People deficit to cause further delay through 2010 - Cera
Posted: 16 October 2007
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Large oil and gas production projects worldwide are likely to continue to suffer delays resulting from an increasing shortfall of qualified project engineering resources.
According to a new analysis by Cambridge Energy Research Associates (Cera), an IHS Inc. company, there could be a potential 10-15% ‘people deficit’ by 2010.
Cera’s conclusion is based on analysis of the engineering and project management staff needed to deliver the over 400 major projects expected to come onstream in the next five years.
This demand analysis was compared to the current and expected future staff available for upstream projects from all major international and regional engineering and project management contractors.
The analysis indicates that engineering and project management personnel are insufficient to meet 2007 upstream project demand and it forecasts that design and project management availability will be an important factor going forward for development of new oil and gas fields.
“Our modeling shows that unless there is a dramatic change in the industry, the next few years will experience a greater imbalance between needed and available staff,” says Pritesh Patel, study co-author and associate director of Cera’s Capital Costs Analysis Forum.
“Pressure in the industry continues to increase as companies vie for a limited pool of skilled resources, and personnel costs rise as companies recruit from each other. We have seen projects where no one bids for the work because they do not have adequate resources, and the quality of the engineering workforce will increasingly become an area of great concern and focus in the medium term.”
The average age in the industry is 51 years. Cera anticipates that over 50% of today's workforce will have retired by 2015, an attrition rate of 6% per year.
This will create a significant gap in available staff hours. While the industry is recruiting aggressively, there will only be a 2% influx of new entrants in 2008, forecast to increase to 5% in 2010 as more graduates gain the experience necessary to work on complex projects.
The net result of this 10-15% shortfall of qualified, available staff by 2010 will be increased costs and further delays that will have cascading effects in other markets, Cera predicts.
As the project engineering talent pool continues to shrink and the number of technically difficult projects such as deepwater, heavy oil, or severe climate operations increases, the demand for the remaining highly qualified staff is expected to increase significantly. “Cera expects this short-term deficiency to lead inevitably to a trend of increasing delays and problems on mega oil and gas projects,” says Candida Scott, Cera research director.
“Given the number of large complex projects scheduled for the next few years, and this trend of decreasing capacity, one has to ask if all of them are going to hit their target dates, or will there be some delays.”
The changing project engineering talent supply environment will reshape the oil and gas business, according to the Cera analysis.
Contractors are changing bidding strategies and methods of performing contracts, and relationships among contractors, oil companies, vendors and subcontractors are evolving to include partnering, profit sharing and long-term commitments among other strategies.
Forward-thinking producers are already examining strategies to manage increased costs and taking steps to ensure a supply of adequately trained and available personnel over the long term.
EPC (engineering, procurement and construction) contractors are using price as a mechanism to allocate scarce resources, but also are seeking new suppliers and partners to expand their available capacity.
The Capital Costs Forum is an on-going Cera research project focused on understanding and forecasting the costs associated with current and future oil and gas project development and the factors that shape those costs. |
