Letter to the Editor

LETTER TO THE EDITOR

The Biggest Threat to the Oil and Gas Industry

By Javier E. Sanmiguel

31 October, 2023

Dear CHOA Editor, I would like to bring to your attention what could be the biggest threat to the oil and gas industry.

I read an article published in The Economist about how global fertility is collapsing (issue June 3rd-9th 2023). They go into great detail about the consequences this phenomenon has on the global and local economies. Things like the lack of young people to help to support the growing population that is entering retirement, or the number of patents and new ideas is reducing. However, it was a part in the Leaders section of the magazine that caught my attention, and it says: “... younger people have more of what psychologists call “fluid intelligence”, the ability to think creatively so as to solve problems in entirely new ways”.

You might ask why it caught my attention. The truth is that the oil and gas industry is facing an existential conundrum, young people are not willing to work in it. On a recent trip to Colombia, I learned that some of the petroleum engineering schools are contemplating closing the programs for the lack of enrolment, which is something like what already happened to the oil and gas engineering program at the University of Calgary. Nowadays it is common to hear that some rigs are on stand-by because they can not find people to work, even if services companies have contracts and can pay well. It is a wide sentiment; it is difficult to find people to work in the industry.

What threat? Or many threats to pick, so which one?

The oil and gas industry, as many other industries, and for that matter, all of us are good at blaming someone else for our failures instead of looking at ourselves. We like to say that our industry is being hit hard because of the big push to transition to renewable energy and the everyday demand to reduce CO2 emissions. However, I think the biggest threat to the industry is “no one wants to work for it.”

I believe that humans will need and demand oil and gas for many years more, but so far, there is no better source of energy. We could argue about how much we will need, but it does not change that we will need to keep producing oil and gas. The big question is, who will be working in 10 to 15 years? If we look at our companies today, we hardly see young people. I am guessing that many of us will be retired in less than ten years. In 20 years, about half of us will not be working because of retirement or death.

The question is, why do not young people want to work for the oil and gas industry after being in one of the most sought-after industries to work for? Here is where the industry needs to look at how it has handled its most valuable assets - people. How many of us have advised our own kids not to work in the oil and gas industry? How many often have we heard things like, “If I have the chance to go back to school, I will study …”

So where are the young going? Well, they dream of working for a technology company or for one of those companies focused on energy transition. They want to work as coders, programmers, data scientists, electrical engineers, and/or anything they believe can make a difference for the planet and humans. Truly, no one really should blame them for their decisions. What will a young person think about an industry when seeing his/her parents being laid off? What do you think a young student thinks when learning that thousands of highly educated and trained people are unemployed in Calgary? How do you think a young person feels when seeing his/her father lose his job on the rig after years of sacrifice? Or when they heard the news that thousands will be laid off even when companies are profitable?

Trust me, no industry is immune to poor management or big corrections. We see it nowadays in the technology industry that thousands have been laid off in San Francisco, New York, Toronto, and other Tech hubs. The issue is that the oil and gas industry kept making the same mistakes, and it became accustomed to the so-called cycles. It was easy to keep that practice because of easy financing, and young people really wanted to work for it until the last big correction.

What can we do?

Our industry must transform in many ways. We must meet high expectations from our shareholders, governments, and the public. Environment protection is and should be our paramount, and managing and taking care of our personnel is our priority, all of this while generating profits. That requires transforming the way we manage our organizations. The old model does not work anymore. It most likely will require that companies become digital, more like technology companies that happen to produce oil and gas. Our organizations should be lean, efficient, agile, and cleaner. Here, I think it is the opportunity to bring young people to our industry. We will need people to bring new ideas on how to become digital, how to analyze the petabytes of data we have collected for decades, how to build our own applications, how to construct our own machine learning algorithms, how to take advantage of Artificial Intelligence, how to become interconnected with the world so we can collaborate with other peoples, how to become leaders in environmental protection, how to listen to the needs of the young people.

We need to make people excited to work for the oil and gas industry. We cannot let our industry die before its time because we cannot find people to work for it. That will be a bad way for an industry to disappear. It is better to die because humans find a better source of energy, and our product is not needed anymore. It is time for us to think about the future of the industry, and what I think it needs is some “fluid intelligence.”

Sincerely, Javier Sanmiguel