Labour Issues in the Energy Sector

1. Labour Issues in the Energy Sector Presentation to the Economics Society of Northern Alberta December 6, 2012 Cheryl Knight

2. Presentation outline • About the Petroleum HR Council • Drivers of change in the oil and gas industry • Labour demand and supply model • Labour market outlook to 2015 • Projected labour supply shortages • Solutions

3. About the Petroleum HR Council of Canada The Petroleum HR Council benefits from industry and union support and advice within all sectors of the upstream petroleum industry in Canada: Exploration and production; Services industries – geophysical services, drilling and completions, and well services; Pipeline transmission; Natural gas processing; and Mining, extracting and upgrading heavy oil and bitumen. The Petroleum HR Council addresses issues by: Developing strategies, solutions, products and services to address industry’s short, medium and long-term workforce issues; Facilitating the exchange of ideas and information; and Providing industry-related information on workforce issues and career opportunities.

4. Labour Market Information Expertise: We produce the following LMI products: • HR Trends and Insights: Information on current and short-term labour market conditions and HR trends within the industry. • Semi-annual, online surveys. • Labour Market Outlooks: Industry-wide labour demand and supply projections and gap analysis help identify labour market risks and opportunities. Employment and hiring projections also available for core occupations, key operating regions and petroleum industry sectors. • Generated using a labour market forecasting model together with industry activity and economic data and forecasts. • Two outlooks released this year: • Oil Sands Labour Market Outlook to 2021 and • Canada’s Oil and Gas Labour Market Outlook to 2015 with complementary Alberta’s Oil and Gas Labour Market Outlook to 2015.

5. Change Impacting Petroleum Industry Activities • Technology is and will remain industry’s game changer. • Because of persistently low North American natural gas prices, Canadian petroleum companies have shifted to more oil and liquids-rich natural gas plays. • Regulatory bodies are adapting or creating regulations to cover the industry’s newest activities and address the public’s emerging concerns. • Social license to operate has never been more difficult for the industry to obtain. • As the US becomes less dependent on Canadian natural gas, access to new markets in general, and the Asia-Pacific market in particular, is paramount. • Strong oil prices will only lead to profitability when cost-management and sustainability are top of mind. • Shortages for critical skills will put additional pressure on costs.

6. Key HR Issues Direct access to current petroleum labour supply & demand data is key to successful long-term planning and strategy development. Critical skill shortages continue to affect oil and gas activities. Industry needs to focus on capacity building, attraction and retention. Supply pools are shrinking – promotion of industry careers across Canada remains a priority. Responding to workforce needs in a cyclical, resource-based industry is an ongoing challenge.

7. Petroleum Labour Demand Model Models use industry-generated employment drivers to project labour demand by occupation. • E&P sector: • Occupation’s relationship to conventional capital and operating expenditures. • Oil sands sector: • Occupation’s relationship to oil sands production. • Services sector (petroleum services, drilling and geophysical services): • Occupation’s growth relationship to conventional capital and operations expenditures as well as oil sands capital expenditures. • Pipeline sector: • Relationship between pipeline sector employment and oil and gas production. • New pipelines need to be considered on a case-by-case basis.

8. Petroleum Labour Supply Model Labour force (supply) by occupation for the whole upstream petroleum industry: • Total supply projection of the occupations in both closely and distantly related industries. • “Like-industries”: construction, chemical, mining, wood manufacturing and paper manufacturing; and • All other industries in the economy. Sources of labour force change: • Age-related attrition, including: • Retirements; and • Deaths. • New entrants into the labour force; and • In-mobility: inter-occupation, inter-industry, migration and immigration.

9. Computing Supply/Demand Balances Model uses industry’s historical share of labour supply as a starting point. • but also takes into account industry’s demand for an occupation and the broader economic context. The projected supply share for each occupation is compared to its demand to determine its supply/demand balance. • Indicated by an occupation’s unemployment rate. The occupation’s projected unemployment rate is then compared to the occupation’s normal/balanced unemployment rate to provide labour supply/demand balance. • Lower than normal: labour shortage. • Higher than normal: labour surplus.

10. Projecting Employment for E&P and Oil and Gas Services • Conventional/unconventional CAPEX is not expected to maintain 2010 levels. • OPEX stays relatively flat. • Oil sands CAPEX is forecasted to increase again during the latter part of the forecast period.

11. Projecting Employment for Oil Sands CAPP’s growth or expected case for oil sands production forecast (published June 2011) was used to project a “most likely” scenario for oil sands labour demand.

12. Industry Employment Outlook in Different Scenarios Industry cycles can quickly change the labour dynamic. Supplying the developing Asia-Pacific markets with natural gas would create a step change for Canada’s petroleum industry.

13. Size of Industry Does Not Equate to Hiring Although growth is projected in the oil sands and pipeline sectors, persistently low natural gas prices are affecting activity and employment in the other sectors.

14. Oil Sands Employment Outlook to 2021 In a “most likely” scenario, oil sands employment is projected to expand by 14,753 jobs (an increase of 73%) over the next decade.

15. Total Hiring Outlook to 2015 for Canada’s Oil and Gas Industry The loss of workers to competing industries creates further hiring challenges for certain sectors and occupations – overall, the industry will need to fill approx. 15,000 jobs over the next four years (2012-2015). This does not include ‘churn’ or movement of workers within the industry. 4,887 3,662 2,914 3,482

16. Skill Shortages Continue for Duration of the Forecast Period Up to 36% of the pending job vacancies may not get filled due to diminishing labour supply – not including additional hiring due to turnover.

17. Skills and Experience Gaps Also a Major Concern There will be mismatches in the skills and experience needed compared to what’s available – new supply will primarily come from new entrants while we lose experienced workers.

18. Petroleum Industry Labour Shortages 2012-2015 Many of the occupations with the greatest projected labour shortages require industry-specific experience. Again, the projected labour shortages does not include hiring due to turnover.

19. What do we need to do? Collaboration and leadership are key • Workforce challenges are not limited to any one company, but exist at the sector or even industry level. • Collaboration between industry, government and labour supply organizations needed to develop long-term solutions. • Senior level engagement and leadership are critical to a strategic approach to address labour shortages The size and skill of the labour pool must be increased. We need to employ a variety of strategies and solutions.

20. Solutions • Need to access new supplies of labourrather than continuing to compete with each other for the same limited pool of workers. • Target youth • Need to improve perceptions of the industry among youth • Need better alignment of education programofferings and industry needs • Take on more apprenticeships and new graduates • Encourage mobility of skilled workers from other regions of Canada and from other countries • Increase numbers of under-represented groups in the industry: women, immigrants, Aboriginal peoples, military, etc. • Maintain and build more internal capacity: • Retain baby boomers longer • Workforce training and development • Leverage technology to improve productivity • Create a positive company culture and work environment • Engaged employees more likely to stay within a company

21. For More Information: www.petrohrsc.ca www.careersinoilandgas.com Share your thoughts @PetroHRCouncil