Oil drillers scramble for workers

As the oil biz booms, filling jobs that often require living in the middle of the ocean for extended periods of time is getting more difficult, and more expensive.

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By Steve Hargreaves, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- With oil so lucrative, the exploration and drilling business is booming. But even as Congress debates expanded drilling, companies - flush with oil cash - struggle to find new workers.

Soaring crude prices and years of underinvestment have sparked a global race to find more sources of oil. Everywhere from the Gulf of Mexico and the deep water off Brazil to the coasts of Africa and Saudi Arabia are seeing either new or renewed exploration activity.

That's led to a big jump in demand - and a big jump in prices - for exploration equipment, drilling rigs and ships, production platforms, and the workers to run it all.

"We face a hiring dilemma," said John Breed, a spokesman for Noble Corp., one of the world's largest offshore drilling companies.

In the next two years, Noble plans on bringing five new drilling rigs online. It takes about 150 workers to staff each rig. The total number of employees required to keep these rigs running around the clock is about 300. That means Noble needs to hire nearly 1500 new employees in the next two years, an increase of over 20%.

And while unemployment nationwide may be rising, filling these positions is a challenge.

First off, the level of technical expertise required on a rig has gone up dramatically as the operation has become more mechanized and computer-controlled.

"You go from a guy on the floor with mud on his hands and a wrench, to a guy working on electronics," said Breed.

Then there's the nature of the job itself - it's anything but your regular 9 to 5.

Oil workers work in shifts - in the Gulf of Mexico, it's two weeks on and two weeks off. Farther afield, it's work for a month at a time.

Then there's the fact that you're living in the middle of the ocean on an oil rig - often in extremely hot or extremely cold climates - and sometimes dealing with armed conflict.

"It's not just your skill set," said Breed. "It's a bit like being an astronaut or submariner, and it just doesn't appeal to everyone."

It's not just a shortage of "roughnecks" - the manual laborers on an oil rig - that the oil industry is dealing with, it also lacks highly skilled scientific and technical workers.

The low oil prices of the 1980s led to massive layoffs in the R&D department at oil firms, while the advent of computers and the Internet drew many minds away from the geosciences.

"There were geologists in Houston in the late 1980s selling used cars," said John Cogan, head of the Global Projects and Infrastructure Practice Group at the law firm McDermott, Will & Emery.

High steel and concrete prices and rising royalty payments have also challenged the oil industry. In the second quarter this year major and mid sized oil companies saw operating expenses surge 40%, according to one study.

"The available supply of labor and equipment in the industry is very tight," said Cogan. "In that situation, prices just go up."

At Transocean, the world's largest offshore driller, the cost of building a new rig has risen to $650 million or more, roughly double what it was in the late 1990s, according to company spokesman Guy Cantwell.

On the plus side for Transocean, the amount the firm can charge the oil companies for one of its rigs has doubled as well - and is still rising.

For rigs coming online today, the going rate is roughly $450,000 to $650,000 a day. For rigs to be delivered a couple of years from now, the rate can be up to $700,000, said Cantwell.

"As you can tell by the day rates, demand is still very strong," he said.

Very strong, but not strong enough to pose a problem for the drillers, they said.

Both Transocean and Noble think aggressive recruitment and training programs - although neither company would say how much they are offering for starting salaries - will let them meet their staffing requirements.

Still, "it's gong to cost them more than they'd like, and more than their customers would like," said McDermott's Cogan.

And despite reports of long delays in getting rigs and ships built, Transocean's Cantwell said the company has had few problems getting new equipment built in Singapore and South Korea.

As for expanded drilling in the U.S. - if and when Congress ever allows it - the long lead times analysts say would be required to get any new oil flowing - maybe a decade or more - already take into account the shortage of labor and equipment in the industry.

The industry itself, unsurprisingly, said they are up to the job.

"It's not going to open up anytime soon," said Cantwell. "But long-term, the industry always adapts to where the demand is."  To top of page

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