Oil and gas contractors must focus on retaining and building on niche geosciences and engineering skills to ensure they remain in contract. Falling confidence and a focus on cost reduction has resulted in the UK’s oil and gas contract market softening.
This is according to the 21st Aberdeen and Grampian Chamber of Commerce (AGCC) Oil and Gas Survey, which also highlights that unless the government introduces a more favourable tax regime, vital investment into new exploration and production will be cancelled. This would have a major negative impact on contractor prospects.
“Companies are not convinced they can get a fair return on their investment and in a global industry, it is very simple for them to move their capital elsewhere,” notes James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce.
“In a mature basin like the UK Continental Shelf (UKCS), the industry must cut costs, innovate and increase collaboration, but it cannot work in isolation of Government and a consistent, fair and stable tax regime is crucial.”
Uisdean Vass, oil and gas partner at the report’s sponsor Bond Dickinson agrees, adding: “This survey provides a stark warning for the government. Confidence is at its lowest since 2008. Costs are making exploration and production in the UKCS, relative to other petroleum provinces worldwide, increasingly less economical.”
Although 57% of operators and 54% of contracting and services firms increased their headcount over the past 12 months, the focus has been on hiring permanent employees.
Worryingly for contractors, the report highlights that: “Half of operators reported a reduction in contract staff in 2014 and almost two-thirds expect a further reduction in contract staff in 2015.”
More positively for contractors, oil and gas clients continue to face skills shortages in areas requiring niche skills such as managerial and professional and technical. During the past year, 60% of contracting and services firms have had problems recruiting technical staff, and 55% experienced difficulties with hiring managerial and professional workers.
According to ContractorCalculator CEO Dave Chaplin, the current market dynamics offer contractors an opportunity to strengthen their position in the labour market: “Skills shortages may have eased across the board but they still exist, and are worsening in some key geosciences and engineering disciplines.
“Skills shortages present those contractors who can spot the gaps and currently have the required skills and experience, or who can develop it quickly, with a clear strategy to target contracts that will remain highly paid.”
The situation for contractors is being exacerbated by fewer workers retiring. Retirement remains a major contributor to the loss of highly skilled staff in the industry, but its impact is lessening.
Firms are also investing heavily in training, with 68% of clients aiming to increase the skills of their permanent workforce through training. This increases the pressure on contractors to maintain their skills by investing in training so that they continue to qualify for demanding and well paid contracts.