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Deloitte Study: The Future of Work in Oil, Gas and Chemicals

COVID-19 and the oil downturn make workforce and business transformation a strategic imperative

As used in this document, "Deloitte" means Deloitte LLP. Please see  www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. (PRNewsFoto/Deloitte)

News provided by

Deloitte

Oct 05, 2020, 08:03 ET

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NEW YORK, Oct. 5, 2020 /PRNewswire/ --

Key takeaways

Continue Reading
Proportion of lost jobs recovering by 2021 in three business-as-usual scenarios
Proportion of lost jobs recovering by 2021 in three business-as-usual scenarios
Employment cyclicality has doubled since 2014 vs. the 1990s
Employment cyclicality has doubled since 2014 vs. the 1990s

  • The U.S. oil, natural gas and chemicals (OG&C) industry slashed 107,000 jobs from March to August 2020, the fastest rate of layoffs in the industry's history.
  • Heightening employment cyclicality and layoffs are challenging the industry's reputation as a reliable, long-term employer.
  • The sensitivity of U.S. OG&C employment to oil prices is extremely high, with a dollar change in oil price potentially affecting 3,000 upstream and oilfield services jobs.
  • In a business-as-usual scenario of waiting and responding to oil price cycles, about 70% of jobs lost during the pandemic may not return by the end of 2021 at $45 per barrel.
  • This downturn or the "great compression" is like no other, challenging fundamental and deeply interconnected dimensions of the industry's work, workforce and workplace.

Why this matters
The industry's reputation as a reliable employer has been challenged following big layoffs and heightened cyclicality in employment triggered by recent subsequent downturns and the COVID-19 pandemic. Deloitte's new study, "The Future of Work in Oil, Gas and Chemicals: Opportunity in the time of change," explores the opportunities today's changed environment could present organizations to transform themselves and bolster their earlier appeal with current and prospective employees.

Employment cyclicality is plaguing the industry
The short-cycle nature of shales has made hiring extremely cyclical. From 2014-19, a dollar movement in oil price affected 3,000 upstream and oilfield services jobs compared to 1,500 in the 1990s. With COVID-19 leading to the fastest layoffs in the industry's history, the study highlights that 70% of jobs lost during the pandemic may not return by the end of 2021, assuming a $45 per barrel oil price, if OG&C companies continue to operate as-is.

This downturn is like no other and will have profound impacts on the industry
Simultaneously confronted with multi-decade low prices, unforeseen demand destruction, and changes in end-use consumption due to mass telecommuting, mounting debt loads, and renewed focus on health from COVID-19, the industry is entering a period of "great compression." This compression is stressing the three deeply connected future of work dimensions of an OG&C organization — the core hydrocarbon business model itself ("work"), who does the work ("workforce") and where work is done ("workplace"). OG&C companies have a big task in hand to decarbonize their work; develop a new workforce architecture with people and for people; and ensure continuity of operations and mitigate risks associated with the new remote workplace environment. 

Key quote
"The oil, gas and chemicals industry was built on human ingenuity; innovation and grit; and it is that same spirit that will forge the industry's next reboot and revitalization. Companies that choose to see the coming decade as an opportunity for transformation will likely not just outlive this compression but may even lead the industry into the future of work. By putting people at the core of business transformation strategies, the industry may hopefully regain its appeal and position itself for what's expected to be a much different landscape in the future."

- Duane Dickson, vice chairman and U.S. oil, gas and chemicals leader, Deloitte LLP

The time for transformation is now
Today's changed environment has given OG&C organizations the much-needed "why not" to transform themselves and find new ways to reclaim their previous appeal. Given the convergence of pressures from the great crew change, global pandemic, energy transition and "great compression," the study outlines four levers of transformation that could push OG&C organizations into the future.

  • About 1% to 2% of oil and gas capital expenditures were spent on green energy in 2019. As the pandemic has put the spotlight on the health and well-being of people, pursuing "Sustainability as a way of business" and creating a structured energy transition pathway with tangible medium-term targets should be considered.
  • Less than 15% of the industry's 2019 job postings were data analytics/mathematics majors and less than 1% of jobs offered flexible workplace options. Creating a structured roadmap for "Digitalization to transform who does the work and how the work is done" holds the potential to unlock new operational gains, effectively manage a distributed workforce and virtualize the entire business model through technology-enabled, human-driven decision-making.
  • More than 45% of the industry's personnel are tenured with most retiring in five to seven years, while total U.S. university graduates for technical courses like petroleum and geological engineering courses have dropped by 15-21%. "Building a workforce of the future" will require OG&C companies to attract people across generations by promoting sustainability and creating new work profiles around new energy business, offering new digital ways of working, making flexible/remote working a reality and building a sense of pride among workforce towards the work and organization, amongst other things.
  • Operational agility in the last downturn helped the industry drive operating costs down from 17% to 30%, but efficiencies seem to be plateauing with suppliers having limited room to reduce costs further. This downturn requires "Organizational agility" as the way forward, by challenging traditional way of functioning, including how companies have set up their core and support functions; and how they manage resources and work with partners.

Key quote

"While extremely challenging, this downturn presents an opportunity for companies to reposition. This is the time for strategists to make bold choices today that affect the work of tomorrow; and to adopt redesigned, cyber-physical teams and embrace a digital workplace culture as a basis for future innovation."

- Kate Hardin, executive director, Deloitte Research Center for Energy & Industrials, Deloitte Services LP

Connect with us on Twitter at @Deloitte4Energy or on LinkedIn at Duane Dickson and Kate Hardin.

About Deloitte
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world's most admired brands, including nearly 90% of the Fortune 500® and more than 7,000 private companies. Our people work across the industry sectors that drive and shape today's marketplace — delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthy society. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Now celebrating 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte's more than 312,000 people worldwide make an impact that matters at www.deloitte.com.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

SOURCE Deloitte

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