Boom and bust: recruiting in the oil & gas industry

The price of oil has plummeted in the last two years and recruiters in the oil & gas industry have been hit hard with thousands of job losses across the sector. Colin Cottell reports
Fri, 29 Apr 2016 | By Colin Cottell

FROM MAY'S RECRUITER MAGAZINE

The price of oil has plummeted in the last two years and recruiters in the oil & gas industry have been hit hard with thousands of job losses across the sector. Colin Cottell reports 

As the world economy recovered after the 2008 global financial crisis, recruiters in the oil & gas sector enjoyed boom times, expanding their businesses and growing their profits. Between 2010 and mid-2014, the average price of oil remained at over $105 a barrel, peaking at $115 in June 2104, driving a wave of new investment by oil companies. And with investment came jobs. Lots of them. Then, as fracking – the extraction of oil & gas from shale rock – took off in the US, recruiters rushed to join in what appeared to be the new gold rush. 

Compare those heady days with today: the price of oil has slumped to less than $40 a dollar, once-profitable oil fields are no longer viable. In short, those same recruiters face a very different world. (See box below for an explanation of why the oil price collapsed.)

According to Sir Ian Wood, author of an influential review on the future of the North Sea, the sector is losing 150 jobs a day, with the total numbers expected to fall this year to around 320,000, down from 440,000 at the end of 2014. This is mirrored across large swathes of the petroleum-producing world.

According to the US Bureau of Labor Statistics, since January 2015, 15,700 jobs in oil & gas have been lost in the US. Late last year, before its merger with competitor Air Energi, oil & gas recruiter Swift Worldwide Resources estimated that job losses could surpass 250,000 before the industry recovers.

“Clients are driving cost reduction exercises at a scale and a speed which has surprised many,” says Stephen Martin, recruitment director at international engineering and technical recruiter Fircroft.

“We have seen the delay and cancellation of a high number of major global projects, which of course leads to fewer opportunities for agencies and anyone seeking jobs in the market,” he adds. 

Oil & gas recruiters tell Recruiter they have been hit hard. “What we had to do as a business was to focus on our costs set against our income,” says Joe Rothwell, managing director of Vitruvian Consultants, a £2m-a-year turnover specialist oil & gas recruiter. To reduce his cost base, Rothwell says headcount has been slashed by 75%. 

“We released the recruiters who were doing ok but not spectacularly,” he explains. 

Will Atkinson, chief executive at global oil & gas recruiter TEC Group Worldwide, says his company was forced to take similar action, closing two offices that focused on oil – one in Manchester and another in the Midlands. Agency margins have also been a casualty, as clients sought to reduce their costs, says Atkinson. Where agency rates can’t be cut any further, contractor rates have been slashed.  

At the beginning of April, it was reported that nine consultants at oil & gas executive search firm Maxwell Drummond’s Aberdeen office lost their jobs after the company went into provisional liquidation. According to the insolvency specialists involved, the business’s failure was due to the industry downturn.  

Company finances have also taken a hit. In March, Hydrogen Group acknowledged that weakness in the sector had been a significant factor in a 34% drop in net fee income in 2015, compared to the previous year. 

Peter Searle is chief executive officer at global energy, process and infrastructure workforce solutions provider, Airswift. In his view, those companies most at risk are smaller companies who rely too much on borrowing, and who are over-reliant on single markets, and prone to bad debts.

However, while recruiters in the sector have undoubtedly suffered, they say they are taking steps to ameliorate the effects and adapt to the new environment. Atkinson says one response has been to switch some resources and staff into other sectors, such as chemicals, nuclear and renewables. Not only does this provide opportunities for the company’s staff, it allows them to continue to place candidates, many of whom have transferable skills, he says.

“Guys that pump stuff out of the ground can pump anything. Those same engineers can work as well in chemicals or infrastructure as in oil & gas,” adds Searle.

Indeed, according to Searle, “all that is happening is that engineers who were previously attracted to oil & gas exploration because it paid very large sums are either going back to their original industries or translating their skills into other sectors”.

Searle says the drop-off in oil & gas shouldn’t blind people to the bigger story, which is “a massive shortage of engineering people”. 

Meanwhile, Fircroft’s Martin says the company is carrying out a full review of its operating model, “and investing significantly in a fully integrated enterprise platform giving us the systems and technology to improve our services and performance”. 

TEC Group Worldwide’s Atkinson points to growing consolidation in the sector in the last two years. 

One example was NES Global Talent’s purchase of Norwegian recruiter Energy People in December 2014, preceded by its earlier purchase of fellow Norwegian recruiter RC Consultants.

It’s tempting to view the merger of Air Energi and Swift Worldwide Resources in January to form a $1.2bn turnover company as another example of tough market conditions driving recruiters’ strategy.

However, Searle insists it was unconnected with the sector’s current travails, and would have happened anyway. “The merger was to do with synergies, with Air Energi covering Asia, Europe and a small part of Africa, and Swift covering America and the Middle East, with only 5-10% overlap between the two companies,” says Searle. 

Paul Andrews, international recruitment manager at Project People Oil & Gas, says there have been no winners. However, he says that amid the carnage, bright spots remain. 

Many of the company’s clients are big state-owned oil companies such as Saudi Aramco which is still going ahead with projects. “These companies don’t have the same restrictions as the oil operating companies,” he says.

Searle sees other benefits: “It did clear out a lot of people who moved into the sector half-heartedly seeing it as a quick way to make a profit. Now, the market has returned to those companies with engineering at their core, be it Brunel, Fircroft, Airswift, which provide added-value services and global mobility of talent. It hasn’t necessarily been a bad thing to have had a bit of a shakeout.”

Atkinson also strikes an optimistic note. “I would like to think that the way clients engage recruiters and recruiters carry out assignments is less erratic and aggressive,” says Atkinson. Another plus is that without the volume to justify their existence, “a lot of oil company RPO (recruitment process outsourcing) companies have gone away, so we are having a lot more direct contact with our clients".

“The current market brings back the old style of recruitment,” agrees Vitruvian’s Rothwell. “It’s about people relationships and networking rather than large-scale accounts with hundreds of positions. We have had to change; I don’t think it will go back to the way it was before.”

However, Atkinson has his doubts. “My fear is that when and if the oil price goes back up to $100 a barrel, it will just be business as usual,” he says.

In a sector that is by its nature cyclical, the only certainty is that it won’t be too long before we find out who is right.

WHAT CAUSED THE OIL PRICE COLLAPSE

According to the World Bank factors that have contributed to the sharp fall in oil prices include geopolitical conflicts, the appreciation of the US dollar (oil is priced in dollars) and a decision by OPEC (Organisation of Petroleum Exporting Countries) not to cut production in line with the cartel's new objective to maintain marketshare rather than target a specific oil price range. The drop was dramatic and precipitous, from more than $100 a barrel in mid-2014 to around $60 in December 2014. The oil price continued to plummet and, in January 2016, fell to less than $27 a barrel. It currently stands at around $46 a barrel.

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