№ 9 (September 2006)
Sourcing Engineers, Middle Managers in Russian Oil&Gas
ANCOR (an acronym for Analytics, Consulting and Recruitment) is Russia’s largest and oldest personnel recruiter. Two Moscow State University psychology professors launched the business after they were recruited and trained by western HR managers to find and assess staff for Russia’s first McDonald’s restaurant in 1990. Today, Ancor employs over 700 people who work in 25 offices from Moscow to Yuzhno-Sakhalinsk. Its personnel database of more than 1 mln people is Russia’s largest.
Oil&Gas Eurasia: How does ANCOR Energy Services operate?
Konstantin Borisov: We have a team of 25 people that work out of offices in Moscow, Tyumen, and Yuzhno-Sakhalinsk. Westerners make up some 80 percent of our oil and gas industry clients, because Russian oil and gas companies have yet to see the value in paying close attention to hiring, developing and retaining personnel. By this I mean the operators, major contractors, well contractors, the EPCs, and suppliers of equipment or materials for the oil and gas industry. Western companies need no explanations of what recruitment is, why they should pay for it, and how it operates, and most important – what advantage it can bring to a business. But over the past six years, we at ANCOR are seeing a number of changes in the attitude of Russian oil and gas, and service companies towards increasing their use of professional recruitment services. The underlying factor driving the market, is that the number of vacancies is growing, salaries are growing, and the number of candidates is decreasing. Competition, therefore, is increasing.
OGE: Where are the vacancies?
Borisov: ANCOR targets mainly middle management, but ANCOR Energy Services delivers all kinds of professionals top to down. Particulary in cases when a client wants to hire a large number of employees at once – for example, when opening an office in Russia. Thus, we compete on all levels against executive search companies, as well as the companies that try to recruit candidates on their own to save money.
In the past five to six years, Russia’s oil and gas industry has started to replace its expensive expat employees with Russian hires. Take, for example, the companies involved in the Sakhalin II project. They employ a considerable number of expats, and some of these expats occupy not managerial, but engineering positions. Normally, expats are very expensive to house, not only in terms of the actual salary or cost. They are also burdensome in terms of documentation – work permits, visas, etc. A typical expat operating in Sakhalin or Moscow will cost some $30,000 dollars per month in salary alone, and then there are the benefits: the car, the apartment, all according to a certain standard.
You’ve probably heard that a recent survey made by Mercer Human Resource Consulting named Moscow the most expensive city in the world. That survey was done specifically to asses expatriate housing costs. So, a Russian is likely find a decent one-room apartment to rent in Moscow for $500 to $800. But corporate standards won’t allow an expat to live in anything less than a downtown apartment, which will easily rent for $5,000-10,000. This $5,000 rental figure was what put Moscow into the “most expensive city” ranking. Thus, companies are starting to understand that it doesn’t make sense to have an expat administrative manager here. To replace them with a Russian hire saves money. And there are plenty of qualified Russians on the job market who speak fluent English, who have been working either abroad or with international companies.
The top managers, the financial managers, the financial controllers will continue to be expats at oil and gas companies. But expats are being replaced in a growing number of administrative and technical positions. For the entire year in 2000, we had less than 100 requests from oil and gas companies for all positions, from a secretary to a manager. But in just the first six months of 2006, we’ve had more than 800 requests.
OGE: Can you comment on engineering recruitment?
Borisov: We primarily position ourselves as a key supplier of Russian engineers. The advantage a Russian engineer has over westerners is cost and a knowledge of Russian standards and specifications. Of course, a foreign company can bring in its own New Zealander, API (American Petroleum Institute) certified, for example, to weld a pipeline. But he’ll be removed from the job by the next day because in Russia, there’s a state certification agency. And all welders must be certified according to their standards. It’s an obligatory certification, whereas the API certificate is a voluntary one.
OGE: What about hiring Russian engineers to work abroad?
Borisov: It happens, yes, predominantly for work in the Middle East. We’ve been supporting several Russian EPC contractors. Being Russian companies, they need Russian engineers to work on their projects overseas. They do the jobs according to international standards, but the management is Russian. It’s easier for them to talk to and recruit Russian guys.
Russia has been running its own oil and gas operations with no western involvement for the past 80 years. Russians know how to drill for and produce oil and many Russian personnel are trained on the latest western techniques. We have the engineering training institutes and western companies are happy with the quality of Russian engineers. The only problem sometimes is English.
Overall, Russian manpower is not very competitive in the world market. But in oil and gas, everyone is recruiting these days, from Shell, to Rosneft, to LUKOIL, and there are plenty of well-paid jobs where one doesn’t have to speak English to qualify. And Russian oil companies don’t pay any less than Western companies these days.
There’s a growing demand for manpower, and there are great chances for a Russian person to find very decent employment at home, probably some 500 kilometers from home, and not in Africa or the Middle East, where there’s shooting. It takes quite a bit of time to find a Russian guy with an API standard who is not really well employed at home. And if this guy wants to go overseas, his costs will then be very comparable to those of a New Zealander or a South African, who are the cheapest among western hires.
We’ve witnessed several occasions when Russian engineers went for international assignments, but those were short – from one to three years for training. On our own team, there’s a person who had worked with Schlumberger for four years in Canada. He’s originally from the south of Russia. After the years in Canada with Schlumberger, he was sent back home to do an engineering job, but already as a manager. Several years ago, we saw multiple candidates who wanted to work overseas and make international careers, but now the situation has changed. Russians are more willing to stay at home, due partly to the fact that everyday we are seeing unpleasant images on TV from oil producing countries in the Middle East and Africa. Also, Russians have very good career opportunuties and financial prospects at home.
OGE: As more and more Russian oil companies adopt western ways of doing things, how are these positions filled?
Borisov: In the Soviet times, we’ve had very limited exposure to western technologies. We did acquire some western equipment, like pumps, but most of the techniques used were purely Russian. That’s still, more or less, the case today. But, from the economic and management side, the industry has changed. If you take a look at a typical Soviet production company of the 1970s, it was entirely vertically integrated. Today, there are independent contractor firms, normally based on former construction departments or drilling departments. Since the industry changed its approach to management and economy, multiple new positions were created, like the sales and the financial people. Earlier, core personnel of an oil and gas company were the engineers. Today, logistics people, supply chain people, finance professionals, etc. have gained importance. Engineers are still important, but they are no longer the core of a company. The role of HR departments has morphed from being simply a department where labor books are filled in and man hours calculated, into a more strategic role, where the development of a human being through trainings and adequate compensation benefit systems are being researched.
OGE: Back to education, oil engineering hasn’t been a popular major for students in the west, where the environmental movement has given oil a bad reputation. Clever kids want an MBA, medicine, law, or IT, but not oil engineering. Muscovites view oil and gas institutes like some places where kids from the provinces will go, or Moscow kids who can’t get into MGU or MGIMO.
Borisov: I would only say that’s true about the Gubkin Russian State University of Oil and Gas. From my own experience, having worked for a western company abroad, I had long conversations with management concerning the fact that there weren’t enough British engineers to go into oil and gas. They were competing for the best talent with IT, law, banking, etc. This is true for the west, but not really true for Russia.
There are several major oil and gas institutions preparing engineers for the industry, in Moscow, Ufa, Kazan, and Tomsk. Nevertheless the premium university in the industry is located in Moscow, if you ask the opinion of employers. Specialists from this university are of most interest to our clients.
OGE: With regard to recruiting oil engineers from Russia for global positions, is there a brain drain that hurts Russia?
Borisov: No, I don’t think it’s real. Myself, I worked abroad, and then returned here, but at a different level. I am a linguist by education. In the early 1990s, quite a few of my friends wanted to immigrate to the US. That’s not true anymore. You go overseas for some years, learn the latest techniques, and return home at the end of the day.