Onshore China

By Philip de Waal, Vice President Asia Pacific, Maxwell Drummond International

When it comes to natural gas production, all eyes of the international energy industry are on the United States shale sector. However, while the industry is watching the US closely, many other regions are positioning themselves to move into the spotlight. Most notably: China.

Shale has become a key area of co-operation for the US and China. After a 2009 visit to Beijing, President Obama and President Hu developed clean energy initiatives including The US China Energy Co-operation Program and a shale gas initiative allowing China to use experience gained in the US to develop its’ own reserves.

China is one of the fastest growing energy markets in the world and the country is planning to make a rapid entrance into the shale game. According to the US Energy Information Administration, China leads the world in recoverable shale gas reserves with an estimated 1,200 trillion cubic feet. Last year, the country released targets for its 12^th Five Year Plan and a top priority is quickly exploiting the resource in Beijing. 15 to 30 billion cubic metres of shale gas production (roughly 5% of all gas production) is expected to be developed by 2020.

China’s push to boost domestic energy supplies beyond traditional sources and importation has been successful in many areas – it is the world’s biggest installer of wind turbines and the biggest builder of nuclear reactors. But whether they can overcome the hurdles associated with shale gas exploitation? It remains to be seen.

First issue is the lack of technical knowledge required for the development of shale fields. The region can look to the International Oil Companies already in play there, such as Shell and Hess, to acquire this, as well as continue to invest in US shale plays. China’s top three oil majors have all made significant investments in US shale gas assets in the last 12 months, such as those of Devon Energy and Chesapeake Energy’s stake in Colorado and Wyoming acreage, with a goal of obtaining knowledge and technical skills to help in the development of their home country’s resources. Talent shortages will no doubt plague the nation as well. Companies with plans to operate in the region, and those that already, must be proactive in their recruiting efforts and develop talent management strategies that bring in a workforce with the technical know-how the country so desperately requires. Further hurdles to overcome will be the publics’ negative perception of the methods used to extract reserves, as well as the country’s water scarcity, brought on by droughts the country faces in the Northwest and Central North basins, which hold three of the four major shale basins.

Once the country has developed solutions to these obstacles, it will truly become a major onshore player.

About the author
Philip de Waal was appointed as Vice President Asia Pacific for Maxwell Drummond in September 2011. He joined the Houston office of Maxwell Drummond in 2007 as Business Development Manager. From September 2007 until August 2011 he established a presence for Maxwell Drummond in Africa by opening an office in Johannesburg.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Canadian Oil Sands

By Graeme Edge, General Manager, Canada, Maxwell Drummond

Canada’s energy industry is threatened by the global crunch for talent. A recent report by the Petroleum Human Resources Council of Canada (PHRCC) stated that the Canadian oil and gas industry needs to fill at least 9,500 jobs by 2015. The country is already short when it comes to the number of qualified workers needed to keep growth plans on track, and workforce requirements in the oil sands sector of Alberta will continue to rise as projects continue to come to fruition.

 

According to the PHRCC’s report, Alberta’s oil sands employment is expected to jump by 29% from the 2011. This sector requires a workforce with a variety of skills; environmental engineers are needed in the planning phases, projects under construction require project managers and engineers. Skilled trade workers in construction, manufacturing, transportation and service industry are also in high demand.

 

Thankfully, the Canadian government has recognized that these deficits cannot be filled within the region and measures need to be taken to bring in skilled personnel internationally. Traditionally, the Canadian immigration policy has made it difficult for companies to navigate through the red tape involved in hiring cross-borders. The Canadian Federal Government has announced that its 2012 budget allows reform to immigration programs to better align them with the country’s labor needs. Proposed reforms include modernizing the selection process under the Federal Skilled Worker applications to better reflect the need for younger immigrants with Canadian work experience, creating a new Federal Skilled Trades program and modifying the Canadian Experience Class to better facilitate the transition to permanent residence by skilled temporary workers.

 

Not only does Canadian immigration policy need adjustment but increased collaboration is required to close the knowledge gap between the younger generation of talent and the experienced management preparing for retirement. Talent development is a critical component to all human resources agendas but an even greater importance needs to be stressed in regions where a talent crisis already exist. Companies must implement continual training, not just for new hires, but for more experienced individuals who have the potential to take on leadership and managerial roles. Companies and the industry alike must collaborate with the Canadian government to establish training institutions and ensure clarification on regulations, application procedures and accreditation. Further collaboration is necessary between recruitment departments and outsourced recruitment specialists to identify international talent and attract these individuals to the country.

 

About the author
Graeme Edge joined Maxwell Drummond in 2007 as a Senior Consultant in our Calgary office. In 2011 Graeme was promoted to General Manager, Canada. Graeme has worked in most sectors of the upstream oil and gas industry including major independent operators, EPC contractors, oilfield service companies, subsea and the SME technology sector.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Texas Shale Activity

By Jamie Ferguson, VP of Global Business Development, Maxwell Drummond


The U.S. Energy Information Administration's (EIA) Annual Energy Outlook 2012 estimates that the United States possessed 2,214 trillion cubic feet (tcf) of technically recoverable natural gas resources. Natural gas from proven and unproven shale resources accounts for 542 tcf of this resource estimate. Texas has long been recognized as the key state for oil and gas exploration and production in the United States. Although much has been said about the Gulf of Mexico’s offshore resurgence post-Macondo, Texas’ onshore oil and natural gas exploration and production activity has also been on a strong upswing. The sector has seen substantial growth over the last decade thanks to the emergence of new technologies which have increased the amount of recoverable gas and improved the economics of the extraction of Shale Gas in the state. Not only have estimates of natural gas still in ground increased substantially, but “legacy” fields, once thought of as obsolete are coming alive as new methods of hydrocarbon recovery have come to fruition.

The Barnett Shale in the Dallas area and the Eagle Ford Shale basins are emerging as crucial components in the nation’s natural gas supply. Estimates from the U.S. EIA state that shale gas will eventually account for nearly half of the total U.S. supply by 2035, and this is a conservative estimate according to many analysts. Even though industry has been aware of the Barnett Shale since the early 20th century, the first wells were not drilled until 1993 and the number of permits granted remained relatively low until 2001 when activity skyrocketed. The level of activity peaked in the mid-2000s and although drilling is slower, production continues. Last year, almost 2 tcf of natural gas was produced. The Eagle Ford Shale, too, is a key driver of Texas’, producing more than traditional shale plays. Technological advances in fracking will also play into production in the Eagle Ford, as its high carbonate content is the ideal setting for cutting-edge technology to be utilized.

A study conducted by the Center for Community and Business Research at the University of Texas-San Antonio has found that the Eagle Ford alone has paid $3.1 billion in salaries and worker benefits, and Midland, TX’s 3.5% unemployment rate was the lowest seen in Texas in April of this year, demonstrating the profound economic effect the oil and gas industry has on areas surrounding these prolific Texas basins.

The supply of natural gas is not as dependent on foreign producers as is the supply of crude oil and the delivery system is less subject to interruption. Additionally, this sector of industry is forecast to provide more than 1.6 million jobs over the next 25 years providing valuable employment opportunities for skilled workers at every level.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 and by July 2011 was promoted to Vice President of Global Business Development. Jamie has extensive experience managing executive level searches for clients spanning the oil and gas value chain and has deep industry networks developed from working on assignments in over 20 countries on 6 continents.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Private Equity Activity in the US Oil & Gas Industry

By Mark Froggatt, Senior Consultant in Houston, Maxwell Drummond

Confidence in North America’s oil and gas industry continues to gain momentum and the amount of financial backing the industry is receiving is proof. The first quarter of 2012 showed the highest amount of private equity (PE) interest in 20 years: PE accounted for nearly 1/3 of the $34 billion invested in the oil and gas industry, according to a recent study done by Pricewaterhouse Coopers. Private equity firms are looking to take advantage of the low gas prices by entering during the downturn and riding the natural long-term view of gas pricing.

PE firms are also taking advantage of technologies that are exposing the U.S. to an unparalleled level of new exploration and production activity. The shift from oil to liquid-rich gas reserves creates plentiful opportunities to investors as low gas prices have caused companies to seek capital for new exploration of profitable assets. The support of private equity firms is extremely important to the upstream sector as a large portion of the petroleum produced in North America comes from independent producers, many of whom rely on these firms for growth. This is also true for smaller niche technical companies who require funding to start, grow and take their products to market.

Many different PE firms have similar investment strategies. They look to enter companies early to maximize growth within that company. They normally do so as control or shared control positions. With this position, advisors can make significant contributions at the board of directors level, leveraging industry contacts and know-how to aid their portfolio companies’ operational growth and restructuring challenges. At Maxwell Drummond, we see a high level of involvement with PE firms, both in North America and internationally, looking to strengthen their portfolio companies’ boards of directors and senior management teams.

PE firms are attracted to the U.S. market due to the stable economic and political environment. The booming onshore shale market and increase in available permits for drilling in the Gulf of Mexico mean we expect the PE sector to play a pivotal role in the U.S. oil and gas market for the foreseeable future.

About the author

Mark Froggatt joined Maxwell Drummond’s Houston team as a Senior Consultant in 2012. Mark has held a range of executive and advisory roles in the oil and gas sector over 20 years since graduating in Law from Cambridge University. He maintains close links with many UK- and US-based majors and independents - both exploration and production and services companies - and as a fluent Spanish speaker has undertaken several projects in Mexico and other Latin American countries

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Gulf of Mexico Resurgence

By Jamie Ferguson, VP of Global Business Development, Maxwell Drummond

The offshore oil and natural gas industry is critical to the United States both from an energy supply perspective and due to its contribution to US GDP and job creation. In 2010, over 30 percent of the oil and 11 percent of the natural gas produced in the United States was produced in the Gulf of Mexico (GoM). This is crucial to US energy security. In addition, investment in the GoM affects many other sectors of the economy, creating jobs and generating tax revenue for the government.
The GoM has seen an increase in drilling activity and this will continue as the US prepares to put over 7,000 oil and natural gas blocks up for auction in June 2012. Already, there are 5,981 active leases and after new permitting regulations were issued, more than 130 new well permits were been granted with many more applications pending.

The U.S. Interior Department and Bureau of Ocean Energy Management will be leasing more than 38 million acres offshore, which is estimated to produce more than 1 billion barrels of oil and 4 trillion cubic feet of natural gas. These blocks begin 3 miles of offshore and continue to 230 miles offshore and will include shallow and deepwater acreage. This marks a significant resurgence in the GoM. Drilling activity is at its highest point since 2010’s Deepwater Horizon disaster.

The rise of the GoM will inevitably add to the global talent shortage. In 2011, the national oil company of Mexico, Pemex launched its first licensing round open to international operators since 1938. The Oil and Gas Journal estimated that as of 2007, Mexico held 12.4 billion barrels of proven oil reserves yet there is a lack of local skills to properly develop the reserves. By allowing foreign companies to enter the local market, Pemex hopes to expand its capabilities to develop unconventional gas, deepwater and bitumen.
As the GoM continues to gain momentum, the industry can expect and even greater need for engineers with offshore and deepwater experience. Petroleum engineers are again a hot commodity and the competition for this talent will continue to increase as the uptake in drilling activity continues.

According to Reuters, the oil and gas industry expects to add eight more deepwater rigs this year for a total of 29 rigs in the Gulf. Not only will rigs need to be staffed with up to 400 workers, but staff will be required for related industries. The Associated Press reported at least 230,000 jobs will be created by the GoM’s resurgence in these other sectors such as real estate, transport, manufacturing, technical services and construction.
Growth in this region is crucial to spur US job creation post-recession. The industry must collaborate to ensure the GoM is developed in a safe and environmentally responsible manner for future success.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 and by July 2011 was promoted to Vice President of Global Business Development. Jamie has extensive experience managing executive level searches for clients spanning the oil and gas value chain and has deep industry networks developed from working on assignments in over 20 countries on 6 continents.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Rise of the Human Resources Executive

By Jamie Ferguson, VP of Global Business Development, Maxwell Drummond

A common business cliché is “our people are our business and our business is our people”. This is often said but how often is it true? While the oil and gas industry continues to boom, the global war on talent remains at the top of many industry leaders’ minds. According to Price Waterhouse Coopers’ (PwC) Annual CEO Survey, only 30 percent of CEOs are confident that they will have access to the talent needed to continue on their path of growth. The shrinking pool of qualified candidates can quickly seize this opportunity for growth, leaving many companies with a shortage of quality resources. Because of this worry, the Human Resources (HR) function is beginning to play an integral role in the boardroom.

Gone are the days of the HR department being purely administrative within an organization. When focusing primarily on payroll and benefits, HR lacks the ability to provide strategic direction in managing human capital. Companies must transform their HR teams to become strategic partners to the CEO and be directly involved in business planning. In PwC’s CEO survey, 79 percent of CEOs reveal the Chief Human Resources Officer reports directly to them. This trend will allow leadership teams to align human capital and talent management directly with their business objectives. The HR leadership function should be a consultant to the board and CEO on all aspects of human capital to ensure that talent management and leadership development are being strategically leveraged to maximize their business advantage. They should also be accountable for measuring the success of their company’s talent management and succession planning strategies.

Corporate culture is an increasingly important area where HR professionals’ skills and experience is critical. It has become essential to attracting, recruiting and retaining talent. This is already apparent in the technology industry. For example, many engineers have aspirations to work for ‘silicon valley’ technology companies. Brand development specialists Universum conducted their annual UK’s Ideal Employers survey last year among British students and revealed that software heavyweights Google, Microsoft and Apple were the top three companies considered to be the most attractive to work for among engineering and information technology. There were no oil and gas companies ranked in the 2011 top ten. Successful recruitment and retention lies in a pitch-perfect branding strategy. HR, working closely in collaboration with the Board, can strategically implement an attractive brand strategy and company perks.

HR professionals can also act as trend forecasters to the Board, spotting up and coming managerial talent and likewise, issues on the horizon. Unlike many other C-suite executives, HR departments are one of the few involved in every level of the organization. This unique position should be developed to interpret trends for business growth.

This visibility to the whole organisation can also be beneficial in times of change. In tough times, the HR department’s role can spread into other functions such as internal communications. When employees are confused or concerned about how a change, such as a rebrand or merger, may affect their role, HR can act as translators between the Board’s dialogue and staff. Over the next several years, the oil and gas industry will experience a shift change and the HR department will play an integral role in facilitating knowledge transfer between experienced employees and new hires.

The huge shift in HR’s role in the last 20 years is demonstrated in the rise of the chief human resources officer (CHRO). The newest CHROs collaborate with the C-team to shape strategy, define branding and culture, communicate with employees and the list goes on. They must have a complete understanding of the organization’s business model, operational state and challenges and finances. Boards should invest in a strategic HR role willingly as the ability to anticipate talent needs, optimize a talented workforce and retain their company’s most talented individuals is essential to their competitive advantage. Harold Schultz, CEO of $10 billion Starbucks agrees: “The discipline I believe so strongly in is HR, and it’s the last discipline that gets funded. Marketing, manufacturing - all these things are important. But more often than not, the head of HR does not have a seat at the table. Big mistake.”

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 and by July 2011 was promoted to Vice President of Global Business Development. Jamie has extensive experience managing executive level searches for clients spanning the oil and gas value chain and has deep industry networks developed from working on assignments in over 20 countries on 6 continents.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.

Industry Overview - Insights from OTC 2012

By Jamie Ferguson, VP of Global Business Development, Maxwell Drummond

The global energy mix is evolving, fast. The Offshore Technology Conference (OTC) marks a pivotal date in the industry calendar to reflect on the last year and the challenges and opportunities it has presented.

By the end of the century, the industry we know today will be unrecognisable. The BP Energy Outlook 2030 predicts that global primary energy consumption will increase by a staggering 39% before 2030. This escalating demand for energy will mean big changes and staffing logistics will become increasingly important.

In our International Energy survey last year, participants recognised the looming problem of significant resource gaps in people and skills. Reservoir and petroleum engineering and drilling and field operations are expected to be the areas most likely to be affected. Last year, BP publicly expressed concern about find the right people with the right skills to complete new projects in the North Sea. This concern has only intensified in 2012.

We witness a high demand for experienced oil and gas professionals on an international basis. The energy industry is inherently global, therefore it is common for workers to move between energy capitals such as Aberdeen, Houston and Dubai for the right role. People with the right skills are a valuable commodity. There is no doubt the skills gap is a worldwide concern.

The Asia Pacific region is increasingly demanding in terms of both energy consumption and production. Australia has an increased focus on exploration and production both onshore and offshore. However, the lack of experienced professionals in technical disciplines could have serious implications on the timing of project development and completion. In Australia, the skills gap in the natural resources market is extreme as the country is experiencing exponential growth both on and offshore. As more projects reach the sign-off stage, we predict see labour shortages will continue for some time, particularly in the key technical disciplines such as engineering, subsea and subsurface. Our Perth office works with various Australian exploration and production companies, major contractors and service providers who are looking to recruit experienced individuals in the oil and gas industry from places like Aberdeen and Norway, markets which have a high concentration of subsea and offshore production expertise.

The trend for deepwater developments is evident in Brazil, a region experiencing an unprecedented boom in Exploration and Production. The government estimates 250,000 workers will be needed for the development of new oil fields over the next four years. From Maxwell Drummond’s experience, government red tape has historically made it difficult to bring foreign talent into Brazil, although there are indications this is changing. Stringent local labour practices, laws governing the importation of workers and an extensive work visa program all contribute to the pressures on recruitment.

Visa issues have been a problem in Brazil but are thankfully are now much simpler. Previously, a company wanting to employ an expatriate had to prove the skills they were looking for were unavailable locally. Nowadays, although a company wanting to bring in foreign talent will still face paperwork, a work visa will be granted in 60-90 days if all the proper procedures are carried out. These small changes are vital in order for Brazil to meet its global potential.

Africa has also benefited from an improved regulatory regime. The continent as a whole has long been tainted by above ground risks and lack of a legal framework but as companies are gaining an understanding of how to deal with the local political environment, more attention is being drawn to the newfound oil reserves. As expected, this new activity is leading to a talent shortage in the region. However, African countries are already making a significant attempt to attract top managerial talent to the region. There has been a steady rise in both permanent and contract salaries and it is expected the increase in average executive compensation will continue. While senior and middle management typically comprises expats, technical specialist roles are more commonly being filled by local citizens, an indication that developments in training the regional workforce are gaining pace. An increasingly common request from our African client base is to re-attract the national diaspora back to their home country. As the region matures we expect this trend to continue and become increasingly important.

Whilst changes in regulations are welcome, often other solutions are required to attract and retain new talent to the oil and gas industry. In Canada, there is an increasing trend for workers with experience in natural resource sectors to transfer their skills to the Canadian oil sands projects in order to plug the skills gap. Ernst and Young’s Human Resources in Canada’s Oil and Gas sector report revealed that Alberta will be an estimated 77,000 workers short in the coming decade, partly due to large projects such as those around Fort McMurray in Alberta and associated pipeline projects. Whilst skills transfers can be a solution, we would urge the industry to be cautious. Some skills are less transferable such as those of petroleum or reservoir engineers or people working in drilling and completions who specialize in the Oil Sands market. Therefore, it’s important for the industry to attract the young qualified engineers into the sector and into Canada.

With evidence that a skills gap affecting some locations may last up to 20 years, we believe one potential solution is collaboration. Geographical regions must now begin to share knowledge and experience, technology, business models, operations and maintenance practices to benefit the industry, individual businesses and employees. This way, we will fulfil the potential of each industry and secure the brightest energy future for all.

About the author
Jamie Ferguson joined Maxwell Drummond’s Aberdeen team in 2006 and by July 2011 was promoted to Vice President of Global Business Development. Jamie has extensive experience managing executive level searches for clients spanning the oil and gas value chain and has deep industry networks developed from working on assignments in over 20 countries on 6 continents.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.