One of the largest challenges facing all of today’s oil and gas majors is how to navigate the Energy Transition – the transformation of the global energy sector from fossil-based to lower-carbon fuels by the second half of this century. It’s a paradigm shift that will call for new skills and talent, as well as behaviours, the specifications of which are only just starting to emerge.
As a sweeping generalisation, those born in the digital age never seem to grow out of the ‘why?’ phase. Millennials are unafraid to ask ‘why do I have to do this role for a minimum of three years before I can move on?’ or ‘why do I have to pay for company benefits that I don’t value?’ or even ‘why can’t I only work 40 weeks per year?’ The most significant question they are demanding an answer to is ‘why does what I do matter?’. This next generation of talent, with their critical digital skills are a discerning bunch with no end of suitors to woo them with a clear articulation of purpose.
Twelve months ago we would have been obsessing about the insurmountable competition from the new breed of tech giants with their voracious appetite for the very brightest and the best. A year on, however, and the picture is slightly different. Recent events in Silicon Valley indicate that this threat may be less severe than we thought.
In August 2018, the Economist reported that, “according to a recent survey, 46% of respondents say they plan to leave the Bay Area in the next few years, up from 34% in 2016” and concluded that “unfortunately, the Valley’s peak looks more like a warning that innovation everywhere is becoming harder”. Whilst this doesn’t exactly offer cause for celebration, the realisation that the world of tech comes with its own ethical dilemmas, constraints on capital and share of autocrats, does balance the scales a little.
At the same time, various aspects of the oil and gas Talent Value Proposition continue to be compelling for new entrants. Pay rates in oil and gas outstrip almost all the other homes of technical skills – even the other energy segments – despite stagnation over the past five years. What’s more, early career opportunities offer significant levels of responsibility and, notwithstanding a focus on maximising local content, there are still plenty of opportunities out there to gain international experience. We believe there is an interesting dynamic at play.
Let’s be clear, however, the Oil and Gas sector undoubtedly has an image problem which needs decisive action, rather than words, to address. We see investment in low carbon technologies as tangible evidence that the IOCs are serious when they talk about change.
Access to talent will be a game-changer in navigating the Energy Transition
The Energy Transition – decarbonisation of the energy sector – will require sustained action on a global scale. As part of that, a powerful appeal needs to be made to those who will become tomorrow’s leaders, to attract, retain and develop them so that they are ready to pick up the baton when the time comes.
The ageing of the technical workforce in the industry has also been a concern for the last decade. Talent managers in the sector have been working out how best to respond to the ‘big crew change’. In an effort to build a sustainable skills pipeline, the largest consumers of engineering skills have pulled together to support intensive STEM initiatives.
However, a skills shortage is a tough concept to sell to any of the estimated 400,000 or more people who lost their jobs in this most recent price collapse (rising to over 1,000,000, if you factor in ancillary jobs). Whilst it’s true that the cyclical nature of the industry, and the subsequent impact on job security, drive higher remuneration levels, the historic boom and bust nature of oil and gas further undermines its appeal to the next generation of talent.
There is growing competition for talent in the energy sector and several years of limited or no pay rises (or even reductions) have allowed other players to close the gap. Pay rates in the power sector have risen and, whilst still lower than oil and gas, the job market in power generation is much more stable.
CEO’s from the industry have been very vocal in stressing that things are different this time round. Companies are focussed on becoming more resilient – transplanting margin discipline from downstream and reorienting their businesses to be more customer centric. Lower for longer/forever requires a fresh approach to cost management to usher in a new age of stability – an operating model that is profitable at any oil price. This in turn would have a positive impact on the talent proposition.
That said, while we are not seeing price escalation in the supply chain, it is concerning to hear anecdotal evidence that some of the laser focus on cost is dissipating at the operational level.
Taking significant steps forward
In 2014 the leaders of the ten major oil and gas companies formed the Oil and Gas Climate Initiative (OGCI) to demonstrate their support for the Paris Agreement and to become a catalyst for change in the industry. The IOCs are speaking up increasingly often about the critical role they have to play in helping the world meet the climate change targets. Whether driven by altruism or shareholder pressure, this will have a positive impact on both the perceived and real weaknesses in the Talent Value Proposition.
The key to success here lies in tangible actions rather than flashy promotions that can back-fire. The American Petroleum Institute’s campaign to “raise awareness about the role of natural gas and oil in economic growth, job creation, environmental stewardship and national security” resulted in the much derided Super Bowl commercial: “This ain’t your daddy’s oil”. Even some of the more grounded and humble social media charm offensives have been greeted with cynicism.
Yet, in some cases, big shifts in strategy are emerging. The acquisition of BG Group by Shell, for example, was largely driven by a desire to add more gas to their portfolio mix. The sector has already invested in a wide selection of businesses, from biofuels to generation assets (wind, solar) to customer facing (B2B energy and fuel sales, consumer energy retailing, EV charging points) to services (energy trading in various power markets, firm power offerings, behind the meter and connected home energy management). These developments help to reinforce the narrative that the biggest players in oil and gas plan to stay relevant in the energy mix of the future.
Bringing the brightest and best on board
So how does the oil and gas sector land a compelling talent value proposition to attract the leaders and innovators of the future? Through a solution that builds on the industry’s strengths, while also acknowledging and addressing its real – and perceived – weaknesses.
Undoubtedly, much more can be done to position these titans of industry as the digital innovators that they really are. We shouldn’t forget, for example, that reservoir modellers were already making use of virtual reality a decade ago – and that trading teams were exploiting ‘big data’ even before it had a name.
Looking for a sense of purpose - how about helping to respond to one of the most demanding tests in history? As part-contributors to the climate change problem, there is an argument that IOCs have to be part of the solution. The future is extremely hard to read – and on the whole the oil and gas majors may lack the agility to pivot and adapt quickly. What they do have, however, is the scale and deep pockets to capitalise on emerging opportunities as the winning strategies emerge, even if questions still remain about their ability to avoid over-engineering and cost inflation.
The sweet spot lies in convincing the next generation of talent that they have a vital role to play as conscious capitalists, with the space they need to shake up the old ways of working and help Big Oil to navigate the Energy Transition. Their appetite for questioning received wisdom – their clear unwillingness to settle passively for the status quo – has the potential to help drive through the profound changes necessary.
Such a decisive change in outlook would, of course, require a new corporate and decision-making culture – something with which many companies may well struggle or be reticent to adopt at this stage.
We should all hope they are successful, not least because many of our pension funds are banking on it.