Short-staffed: The Challenge of Maximizing Oilfield Production in a Pandemic

Layoffs have cut critical Oilfield Operations staff. Rehiring top talent won’t be easy. Virtual wellsite monitoring technology can fill the gap.

According to a recent Deloitte report, the oil and gas industry has suffered the fastest rate of layoffs in history.

The U.S. market has shed some 107,000 energy sector jobs since the start of the COVID-19 pandemic, or 7 percent of its workforce. In Canada, 37 percent of oil and gas companies suffered permanent layoffs, according to PetroLMI. Most producers implemented multiple measures to cut labor costs – including layoffs, furloughs, hiring freezes, pay reductions, and/or reductions in hours. In all, the Canadian market has shed 21,000 workers, or 11.5 percent of its workforce.

If not for government intervention, it could have been worse. The U.S. Congress has pumped $10B into the industry, benefiting 26,000 companies with a combination of tax cuts, paycheck support, and loans.

The Production sector is faring better than upstream Exploration and downstream Refining, but that’s cold comfort. Existing field operations must continue, even as producers put new drilling on hold and refineries lower their output in the face of a supply glut. Many producers have turned to restarting shut-in wells or completing an extensive inventory of DUC wells.

oilfield-layoffs

If there is some good news, it’s that the long road to recovery has already begun. Late 2020 witnessed a bit of a rebound. By year’s end, Canadian oil production will have dropped by a mere 7 percent in 2020, according to estimates.

This does not mean that all of the jobs lost are coming back, however.

Deloitte makes the following predictions for 2021:

  • If oil prices drop to $35 per barrel, a mere 3 percent of lost jobs will return
  • At $45/bbl, estimates are that 30 percent of jobs will return
  • Most optimistically, even at $55/bbl, one third of jobs lost will not come back
  • Recent 2021 forecasts predict the recovery will land between $30-45/bbl next year
  • Even a $1 swing in oil prices will affect 3,000 exploration, production and oilfield services jobs

The unemployed don’t have just COVID-19 to blame. Crude prices will remain depressed due to oversupply, shifts to renewable energy under both the Biden and Trudeau administrations, and the net-zero emissions commitments made by majors such as Shell, BP and others.

Still, even if oil prices come roaring back with higher demand thanks to the COVID vaccines, staffing up again won’t be that easy.

The Brain Drain in Oil & Gas Operations Talent

When and if staffing levels recover, finding suitable experienced candidates will remain a stubborn challenge.

Even before the pandemic, a talent crisis was affecting the oil and gas industry. A 2019 survey of industry professionals revealed that 42 percent of respondents were considering a move to the clean/renewable energy sector within three years. During the last downturn in fossil fuels, many producers cut graduate schemes, apprenticeships, and training programs that helped mature the next generation of human capital.

There is a shortage of skilled talent that will persist for years. Between 2015 and 2019, the drop in university graduates in geology or petrochemical engineering ranged from 15-21 percent. Younger workers could be attracted by opportunities in the renewable energy sector, but depressed profit margins are currently limiting oil producers’ investments in these new sources. We are competing for top engineering talent with technology firms like clean/green energy startups.

Luckily there is a parallel trend in today’s market that can help any producer do more with less: the rise of digital oilfield automation technologies. KPMG advises that Internet of Things (IoT) solutions are already reducing the need for oil and gas companies to return to “normal” staffing levels.

Bottom line: theses dual realities of a reduced workforce and industry talent crunch need not indicate only gloom and doom.

Remote Wellsite Monitoring Fills Labor Efficiency Gaps

The current labor shortage has presented an opportunity for forward-thinking producers to turn to oilfield automation solutions such as remote wellsite monitoring.

Monitoring the state of well production remotely (using an IoT solution like WatchDog) frees operations personnel to spend less time in the field, and more time and energy focusing on other priorities. Wells can be managed by exception, with attention given to fixing problems that are detected and resolved quicker. Field operators are deployed more efficiently and effectively. This maximizes production on more mature wells. More production means less downtime and more profit.

Some good news: the next Energy market rally has already begun. During last November’s blockbuster month in the U.S. stock market, oil and gas companies were 6 of the top 7 performing stocks in the S&P 500. Oil prices surged back 27 percent in a single month, one of the best performing ever. While there is still a long climb back, there is cause for hope.

Technology that enables the Virtual Wellsite Visit will ensure that field operations efficiency contributes to the industry’s return to profitability.