Skills Shortages Could Scupper UK Energy Plans

Surging demand for energy, an aging workforce and a lack of new entrants to the industry is combining to threaten delivery of the energy strategies of countries worldwide. Addressing delegates at the ‘People: The Real Energy in Oil & Gas’ conference in London, John Westwood, MD of energy business analysts Douglas-Westwood, cited the UK as likely to have particular problems with delivery of its power station replacement and renewable energy plans.

“We are seeing an unprecedented demand for energy, driven by China in particular, at the same time as production of oil & gas is reducing in non-OPEC areas such as the UK North Sea. The result is oil prices at record levels and a surge in exploration & production activity, particularly in the Middle East. This is fuelling major worldwide competition for human resources at all levels, but the key need is for experienced staff.

Engineering skills famine

“The ‘baby boomers’ that entered the oil industry in the late 1970s and the early ‘80s are now retiring – a major issue – as during the oil price lows of the 1980s and 90s many skilled people were laid off and new personnel were not recruited.

“Also, a poor perception of engineering in general and oil & gas in particular has been generated. The oil & gas industry gained a reputation of being ‘hire & fire’, ‘dirty’, ‘polluting’ and since recent oil price highs of making ‘obscene profits’.

“Traditionally oil & gas recruited from other engineering industries but these are now also suffering major skills shortages.

“The oil companies themselves are able to offer good salaries and excellent training programmes, so the real problem is amongst the huge number of companies that constitute the supply chain.”

Moving to power generation Westwood noted that the UK faces a particularly difficult situation. “By 2016 it is likely that some 15 to 20GW (about a quarter of the UK’s existing generating capacity) will need to be replaced, and further substantial investment on a similar scale may be required in the following decade. Conventional and nuclear power generation and renewable energy are all, together with other engineering sectors, competing for the same people as the oil & gas industry.

Education unfit for purpose

“The core of the problem is that UK’s education system is unfit for purpose. It has failed to provide young people with the necessary skills to enter the workforce at all levels, from the ‘black trades’, through technicians to graduates. The recent UK Employers Survey noted that the main skills lacking were technical and practical ones. Another noted a ‘lack of specific engineering skills with the right levels of experience’. And this is happening a time when over 518,000 18-24 year olds are out of work.

“The House of Lords Select Committee on Economic Affairs noted in its July report that ‘many young people leave school without the basic functional literacy and numeracy required for apprenticeships and that schools also fail to inform many students about apprenticeship.

“Even the OECD has critised UK government urging it to ‘devote more effort to getting better value for money’ and to ‘take care that a greater quantity of education is not sought at the expense of quality’.

“A current major problem is undoubtedly the obsession with producing gradates with economically valueless degrees. The respected Petroleum Review notes that ‘in the past few years the UK has produced more media studies graduates than physics and chemistry graduates combined.’

“So what is the government response? On November 1, Gordon Brown the UK Prime Minister pledged to overhaul the apprentiships system and to introduce a legal entitlement to an apprenticeship for every young person by 2013. And on November 16 UK government promised a massive skills push including 3.5 million literacy and numeracy courses. But will the politician’s promises be met?”

An exciting future

So what does the future hold? Over the period to 2020 Westwood forecasts further growth of energy demand and that the basic skills situation could slowly improve but the experience deficit grow. The UK’s offshore oil & gas and nuclear decommissioning programmes plus power station replacement will increase competition for human resources and the UK renewable energy programme is likely to be hit by skills shortages.

“The energy industry is without doubt one of the world’s largest and most important and is fundamental to western civilisation. It offers virtually unparalleled opportunities to build challenging, absorbing, rewarding and even exciting and very well paid long-term careers.”

And then there is the wild card – the potential for global oil supplies to peak. In the words of Westwood “if the peak oil scenario plays out energy prices will rocket and the engineering personnel needed to deliver it will be writing their own pay cheques”.