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Oil and gas contractor skills shortages help UK buck global salary trend

Oil and gas contractor skills shortages have bolstered contract rates and salaries in the UK and North Sea, against a global backdrop of flattening salaries. This is according to the new Hays Oil & Gas Global Salary Guide, which also shows 68.1% of clients plan to increase headcount during 2014.

“Salaries in the UK have held up well in a tough climate, but with such an improvement in employers’ outlook and more positive sentiment, we are expecting 2014 to provide plenty of opportunities for professionals,” notes Ed Allnutt, director of Hays Oil & Gas.

“Professionals with very niche skills and experience can command high salaries and are highly sought after, and this will become more widespread over the coming months,” he adds.

Salaries and rates flatten globally

After two years of sharp increases, salaries and rates have begun to flatten and hirers are placing more emphasis on benefits packages for their permanent staff to retain key talent. Nearly a third of UK employees are being offered bonuses and a quarter are being offered pension plans.

Oil and gas contractors continue to be in high demand and 83% of clients expect that salaries and rates will increase again during the next 12 months. UK average rates have risen by 0.85%, whereas globally there has been a fall of 1% in average rates.

According to Hays, the “slight reduction in growth of salaries can also be attributed to a market correction after a particularly buoyant two-year period of increases within the industry.

“This is probably a necessary correction after two consecutive years of growth in salaries that have started to threaten the financial performance of some companies and assets, including the UK’s ageing North Sea oil fields.”

Skills shortages “plague the industry”

According to Allnutt, skills shortages are continuing to plague the industry and remain a concern for employers. Although there are measures underway to tackle this, it should remain a key focus to secure the UK sector’s future.

“Developing graduates in science, technology, engineering and mathematics (STEM) subjects and ensuring talented professionals have access to work in the UK are both critical. Government, business and education need to work together to make inroads that will benefit the industry and everybody working within it,” says Allnutt.

Salaries in the UK have held up well in a tough climate, but with such an improvement in employers' outlook and more positive sentiment, we are expecting 2014 to provide plenty of opportunities for professionals

Ed Allnutt, Hays

Although not so positive for clients, the skills shortages in the UK’s oil and gas labour market have clearly maintained contractor rates of pay, and have also led to 20% of the North Sea’s workforce coming from outside of the UK.

North Sea client mix shifting to smaller players and national oil companies

The report shows that the profile of clients is also shifting. As a result of its maturity, North Sea fields “are increasingly relying on national oil companies, small operators and service companies to keep production and tax revenues flowing”.

London has become a financing centre for many of the junior exploration and production companies, which are using the finance raised to fund further exploration and to acquire licences from established firms seeking to divest their North Sea assets.

Although exploration activity slowed during 2013, it is increasingly focused on the Atlantic side of the North Sea, west of Shetland. And activity in the Norwegian sector continues, with record levels of investment set for 2014.

Geoscientists and subsea engineers in short supply

Although experienced contractors in all disciplines are in short supply, the skills shortages are most acute in areas such as subsea engineering, geoscience and subsurface technologies.

Clients operating in the North Sea are having to compete with international opportunities for contractors, as North Sea experience is highly prized in other oil and gas provinces worldwide.

This poaching of contractors with highly sought-after skills is encouraging some clients to persuade the contractors to join the payroll and become employees, and underpins why salary levels have held up in the UK. Popular destinations for UK contractors include Brazil, the Gulf of Mexico, West Africa and the Arctic.

Shale gas development incentives

Duncan Freer, managing director of the report’s co-author Oil and Gas Job Search, highlights the government measures to stimulate shale gas development: “Whilst the overall level of increase in pay in the UK has slowed, the government has taken steps to welcome further business and investment in the UK by announcing a new tax allowance aimed at boosting the development of shale gas resources.”

Despite these tax breaks to encourage onshore development of the UK’s unconventional resources, there was no significant shale gas development during 2013. Industry observers highlight that it could take a decade of investment for the UK to develop the country’s shale gas industry.

Freer concludes: “Despite the concerns over a sluggish economic recovery, the feeling in the industry remains positive. Employees and new entrants to the industry can look forward to working in a dynamic and rewarding global sector.”

Published: 20 February 2014

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