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Running out of Roughnecks

Prepared by: Toni Johnson
August 28, 2007

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The prospect of a work stoppage by more than twenty-thousand construction workers in Canada’s oil-rich province of Alberta has sent tremors far beyond North America. “Unions know they have oil companies by the neck,” writes the Financial Post’s Claudia Cattaneo, pointing out Alberta’s labor shortage, which gives workers the clout to reject a 24 percent pay increase over four years that would make most Canadians “cringe with envy.” Some of the workers consider a four-year contract too long (Global Investor) and say they are “simply fighting for the best deal as employers book record profits."

The possible strike highlights a growing international trend—the shortage of oil industry workers and the increasing cost to retain them. Alberta’s labor problems could disrupt some of the world’s largest construction projects involving the conversion of giant fields of oil sands into crude oil. Exploitation of Canadian oil sands would elevate the country’s oil reserves to second place (Ottawa Citizen) behind Saudi Arabia and could account for as much as 20 percent of the world’s overall increase in oil production. This CFR Task Force report recommends the United States also exploit its oil sands to help ease world oil price increases and foreign oil imports.

Roughnecks, as oil workers are known in the trade, have become “a precious commodity” encouraging companies to offer better benefits (Bloomberg) in an increasingly competitive job market. Brian Maynard, a vice-president for the Canadian Association of Petroleum Producers, says the nation’s energy industry will need several thousand (Calgary Herald) more workers in the next eight years. Maynard says experienced oil workers are so difficult to find globally that even dramatically increasing immigration would fail to bring in adequate labor. This government-sponsored report looks at labor needs in Canada’s energy sector through 2013.

Alberta’s problems are not unique. Fuad Al-Zayer, head of data services for the Organization of the Petroleum Exporting Countries, notes “wage pressure” from the global labor shortage drove oil project costs up by 15 percent in 2005 and blames the lack of skilled workers on early retirements in the industry. Recent statistics (PDF) for the U.S. petroleum industry show at least half of oil professionals are over fifty and only 15 percent are in their twenties to mid-thirties. Over the next decade the industry as a whole is facing a wave of retirements (Rigzone) that could strip it of its most experienced managers, slowing projects and driving up costs. One oil worker said he’s sees a lot of job-switching (Energy Tribune) by qualified personnel “because people keep offering them more money.”

In addition, university enrollment in geosciences and other majors needed by the oil industry is decreasing (PDF) in many countries —though China and a few other nations are enrolling more students (ZDNet) in these fields. Oil analyst Jim Letourneau says a four-year degree (KWR Advisors) plus several years of work experience is needed to be deemed a “competent” professional, highlighting the need for strategic planning. Compounding the challenge is growing labor demand in other energy and extractive sectors. Shortages in technical fields also threaten to impede growth in the nuclear power industry and mining sectors (IHT).

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