The reduction in the upstream energy workforce over the coming five to seven years is a challenge that can, if addressed properly, be effectively managed and also create competitive advantage.
The workforce demographics in the upstream industry have been well-documented. Within five to seven years, the average technical professional will retire from full-time employment. Companies that do not adequately prepare themselves for this massive turnover will find themselves severely disadvantaged and vulnerable. Performance targets that seem demanding today will suddenly seem unattainable, as the people with the relevant expertise and knowledge will no longer be available to help the organization succeed. But companies that prepare can insulate themselves from the longer-term knowledge-deficit while reaping significant benefits in the short-term.
Few dispute the numerical dilemma based on the demographics. What is under debate is the effect of those demographics on future energy and petroleum (E&P) industry performance. Basic macroeconomics will dictate that the laws of supply and demand will dominate the new landscape. One view holds that the factors of demand, such as higher salaries and benefits for vacant roles, will create a larger supply, from both universities and other industries. In effect, the equilibrium remains in balance of talent and need. The other predominant view is that the magnitude of experience leaving the industry will occur much too quickly for the market to adjust, leaving a large shortage. This paper is written with a bias towards the latter scenario.
The gloomy outlook for the E&P industry is not inevitable. There is an alternative for those companies that choose to take immediate action. Each of these steps could be taken at separate times, but the synergy of moving forward with them all, in a comprehensive, transformational approach, will yield much higher results.