. ‘Being a good engineer is about creativity, thinking outside the box and good project management skills’
Yasmin Ali, a former IET Young Woman Engineer of the Year finalist, agrees. ‘There are definitely still opportunities out there,’ she said. ‘In the UK North Sea, decommissioning of ageing assets will become a large area of focus. This is something we, as an industry, don’t have a lot of experience in. We will have to tackle the issue very soon as more and more oil and gas fields reach the end of their lives. These large scale projects will require engineers to solve the technical challenges presented in a cost effective, safe, and environmentally sustainable way.
‘If it’s an area that interests you, don’t be put off by the declining oil prices, it’s an opportunity for the industry to change for the better.’
For all sorts of reasons, all sorts of industries have periods of boom and subsequent ‘slumps’.
My dear and former US boss (he knitted the first nylon-stocking ever -I was not born then) used to say “Mike, never worry about working in textiles: when you are born, the first think they do is wrap you in textiles, when you die, the last thing they do is…..and inbetween, except when you are in the shower, you will be touched by …textiles. It is a big business. As long the population of the world gradually increases and that only requires ‘people’ to continue to “sc**w”(and they will) the demand for textiles (and everything else) will continue.” I believe the same situation applies to all commodity products and raw-materials. Yes, there are the occasional ‘blips’ caused by imbalance: but the demand for everything will invariably show a gradual up-ward trend. Technology changes will of course create occasional ‘step’ jumps (and consequent subsequent falls) in demand. I am reminded of a comment from Richard Nixon in the 80s: “almost all the corporate planners of major US firms are from the Ivy League Universities: and they were all trained in the same way: and hence they all react in the same way to data and situation changes. Lemmings in league with each other to cause booms and slumps”.
Nixon used this to engineer? changes in the economy he sought, without his name being on it! The Teflon President.
Your comments about corporate planners applies most strikingly recently to bankers.
In the early part of the last decade, one of my long-term clients (working for a/the major German Chemical Company) sought my contribution to a study into the costs issues in synthetic fibre manufacture (nylon, polyester, acrylic) of the effect of a speculated future price-hike to what was termed $60 barrel crude. At the time the price hovered around $40 and had been so for some time. I have to say that initially I was sceptical that the price would ever reach $60: as we know it peaked at nearly $120.
It is now down to what many believe is a sensible and sustainable price. One has to ask: just how much of the ‘price’ (rise and fall) is caused by rampant speculation in the oil and gas ‘market’ by traders, rather than users. [just as house prices (at least in the Anglo-saxon world) have little to do with the actual needs or costs for accommodation. Think of just how many ‘fingers (actually up-turned palms, even fists)’ dip into that pie..]. I hope that clever minds than those which thus far have caused these massive swings are actually involved. As we Engineers will know, undamped oscillation between extremes invariably results in catastrophic breaks. And whilst governments comprised of ‘financial’ experts will always ‘look-after (ie cover, protect, bail-out call it what you will) their cronies…..what will/can they do now?
The problem with oil production in particular is down to the supply / demand curves. In most industries supply can be reduced easily to lift market prices. The problem in particular with oil (not so much gas, but it is also affected) is that you can’t simply turn off an oil well. Yes the valve packages are there to physically do it, the problem being (esp. North Sea) as the oil/gas cools due to lack of flow it reaches a point where hydrates form and effectively ice up the system to a point it can’t be restarted. Similar is the effect of Ashphaltines (tars) which do the same.
Oil and Gas production systems have quite short ‘no touch times’ this is the time that you can shut the well and subsea equipment down and still very successfully re-start. Exceed these times and you risk clogging up your whole system or having to pump it full of chemicals to unblock it. Chemical pumping is OK while very expensive, but even that will only work to a certain extent. Once the system is too cold (especially down the well itself) it is blocked and the only way to re-open it is to re-drill. Very Very expensive and very very complex.
In our past years we have put hundreds of ‘holes in the ground’ producing oil and gas to the point we are now oversupplying. The problem being we can only notch back so far, and even that is still oversupply. Throw into this scenario OPECs unwillingness to cut production (a little bit on a lot is better than nothing on a little) and we have created the perfect storm.
Many hundreds of wells have come on stream in the last few years that have been in the planning for some years, when planned there was presumed undersupply, everyone put holes in the ground to the point the swingometer went the other way.
The figures are astounding especially gas with a single well easily capable of 42 Million Standard Cubic Feet of gas per day! It is easy to see even if only fractions of a penny per Cubic foot are made the sheer volume soon mounts up.
It is a tough time for the industry with many 000’s of jobs gone, however these are primarily in the offshore plant maintenance sector, which typically enjoyed overmanning levels and rotational shift pattern, with high associated transport costs for the operators. (10 /16 seat helicopter to replace a 200 man crew every 3 weeks). If those crews can do an extra week per shift it is obvious how savings can be made quite quickly, in personnel quantities and transport.
Where the industry is really shaping up is operators who typically wanted bespoke development for each well site (rig) are now looking at more standarised equipment from suppliers and ways of improving efficiency in an industry that is very slow to adapt. For us engineers this is great as it leads us to be able to offer some real solutions while developing systems at the same time.
What is often forgotten is oil and gas production (especially subsea) is really quite a young industry only effectively being around 40 or so years old. With 25 year lifecycle equipment it can be seen we are only just entering 3rd generation equipment.
Its time for change in oil and gas, we’re getting there. the industry is by no means dead, the equipment providers are working hard to get the producers the right kit , and if nothing else this glut has forced the producers to look at a more ‘standard’ product. For engineering in the industry its a good time, slow but good. Its not all the doom and gloom thats been portrayed, but at the same time I condole my colleagues who have lost their jobs recently but the writing has been on the wall for a while its just its been walked past until now.
Dear Geofrey, thank you for an outstanding and comprehensive explanation of what is clearly ‘your’ field. I learned a lot. I did offer our Editor a short story (part of a book written by and about a once young Engineer quite well known to me) following his recent piece about a visit to the R&D site a well known firm which has a sea-shell as its motif. The story is about a visit to a rig off-shore in Trinidad in 1965! The same gladly offered for your interest, should you contact me directly. (mikeblamey@yahoo.co.uk)
obviously Geof has still got a job in the oil and gas industry, judging by his optimistic views, and only 40 years oil and gas industry? ummm, think someone needs to check their history out a bit more, I think you will find, it is quite easy to keep wells flowing, even at part rates, chocking the flow , or reducing the flow can still be done, no need to shut in completely, not all wells are the same, HP/HT wells, can be shut for long periods of time, its the LP/LT wells that require some sort of ESP or gas lift or water injection to start them again, obviously these cannot be shut in for long periods, but the production is very minimal from them anyway and can be kept flowing, even at a chocked rate, yes, some wells suffer from waxing, or condensate and bridging by ice plugs, these are all controllable, especially gas wells that have chemical injection at a constant rate, what has theoretically reduced the industry to its knees is over production of Frac wells, and constant flooding of the oil market with oil from the Middle East, who are not worried bout the price as they over produce anyway, which in turn creates the downturn on the market, I have worked on Gas storage facilities, and also Rig’s and land wells for quite a few years, and it has never been this bad for job losses since i can remember, yes the market will eventually pick up, but for some people like myself the damage has been done. People live to their means, and some more so, as we all know wages in the oil and gas industry were quite good , so people who had been working for years and suddenly finding themselves without a job will struggle to return in the long run if at all, thats if most have not lost homes, families, and probably there way of living by then, which is not recoverable in the slightest, so people who are still in the industry will look on the BRIGHT side of the whole thing and shrug off the downturn as one of them things….
Steve, Yes I still have a job, but am far from looking on the bright side, and many (very many) close friends are now or imminently redundant and I feel their pain, and currently do not consider my position as secure as 2 years ago despite a positive trend on FEED work.
Unfortunately a few are also creating their own demise, by trying to refuse new economic working patterns which would maintain their job but increase working time.
Without opening up too much digression OPEC yes is over producing. Frac wells have also played into the scenario only exacerbating the problem by increasing production in a saturated market. Yes producing wells can be choked back, as you correctly state, BUT choking the wells leads the platform or drill-centre to become completely un-economical, offshore being first to be hit due to economics of offshore supply and logistics. The option of long term shutdown (mothballing of wells) is not there due to the problems of hydrate and ashphaltine formation which after months / years of well inactivity (we are unsure how long the downturn will last) would require full intervention to unblock the well. Obviously full shutdowns (long term) will also lead to plant (topside) re-certification at resumption of production. I appreciate many wells and rigs have shut-down periods and this is possible but these are not in terms of weeks / months / years that are currently being envisaged. This is where I was coming from, and a view that has been expressed within the industry and by many producers.
Getting back to the point of the article opportunities exist in the industry despite the widespread reports of decline. What the decline has achieved is to focus producers, and equipment manufacturers (where I am employed currently) on optimising and stadardising designs on which little has changed in the ‘mature’ element of the industry lifespan (i.e. the last 40 years or so (esp. Offshore)).
Todays tenders and specifications for fields are considerably different in content to those of even a few (<4) years ago, due to economic considerations imposed by producers often investing billions in a new field development. I am sure similar effect are being felt felt by installation contractors and topside manufacturers. As a whole the industry is looking at a step change (in my view long required) due to many factors but mainly down to current / recent overproduction and inability to shut-down without massive economic impact on resumption of activities. It is only my view and I am happy to discuss further, if required.
A sad snapshot is shown by the industry news as depicted in Offshore Energy Today newsfeed, an link to a latest version is below (if accepted by TheEngineer).
http://tinyurl.com/jyt7y7l
Oil and Gas is a dying industry and there is no engineering career associated with Oil and Gas. There are too many Oil & gas producing countries now and with Shale Gas coming on there is going to be more supply than demand. It is unlikely that price will reach $50 this year or even next year. LNG was considered as a good engineering prospect, however again here there is more supply than demand. It is time to get out of Oil and Gas altogether for new entrants
Keeping it short, this is particulalrly pertinent to the story and comments above.
http://tinyurl.com/gvb6wun
Anyone noticed the elephant in the room? Outside this magazine, people are talking about the need to leave the oil and gas in the ground to prevent global warming. If that idea gains traction how will that allow a rebound?
Not everything, especially not research and development, at the large oil companies BP, and Dutch Shell, is about fossil fuel. In fact, nearly every oil company is looking at renewables in new and exciting ways….not that any of them can yet compete in the global energy marketplace with some serious shoring up from government finagling with reality. Oil prices will be back to $45/bbl by the end of this year, maybe higher depending on what happens in the general election cycle in the U.S.A. It is a reality that America will still make a big dent in whether global economy tanks or rises, and energy rises or falls on those fortunes, it is simple math.
The reality for me is:
Lost my house, family, savings, EVERYTHING!
My degree is now next to worthless in other industries.
TOTAL DESTRUCTION!!!