High oil prices and global demand are encouraging oil companies to invest in both conventional oil exploration and unconventional oil projects. But an aging workforce and a diminishing pool of new and experienced talent may be hindering growth. The Canadian upstream oil and gas sector, centred primarily in Alberta, employs about 500,000 direct and indirect personnel, and oil exploration growth is expected to produce more jobs. By 2010, new oilsands projects will create about 20,000 new jobs and will require specialized skills — geologists, pipe fitters, carpenters, welders and project managers. Is the oil patch prepared to meet this demand?

Deloitte has examined the labour shortage in the U.S. upstream oil and gas sector and suggests that focusing on a new demographic may be the key to enabling growth. In a study entitled The Talent Crisis in Upstream Oil & Gas, Deloitte Research discusses how younger workers can contribute to the workforce and suggests specific ways to engage and sustain this demographic. Though the Canadian oil and gas industry's workforce is about a quarter of the size of the U.S., it shares similar human resource challenges, and will also have to look to its "Generation Y" pool — workers born after 1982 who currently comprise 15 percent of the labour force.

"For the past 15 to 20 years there's been a labour shortage in this industry. Alberta's low unemployment rate, declining number of technical and skilled trades graduates, and lack of sufficient migration from other geographies impairs our ability to fill the gap with required skills."

— Dick Cooper

The shortage in Canada's upstream oil and gas sector
"For the past 15 to 20 years there's been a labour shortage in this industry," says Dick Cooper, the Energy & Resources  practice leader based in Calgary. He sees emerging demographic, industry and educational trends contributing to the problem. "Alberta's low unemployment rate, declining number of technical and skilled trades graduates, and lack of sufficient migration from other geographies impairs our ability to fill the gap with required skills."

The Canadian industry weathered the consolidations of the past two decades in part because of its tight labour market — unlike the U.S. industry. "We avoided redundancies from M&A activity because our smaller talent pool favoured retaining these workers' skills," says Cooper. When layoffs occurred, they resulted from technology improvements within the industry and energy sector "crashes" in 1986, 1994 and 1998, when oil prices dropped significantly.

The study reports that people's negative perceptions surrounding the oil and gas industry and its volatility have contributed to fewer new employees entering the oilpatch. "Price fluctuations may imply a 'bust' in the near future, which makes it difficult to entice new workers into the job market — even in prosperous times," notes Katie Hester, a Deloitte energy consultant. Moreover, workers who were previously laid off may be averse to rejoining the now burgeoning sector. "After downsizing in the 1980s and early 1990s, many young engineers entered the tech sector instead of oil and gas." As a result, tech companies employ a large share of these skilled engineers, while the oil and gas sector has many middle-aged workers, with an average age of 48.

The oilpatch is developing labour retention strategies
Canadian oil and gas companies are starting to recognize the urgency, and are beginning to develop strategies to retain workers. In Fort McMurray, Alberta, Suncor Energy and Syncrude Canada have partnered with Keyano College's Mine Operations program to "rebrand" the sector through education and recruiting initiatives. Other oil and gas companies are experimenting with different approaches — such as flex time and flying workers into the oilsands and back — that go beyond just compensation.

"There is a trend to re-evaluate human resources management within the industry in order to attract new engineers and skilled trades," says Hester. "There is no single answer to the talent management issue, so companies must work together toward an innovative attraction and retention solution," says Cooper.

"We need to create a culture of flexibility to engage and attract Generation Y talent — not just focus on compensation and incentive strategies as we did with the baby boomer generation," says Cooper. Cooper and his colleagues are part of a Calgary-based oilsands strategy team that strives to tackle the industry's daunting challenges. "The companies that understand how critical talent issues can make or break their business will be well positioned to compete strongly in the oil and gas industry of the future."

Read the study, The Talent Crisis in Upstream Oil & Gas: Strategies to Attract and Engage Generation Y.