What's the Fuss? Assessing the Labor Market in the Petroleum Industry (06.02.2007)

Marianna Rumyantseva  

Convergence of these two approaches is gradually taking place," says Andrei Chepurnov, head of recruitment for Shell Russia.

Due to this convergence and rising standards, the thriving industry and globalization, the competition for qualified candidates becomes fiercer every day. Companies are forced to increase their HR expenditures, by adding staff and calling in additional recruitment agencies. Thus according to a survey published in the "Study of oil and gas, chemical industry, ferrous and non-ferrous metallurgy labour market" by the Russian recruitment agency "Agentstvo Kontakt" in late 2005, 13.5 percent of the interviewed companies had more than 5 HR division employees, 19.1 percent had 2-5 employees, 16.4 percent had 1 employee, while 10.9 percent did not have such specialists at all.

The recruitment market in the oil and gas, chemical industry, ferrous and non-ferrous metallurgy industries now totals $4.2 mln. Its potential could reach $14.36 mln if 70 percent of jobhunts were outsourced to external recruiters. Presently, companies fill 20.8 percent of their vacancies through recruiters and have, on average, 8 vacancies per year.

The penetration of the recruitment industry into the aforementioned sectors has reached 72.2 percent. In the past 12 months, 52 out of 73 companies surveyed used recruiters, a substantial level of market development. Respondents ranked "Recommendations by colleagues" as the top criteria (4.741 points out of a possible 5), followed by "The agency's reputation" (4.519) and "Cost of services" (4.352).

"Human Resources management has become a key strategic issue for most of the oil and gas companies," comments Yulia Zabazarnykh, head of Kontakt's Oil and Gas department. "The rising demand for all types of qualified staff forces employers to form buffers of personnel. Most wanted nowadays are qualified specialists and experienced executives."

According to the 2005 survey, most common were vacancies for senior sales manager (12.5 percent of respondents), technical specialist (10.7 percent) and project manager (7.2 percent).

In particular, research results reveal a significant shortage of technical staff. 89.3 percent of the interviewed companies have difficulties fulfilling technical vacancies: 37.3 percent lack experienced workers, while 52 percent are in search of qualified engineers.

"Highly qualified workers and experienced servicemen have become critically important for the majority of companies. The industry's rapid development, increasing production volumes, and new exploration projects have sharply increased the demand for such specialists, which explains why companies invest significant funds in recruiting, developing and retaining them," notes Andrei Chepurnov.

"The work force in Russia still suffers from a low status," says Marina Pakhomkina of TNK-BP's corporate training department. "That's why companies today are forced to upgrade their personnel training system to western standards. The Russians grew up in a system with strictly defined and segregated skills and responsibilities. Nowadays, we have to broaden the Russian worker's range of skills, and make him more well-rounded by supplying him with additional managerial and other skills."

List 1. Most sought-after specialists in oil and gas, chemical industry, ferrous and non-ferrous metallurgy

Managers (required by 46 percent of the interviewed companies):
• Sales Manager - 12.5 percent
• Project Manager - 7.2 percent
• Foreign Trade Manager - 3.6 percent
• Chief Operating Officer - 2.0 percent
• HR Director - 2.0 percent
• Construction Projects Manager - 2.0 percent

Corporate specialists (required by 21.4 percent of the interviewed companies):
• Finance / Economist - 7.2 percent
• Lawyer - 3.6 percent
• Accountant - 3.6 percent
• Analyst - 2.0 percent
• IT-specialist - 2.0 percent
• Technical Translator/Interpreter - 2.0 percent

Technical staff
(required by 89.3 percent of the interviewed companies):
Workers (required in 37.3 percent of the interviewed companies)
of which 16.3 percent general workers, not specified
by respondents; with the other 21.0 percent:
• Wireman - 5.4 percent
• Warehouse Worker - 3.6 percent
• Crane Operator - 2.0 percent
• Fitter - 2.0 percent
• Boilerman - 2.0 percent
• Master Well Driller - 2.0 percent
• Welder - 2.0 percent
• Driver - 2.0 percent

Technical Specialists / Engineers
(required in 52.0 percent of the interviewed companies):
of which 15.9 percent engineers, not specified by
respondents; with the other 36.1 percent:
• General Specialist - 10.7 percent
• Design Engineer - 5.4 percent
• Field Engineer - 2.0 percent
• Safety Engineer - 2.0 percent
• Oil and Gas Field Development Specialist - 2.0 percent
• Geologist - 2.0 percent
• Chemical Products Processing Specialist - 2.0 percent
• Mining Engineer - 2.0 percent
• Metallurgist - 2.0 percent
• Chemical Engineer - 2.0 percent
• Reservoir Engineer - 2.0 percent
• Maintenance Specialist - 2.0 percent

Vacancies for qualified specialists in the $1,200-$3,000 salary range are most frequently filled by recruiters (47.2 percent), followed by middle managers earning $3,100-$7,000 (27.8 percent), then junior positions earning less than $1,200 (17.5 percent) with top managers starting at $7,000 (7.5 percent) the least common.

"Apart from the general growth in the industry, the main cause of the increasing shortages is to be found in the aging of the workfield specialists," explains Yulia Zabazarnykh. "In the early 1990s many specialists shifted from technical industries into commerce. In many companies the average age of experienced engineers and well drillers is over 50 years. The aging of industrial personnel requires significant investments in the recruitment and training of young specialists. Nowadays, companies have not only to account for material resources, but for human resources as well. HR managers of both Russian and international companies complain that demand exceeds supply in an increasing number of vacancies. Proactive hunting methods are the most effective.

"Most difficult to find are senior specialists with 8-10 years of international experience, who speak English and have knowledge of international business methods," Andrei Chepurnov points out. "The industry is in great need of experienced bi-cultural managers capable of conducting complex operations in an international working environment, with knowledge of both the Russian and Anglosaxon management cultures." Yulia Zabazarnykh adds: "Luckily, Russia possesses many highly-qualified and experienced field engineers. Most of them began their careers back in soviet times. They visited the fields, gained insight into the industry and obtained valuable experience, which combined with knowledge of modern technology is highly appreciated by employers. However, most of these specialists unfortunately do not speak English or any other foreign language, and they often lack the flexibility to pick up new technologies, which makes it all the more difficult for them to adapt to the international business environment. The issue of the corporate integrity of such specialists and their conformity to international standards is typical for the industry as well."

However, according to Marina Pakhomkina, the issue of personnel aging in the oil and gas industry is a global trend, not a specific feature of the Russian market. "The most appropriate solution to tackle the aging problem is to recruit new personnel from the ranks of junior specialists," says Pakhomkina. "That is why we cooperate closely with universities and conduct comprehensive multilevel education programs for newcomers. Each year over 300 young trainees join TNK-BP and immediately become participants of the 'Three Horizons' development program. This three year program consists of 3 stages (horizons) 'My company and I', 'My profession and I', 'My career and I' which all help the trainee to acquire world standard skills and knowledge.

"Shell invests significant resources into its trainee selection system which we employ worldwide. In the selection, the prospect's academic performance is certainly not decisive. The candidate's potential, his/her ability to make fast decisions, analyze complex situations, reach targets and build relationships with people from both inside and outside the company are as important to us," notes Andrei Chepurnov.

Today, there exists an open competition for young candidates in the whole of Russia. The easiest way to ensure access to these young candidates is to identify them as early as possible. That's why the majority of companies are in close contact with the country's leading educational institutions which allows them to identify the most gifted students and graduates. The survey reveals that 61.1 percent of respondents cooperate with universities and other institutes, of which the Gubkin Oil and Gas University occupies the most prominent position (45.4 percent of the responding companies cooperate with this university). Most wanted by future employers are well drillers, specialists in the exploration, development and extraction of oil and gas and other mineral resources, miners, metallurgists, welders, programmers, engineers, economists and accountants.

HR managers are practically unanimous that the majority of today's generation is not ready to be assigned to any practical work immediately after graduation. Many graduates who arrive at Andrei Chepurnov's desk lack understanding of what business is really about. "They may have acquired sufficient theoretical knowledge but that's unfortunately not enough. You won't get far if you don't have the skills to apply that knowledge or the ability to work in a team."

"Extensive field experience is essential for becoming an expert, but graduates often lack the willingness to travel. Many of them don't even seem to realize that there are no oil fields in Moscow or Saint Petersburg," says Yulia Zabazarnykh.

With exploration locations expanding nationwide companies try to resolve the issue by establishing mobile groups of experts which can be deployed in any region where the company operates. "These mobile groups of experts are crucial at the launch of projects in new fields, where infrastructure and qualified staff tend to be absent," explains Marina Pakhomkina.

The oil and gas industry's prestige and its role in the country's economy are on the rise, which may create the impression among graduates that high wages and other benefits await them right after entering the company. The actual situation is slightly different. Most of Russia's oil and gas companies lack a clear compensation and benefits system.

HR managers can be excused for this by their sheer lack of time, as staff recruitment consumes much of their working day. Of his/her total work time an average HR manager spends 27.4 percent on recruitment. Hence significantly less time remains for vital matters such as incentive package development, personnel training and assessment.

"HR managers tend to spend too much time on personnel recruitment, instead of outsourcing it to professionals. Some functions, especially those requiring direct candidate search, can be properly fulfilled only by professional agencies," points out Yulia Zabazarnykh. "As the competition gets fiercer, and the hunt for qualified candidates becomes more complicated, HR managers are starting to understand the benefits of employing external recruitment and selection agencies who have more resources and abilities to attract the desired candidates."

By way of conclusion let us return to incentives. Insufficient as their benefit packages may often be, companies seem nevertheless to take serious care in their employees' health, particularly in comparison to other industries. Apart from gym and fitness facilities which can be found in most of the Russian companies, some lucky employees have swimming pools at their disposal (15.0 percent of the respondent companies), others have their own sanatoria, resort therapy courses and other company recreation facilities (10.7 percent of the respondent companies).

"Traditional Russian companies differ significantly from their foreign counterparts," says Andrei Chepurnov. "Russian companies emphasize housing, loans, recreation opportunities in specialized sanatoria/resort centers as main incentives, whereas foreign companies concentrate on financial and social benefits, such as medical and/or life insurance, subsidized meals, compensation of mobile telephone charges."

"The Russian Oil and Gas Industry has traditionally been marked by a number of so-called mono-cities: large towns built around the (Siberian) fields. Now, the industry is confronted with the task of attracting young employees to these remote regions, by providing housing for them, pension and remigration facilities, etc." says Marina Pakhomkina. According to Yulia Zabazarnykh, the problems in the HR sector will further heat up, the competition for young candidates will get stiffer in the future, companies will cooperate more actively with universities and institutes in order to secure access to new resources. "Employers will have to increase their benefits and incentives packages, and to elaborate new competitive and innovative HR strategies. In this whole process the professional experience of qualified recruitment and selection companies will become more and more indispensible."

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