Whats AheadFrom TWAs Editor-in-Chief

Dj vu for Petroleum Engineers:

A Cautionary Tale
Tony Fernandez, Editor-in-Chief, The Way A head

14,000
12,000
Number of Students

remember my first year in the industry very fondly:

it was 2006, oil prices had been climbing steadily for
over half a decade, and the big crew change was
starting to become dinner table discussion. The brain
drain that would eventually come from the retirement of senior
employees was imminent, experts advised, and it seemed like
companies were taking advantage of the good times to hire
like crazy as they positioned themselves to hedge the effect on
theiroperations.
I vividly remember a recruitment event organized by a
large independent during the ATCE for which they rented
the entire Sea World theme park in San Antonio and threw a
party for us. It was an extraordinarily memorable event for any
impressionable recent grad, and the future seemed prosperous.
The Petroleum Economist encapsulated the hiring spree by
quoting the head of US recruiting for one of the supermajors as
saying, Times are very good for usand we are expanding
USD 60 [a barrel] oil will do a lot for your business. At the same
timea large number of employees are in their 50s and we
need to increase our hiring across the board.
Academia listened to industrys pleas for help, experiencing
a meteoric rise in petroleum engineering enrollment not seen
since the 1980s (Fig 1). Unfortunately, those students in the
1980s largely found themselves unemployed upon graduation
as a result of cost-cutting measures following the oil price
collapse of 1987, the result of which became the very same lost
generation of talent that evidently now needs to be bridged by
the big crew change.
Fast-forward to today and, after some wild swings in
commodity prices, to be sure, we nonetheless see oil once
again hovering at around the same USD 60 mark which I fondly
recall from the birth of my career. But a quick study of the
headlines paints a starkly different picture this time around, as
seemingly every company is either laying off people, freezing
hiring, or doing both. An onslaught of such headlines has
turned the mood in university campuses to an anxious and
somber (if not pessimistic) one, which is completely opposite
to the confident euphoria when I was there. I encourage you
to read the TWAInterAct section, which features comments
from SPEstudent chapter presidents on how the price drop is
affecting students.
According to a Schlumberger Business Consulting study
reported in the Houston Chronicle, our industry was expected to
have a net loss of professionals by 2014-2015 due to retirements,
and that was before todays commodity-driven hiring freezes
and early retirement packages. This means that as the big crew

10,000
8,000
6,000
4,000
2,000
0
1975 1980 1985 1990 1995 2000 2005 2010 2015
Academic Year

Fig. 1US petroleum engineering enrollment. Courtesy

of Lloyd Heinze, Bob L. Herd Department of Petroleum
Engineering, Texas Tech University.

change is finally under wayand the industry prepares to feel

the effects of its neglect on its workforce during the 1980s and
1990sacademia is beginning to experience the same cold
shoulder from the industry in the form of underfunding and low
hiring that it felt back then.
It is a tough but understandable decision for executives: do
you stay the course and allow your company to hemorrhage
right into bankruptcy, or do you cut costs any way you can (even
if it means laying off people) to try to secure the future of the
business? Your employees (those still around, anyway) and
shareholders would certainly support the latter.

Final Thoughts
At a time when the wound is still healing from the damage of
the 1980s, we as an industry must ask ourselves whether ripping
the scab off by virtue of another lost generation will in fact leave
a permanent scar and cement our reputation as an industry of
boom/bust hiringincapable of protecting the lifeblood of the
business by adequately managing knowledge transfer between
generations. The irreparable effects such a reputation could
have on the industrys pipeline of talent are self-evident and too
grave to want to think about. Students will always be pragmatic
about their careers and, facing an uncertain future, they will
seek alternatives and, more than likely, never return.
Indeed, the similarities between the 1980s and today are
too many and ominous to ignore. Does the cyclical nature of
our business automatically doom us to these lost generations
during each abrupt dip in commodity prices? Or will there be
a generation that finally says, fool me once, shame on you; fool
me twice? TWA

Vol. 11 // No. 2 // 2015