Industry Must Showcase Its Strengths, Support Universities

Ali Daneshy, SPE, Director of Petroleum Engineering, U. of Houston, and Executive Vice President, Engineering and Operations, Tecton Energy, LLC

Even old-timers like me who, with age and experience, have become cynical about the predictability and stability of the oil and gas market are grudgingly admitting that the present price regime is likely to be around for quite some time. The drivers of this market are economic progress in countries that have huge growth capacity and the financial means to pay for the energy that will fuel it, as well as the global awareness of the need for cleaner energy. While higher prices have stimulated investment in the industry, they also have created a new set of market dynamics that have upset the equilibrium that existed just a few years ago. The manifestations of this imbalance are shortages; higher prices and long waiting times for materials, equipment, and services; shortages in refining capacity; public discomfort with rapid price changes; and stiff competition for the limited available trained human resources and skills. This article addresses the longer-term issues of skills availability, in terms of both technologies that will enable the extraction of more oil and gas from available conventional and unconventional sources and the people who will execute these technologies.

Over the last 2 years, the shortage of technical skills has become a concern of many in the industry. High starting salaries and sign-up bonuses are used as enticements for attracting talent. But these do not increase the pool of available people; they only cause a shift in employment. The longer-term approach has been to hire nonpetroleum engineers and give them in-house training. In fact, the combined number of mechanical and chemical engineers hired by our industry is higher than petroleum engineers. But the shortage of engineering talent is not limited to our industry; it persists in many other industries as well. There is a dire need for a long-term solution to this problem.

The Demographic Challenge

This issue should be addressed in light of the following:

The need for trained technical people in the oil and gas industry is expected to grow by around 30% over the next 10–20 years.
At the end of 2005, the average age of an SPE member was 48. That suggests that within the next 10–20 years, more than 50% of the present workforce will be exiting the industry.
Within the younger and more idealistic age group, the industry’s image needs great improvement. This has limited our ability to attract the best and the brightest who are needed to face and overcome the enormous challenges of the future.
The capacity of universities to train petroleum engineers has decreased over the last 2 decades. In the U.S., enrollment in petroleum engineering programs is now less than 20% of its peak 2 decades ago. Either directly or indirectly, the training of many technical people working in the oil and gas industry is U.S.-based. The limited enrollment in the U.S. will have adverse global effects in the future.
The U.S. has severely limited the granting of student visas to Middle Eastern applicants. As citizens of these countries seek education opportunities outside of the U.S., there will be a gradual shift in the culture of our industry.

Within 2 decades, more than 80% of the industry workforce will consist of new people who are very likely to have work habits and values different from ours. In this regard, our industry has the most demanding requirement of any major industry. Overcoming this limitation begs close cooperation between industry and universities.

Our ability to attract the brightest and best talents into our industry is of paramount importance. But we face formidable obstacles in trying to achieve this goal. Part of the problem is our image. But the other part is inadequate community activity. We need to showcase our industry’s strengths to young people, starting at a very early age. They need to get exposed to who we really are and what we do. This requires a grass-roots effort by human resources groups. Professional organizations also can lend a helping hand, as SPE has with its recent emphasis on young professionals’ programs and the publication of The Way Ahead magazine. But the focus of the effort needs to be aimed at people of a much younger age. Kids are getting exposed to the outside world and forming their opinions at a much younger age, and we need to respond to existing realities.

Increasing enrollment capacity at universities is going to take several years to build the necessary infrastructure and recruit qualified teaching and research staff. Most universities are pressed by state governments to attract external funding for their growth. Support and funding by industry will help universities attract more state and federal funds.

Technology and Its Acceptance

Over the last 2 decades, technology spending has favored “incrementalism” and “development” over fundamental research. During the same period, universities and private industry have put great emphasis on computer-related technologies (e.g., simulation, data analysis, engineering computation). Part of the reason for this imbalance has been the enormous pressure to show the short-term financial benefits of technology spending. It is cheaper (and sometimes faster) to complete a computer-based project than to design, build the necessary equipment, perform the laboratory testing, and analyze the data required for fundamental research. While development and computer-based research are essential and need to continue, more emphasis on fundamental research is badly needed to tackle the future challenges of finding and extracting more oil and gas. Traditionally, this type of research is funded by two sources—government and nonprofit institutions, and industry. The reality of our business is that the former form of funding has been minimal to nonexistent for a long time. It is up to industry to back this effort.

In spite of recent progress, our industry continues to be risk-averse and reluctant to embrace new technology, even after successful field demonstrations. In a recent public gathering, industry leaders identified lack of technology “backbone” as one of the contributors to this culture. Meeting future world energy demand requires taking risk and venturing into the unknown. The financial health of our industry gives us room for taking measured risks. Industry leaders need to more emphatically embrace a culture for taking risk while the mechanism for quantification of this risk and its distribution within the larger organization is put in place.

Ali Daneshy, SPE, is Director of Petroleum Engineering and Adjunct Professor of Chemical Engineering at the U. of Houston and Executive Vice President, Engineering and Operations, for Tecton Energy, LLC. He is a member of the SPE Board of Directors and has been an SPE Distinguished Lecturer. Daneshy’s previous positions include President of Daneshy Consultants Intl. and Vice President of Integrated Technology Products for Halliburton Energy Services. He is the author of numerous technical and management articles. Daneshy earned an MS degree in mining engineering from the U. of Tehran, an MS degree in mineral engineering (rock mechanics) from the U. of Minnesota, and a PhD degree in mining engineering (rock mechanics) from the U. of Missouri-Rolla.