What does the collapse in oil prices mean for graduate engineering jobs?

Written by: Stephen Harris
Published on: 5 Feb 2015

Job Interview Article image 4
Source: BP
Not just the North Sea: new markets such as Azerbaijan are creating job opportunities for British engineering expertise abroad.

What’s happening to the oil industry?
The oil and gas industry has had a big shock over the last few months: oil prices have plummeted by 60 per cent – with serious consequences for UK-based companies.

Much of the oil left in the North Sea is so difficult and expensive to recover that it may not be worth the investment needed if oil companies can only sell it for $45 a barrel. As a result, firms such as BP, Shell and Chevron have already cut hundreds of jobs and massively revised their spending plans on new projects.

This doesn’t sound good for anyone considering a career in the oil industry. The top companies in the sector have already cut their graduate recruitment by an average of over 10 per cent, with some companies going much further.

BP, for example, plans to hire just 80 graduates in 2015, down from 250 in 2012. ‘The number of graduates we employ will fluctuate from year to year, but we remain committed to growing and investing in UK engineering talent,’ the firm told The Student Engineer in a statement (although it couldn’t tell us how many of those 80 jobs were for engineers).

As the company expects 7,000 applications, competition for these remaining roles will be cut-throat. (If you’re applying for a job with BP make sure you read our interview with the firm’s head of graduate recruitment for her top tips).

Which roles will be hardest hit?

Oil Price article image 1
Source: Fuelling the next generation – a study of the uk upstream oil and gas workforce
The most and least in-demand job sectors today, according to Oil & Gas UK

The biggest impact is likely to be on new projects and exploration so anyone looking for jobs in reservoir engineering, well appraisal and construction will now find things harder – just 2-4 per cent of firms are hiring in these areas, according to a recent report from Oil & Gas UK.

Geologists and geophysicists are also likely to have a difficult time, according to Andrew Speers, managing director of oil and gas recruitment firm Petroplan, although he added that companies were still interested in the top graduates.

‘If you are coming out of university with a degree today, it is difficult as a geologist to find a job,’ he said. ‘But we know quite a few companies who still go to universities to court talent.’

Why is the industry still attractive?

Oil Price article image 2
Source: BP
The UK’s oil and gas sector still directly employs well over quarter of a million people.

Now the good news. Production from the North Sea may be much lower than its peak 15 years ago but the industry is still pretty huge, directly employing well over a quarter of a million people and will need new recruits for many years to come. And engineers are far more often seen as essential to oil businesses than more administrative roles such as HR, which are more likely to face cuts when things get tough.

Although recent research has found oil and gas has less of a skills shortage than previously thought, there is sufficient demand to keep wages relatively high. The average salary in the industry is nearly £64,000, and the average graduate salary at the top oil firms is £32,500 – higher than in any sector except banking.

Over the next five years, the number of people working in the UK oil and gas sector is set to shrink by about 9 per cent by 2019. But even more people are due to retire, meaning the industry needs 12,000 new entrants needed over next five years – that’s 2,400 a year.

Where are there still jobs?

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Source: Shell
New “digital oil field” technology is helping to create jobs for software and electronic engineers, and in advanced data analysis.

While the oil price remains low, these jobs are likely to remain most commonly in areas such as operations, maintenance and mechanical engineering, helping to bring already green-lit projects onstream and running existing platforms as efficiently as possible.

‘Projects that have been well funded, are well underway and at a production stage are continuing to hire, develop and do business as usual,’ said Speers.

Plus, there are still opportunities in the supply chain companies that support the big oil firms with products and services. For example, GE Oil & Gas told The Student Engineer it was looking at adjusting its recruitment plans in response to the current oil price but would still work hard to identify talent for the future.

‘We still see high demand for employees focused on product design and development but we are also now seeing more demand for applications and software engineers in our industry and we are focusing our engineering leadership programs accordingly,’ the company said in a statement.

What new jobs are set to appear?
Oil Price article image 4
Source: Fuelling the next generation – a study of the uk upstream oil and gas workforce
The future of the UK oil and gas industry

The changing nature of the industry also means it is creating new kinds of jobs. The fact that the remaining North Sea oil deposits are harder to get at means companies have already invested in so-called enhanced oil recovery (EOR) technologies and need employees with new sets of skills to use them.

Meanwhile, software and electronic engineers are growing in importance as oil firms turn to a new range of “digital oil field” technology that ranges from remote-controlled and autonomous underwater vehicles to detailed data analysis.

The future also holds the promise of brand new sectors for the UK oil industry. The gradual decline of the North Sea means the area of decommissioning is set to increase, with a third of companies expecting it to create new jobs, particularly for mechanical and structural engineers.

Onshore, the development of shale gas fracking could well create new opportunities for those engineers who are losing out with current cut backs, with reservoir, drilling and well engineers and geoscientists all set to benefit – if the public allows the industry to take off.

What else is set to drive industry growth?

Oil Price article image 5Source: Kongsberg
British expertise in subsea technology is in particular demand overseas.

The other key thing to remember is that oil industry is global, and there are many countries around the world where falling prices have not impacted the progress of projects. West Africa, the Middle East and even places like Azerbaijan are all hungry for expertise.

‘You cannot look at the UK oil and gas industry as just being the North Sea: it has a huge influence around the world servicing and delivering global oil and gas projects,’ said Speers. ‘Being mobile, being able to be flexible is really important and accepting the fact that things are tough and you may have to take a job you didn’t quite plan to get to the next step. It’s not always easy to work into the ideal job.’

Continued growth of the oil industry overseas is also set to help British supply chain companies. This export market is now worth £14.8bn, up from £10.3bn in 2008 and half of the companies surveyed by Oil & Gas UK said they expect their future skills demand to be driven by expansion into developing countries such as Nigeria and Brazil.

The final thing to bear in mind is that the oil price could well go up again over the next one or two years, potentially giving the UK industry a new lease of life. A report last year said the right investment would enable the sector to generate £200bn over the next 20 years. The world will need oil for many years to come and Britain still has lots of it.