In good times and bad, the challenge of finding and retaining skilled and experienced workers in the Oil & Gas industry remains high.

When the Oil price slumped to below $10 a barrel by mid-1986, the industry reacted by delaying or dropping projects, cutting exploration and capital spending along with major job losses across the sector. The impact of this drop in training and recruitment was felt for many years later and by 2013/2014, when record spending pushed up activity levels in the North Sea, there was an acute shortage of workers with 10-15 years experience.

With the oil price dropping to below $50 a barrel over the last year, the industry has again reacted by delaying or dropping projects and cutting spending, along with job losses across the sector. But with this reaction do we risk being in the same boat as 2013/2014 in 2030?

Oil and gas producer BG Group has become the first to explain recently in detail how it intends to make its offshore platforms more efficient. By simply reducing "dead time" on installations and empowering the offshore workforce to carry out its own logistics and planning.

Thousands of staff and contractor posts have already been lost or had their rates significantly slashed, and we don't seem to be at the end yet. There are a lot of savings to be made by what BG is doing and engaging with the workforce is key.

You don't deliver efficiency by just cutting jobs.

Perhaps we can look at what Dave Brailsford did with British cycling in 2008 when he was head of performance at British cycling, marginal gains.

The concept of marginal gains is that you break down all the individual elements involved and improve each of them by just 1% to realise a significant increase when all were combined. In these lean times it is one that should be considered as a means of transforming companies so they are streamlined, efficient and ready to handle challenges of the future.

Every June we assess the mid-year market sentiment throughout the OCTG supply chain. It is interesting to note how the weather in Texas and much of the country’s midsection seemed in sync with so many of the observations; a somber affirmation of the expression “when it rains it pours.” Most of those with whom we spoke wondered how or for how long they will have to weather the storm that looms large over the oil patch. While optimism seemed in short supply, the fact is there are a few rays of hope on the horizon. 

While one month does not make a trend, it was encouraging to see that Texas permitting tipped up in the most recently released May report. The rig count, despite a ripple here and there, seems to signal that we’re closing in on a trough. Moreover, the combination of deep domestic OCTG production cuts together with declining import tonnages appears to be keeping a lid on inventories, a development that we will determine conclusively in our inventory quarterly survey next month. Clearly, every advancement made in the current ‘upstream’ battle has been hard-won. This confluence of catalysts is critical to bringing much needed stability to the market. 

In terms of prospective tailwinds insofar as domestic OCTG producers are concerned, the U.S. House of Representatives voted in favor of an improved trade remedy bill on June 12. The American Trade Enforcement Effectiveness Act modernizes the “injury” standard used in antidumping trade cases and includes provisions to strengthen our trade laws significantly – a decided win for the domestic steel industry. We will also remind readers that the first administrative review of the imposed duties on the affirmatively named countries in the OCTG trade case can be requested this September by either importers or domestic petitioners. 

Meanwhile, nobody needs to be reminded that oil prices are running one-third below the five-year average and the fate of OCTG for 2015 is balanced on a fragile ecosystem. While definite improvements have been seen in oil pricing of recent, much hinges on the production response if oil prices recover upwards toward $65 - $70/barrel. Domestic OCTG mills are proceeding with great caution eyeing “lean” order books and rising costs of raw materials. OCTG demand is expected to “inch up” by the end of the year while prices remain down or flat until inventory levels can be restored. If oil prices take another turn for the worst all bets are off. Distributors primary concern is reducing inventories/months of supply. Some are worried about the impact of the demand fallout on their already thin margins. 

So what will it take to turn the OCTG industry around and what will the oil patch look like five years hence? “Restraint from oil companies, OCTG producers and importers,” was the answer frequently given for the former. And in five years’ time we can expect to see “the outcome of a lot of consolidation”; suggesting for all but the leanest and most efficient of organizations the well will likely run dry as excess supply, weaker demand and uneven economic growth catch up with the oil patch. Be that as it may, don’t let this forecast rain on your parade. After all, how many folks predicted the “U.S. Shale Revolution” prior to 2007? 

Photo Courtesy Hunting Energy Services Inc.