(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON Jan 13 Forget careers in
journalism, finance and the law. The glut of new graduates is
outstripping demand and putting downward pressure on real
Instead, some of the best career opportunities are currently
in petroleum engineering, geology and other disciplines
benefiting from surging demand linked to rising oil and gas
prices and the boom in exploration and development (including
shale gas/oil drilling).
Following almost two decades of job cuts, which saw the
closure of a significant number of university courses in
petro-engineering, the U.S. oil and gas industry faces acute
labour shortages, and salaries are soaring.
Just 690 people graduated with bachelor's degrees in
petroleum engineering from U.S. universities in 2008/09,
according to the U.S. Department of Education's "Digest of
There were another 133 graduates in geophysical engineering,
86 in the discipline of seismology (essential for finding and
mapping new deposits), and 3,257 in general geological sciences.
Graduation rates in petroleum engineering tripled between
2003/04 and 2008/09, with smaller but significant increases in
other disciplines, as a new generation of college students and
postgraduates responded to strong salary and employment
incentives for joining the domestic oil and gas industry.
Nonetheless, the number falls far short of demand. Graduates
with relevant disciplines represented just 0.3 percent of all
graduates with first degrees from U.S. universities in 2008/09.
The number of graduates in petroleum engineering and
geological sciences remains tiny compared with the numbers
graduating in finance (34,000), economics (25,000), journalism
(12,000) and law (4,000).
The industry's skill shortages are the product of surging
demand and the legacy of an aging workforce following savage
cutbacks in the wake of the 1986 oil price collapse and more
than a decade in the doldrums.
The American petroleum industry reduced its workforce by 60
percent between 1986 and 2000. "Many of those laid off were
World War Two veterans, who have since retired, taking their
institutional knowledge with them," according to a report on
"Petroleum Professionals" prepared for the Interstate Oil and
Gas Compact Commission (IOGCC) in 2007.
"Of the remaining oil and natural gas industry workforce,
half are now between the ages of 50 and 60, while only 15
percent are in their early 20s to mid-30s. The average age in
the industry is 48, with some major and super-major companies
reporting an average age in the mid-50s," the authors wrote.
Layoffs and cost-cutting also dismantled much of the
educational infrastructure needed to train a new generation of
engineers, drillers and field scientists. University departments
were downsized or closed and faculty positions cut.
"From a peak of 11,000 students enrolled at 34 universities
in 1983, only 1,300 were enrolled in 17 programs by 1997. In
2004, those institutions had a combined enrolment of 1,500
students", according to the IOGCC survey.
Graduates with a bachelor's degree in petroleum engineering
could expect an average starting salary of more than $61,000 in
2007, rising to $81,000 in 2011, according to the National
Association of Colleges and Employers, making them the best paid
entrants to the workforce.
New petroleum engineers were offered a starting salary more
than 75 percent higher than the average graduate. And while
starting salaries for most graduates have fallen during the
recession, starting salaries for petroleum engineers have
The rising number of graduates in oil and gas relevant
disciplines over the last five years (2004-2009) for which
survey data is available indicates students and the education
system have begun to respond to the job and compensation
incentives being offered by the marketplace.
The number graduates in petroleum engineering has grown much
faster (150 percent) than graduation rates generally (14
percent) or saturated disciplines like law (35 percent), finance
(21 percent), journalism (11 percent) and economics (9 percent).
But it will take another decade for supply to catch up with
demand, enrolling and graduating new students, and giving them
enough practical work experience, to replace the large number of
veterans leaving the sector as well as meet the needs of organic
The revolution in oil and gas production brought about by
hydraulic fracturing and horizontal drilling has banished the
threat of peaking oil and gas supplies for the foreseeable
The key question is how quickly technical advances pioneered
in the U.S. gas industry, and now being applied to tight oil in
North Dakota and Texas, can be scaled up to the rest of the U.S.
oil sector and worldwide.
Political and environmental constraints on the spread of
fracking are well known. However, the more daunting problems are
bottlenecks caused by shortages of skilled drillers, fracking
crews and seismologists as well specialist equipment such as
drilling rigs and materials like oilfield pipes and the proppant
that is used to keep fissures in shale beds
Most attention has focused on the rising cost of equipment
and materials. Such shortages can be overcome in a relatively
short timescale. Lack of experienced staff will take longer to
The rising number of geology and petro engineering graduates
indicates the U.S. education system is starting to address the
problem. And the number of drilling crews and seismic surveying
teams operating in the United States has risen sharply since
2000. Further progress will be needed though to relieve acute
skill shortages and it will take time.
ENTER CHINA'S ENGINEERS
The more important dimension is international. Foreign firms
such as China's Sinopec and CNOOC, Saudi Aramco and Spain's
Repsol have shown interest in buying stakes in U.S. fracking
firms to access their technology and expertise.
The question is how quickly can they scale up drilling and
China in particular graduates hundreds of thousands of
engineers every year (600,000), far more than the United States
(80,000), according to the U.S. National Academy of Engineering
Sceptics have questioned the quality of these graduates, but
they are an increasingly important resource for the global oil
and gas industry.
"There is a huge range of quality across China's higher
education system. But the best of their universities are pretty
darn good in engineering and science, and we can safely assume
the overall quality trend is upward," NAE President Charles Vest
said in a speech in October 2011 ("Engineers: the next
generation - do we need more?").
"Across Asia more than 21 percent of the students are
graduating in engineering fields. Across Europe just under 12
percent of recent graduates are engineers. In the U.S.? 4.5
percent," according to Vest.
The question is how quickly fracking technologies can be
transferred worldwide and scaled up if international firms from
countries with a big engineering base like China become
No issue in the oil market is more important. How quickly
shortages of skilled staff and specialist equipment can be
overcome will be the most important determinant of oil and gas
prices over the next decade.
(Editing by Anthony Barker)