January 18, 2012 / 4:40 PM / 7 years ago

COLUMN-Have you considered a career in petro-engineering? Kemp

(John Kemp is a Reuters market analyst. The views expressed are his own)

By John Kemp

LONDON, Jan 13 (Reuters) - Forget careers in journalism, finance and the law. The glut of new graduates is outstripping demand and putting downward pressure on real compensation.

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 Education Statistics”.

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 surged.

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 growth.


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 future.

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 open..

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 rectify.

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.


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 fracking capacity?

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 (NAE).

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 involved.

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)

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