Identifying and Addressing Labour Supply Gaps

Restructuring of Canada’s oil and gas industry has impacted labour supply and the type of talent required

As counterintuitive as it may seem, labour shortages are cropping up in some pockets of the oil and gas industry. The shortages come even though the industry has shed workers due to the long economic downtown and, more recently, the impacts of reduced demand from COVID-19 and an oversupplied oil market. Why is that? And how can job-seekers and companies respond? 

Making sense of labour supply gaps 

Determining a labour supply/demand gap involves comparing industry’s potential labour supply against its demand to determine whether industry will experience a labour surplus or shortage. It’s measured in terms of the projected unemployment rate relative to what is known as a “balanced” unemployment rate. 

The natural, or balanced, rate of unemployment is the lowest level that a healthy economy can sustain without creating inflation, while still accounting for workers moving between jobs and training to address skills mismatches. If the unemployment rate is above the balanced rate, a surplus of available labour typically results. When the rate falls below balanced, it is an indicator of a tight labour market and talent shortages.

In the case of Canada’s oil and gas industry, not only has employment been trending downward (declining 26% from 2014 to 2020), but so has the pool of potential workers. A mature workforce and challenges attracting experienced workers back to the industry are contributing factors. In addition, as an industry there are hurdles in appealing to youth and disruptions to its talent pipelines due to COVID-19. The conditions are poised for a shrinking talent pool. Structural shifts — including consolidation and the adoption of new technologies to realize economies of scale and efficiency — are also changing the type of talent required, creating different gaps. 

To provide more perspective: 

  • An ageing workforce
    Based on annual age-related attrition rates (jobs vacated due to retirements or death), the oil and gas industry could lose up to 12,000 workers by the end of 2023. Companies have indicated they are monitoring retirements and despite lower retirement rates in recent years, the risk of losing more experienced workers is on the horizon. In some cases, companies may not hire for the same occupation vacated by a retiring worker, instead choosing to bring a different set of skills into their workforce. The greatest impacts of retirements are expected to be in parts of the exploration and production (E&P) and oil and gas services sub-sectors.  

 A study by Deloitte Canada found the number of industry retirements are closely correlated with oil stock prices, making this an important indicator to identify when workers may act on retirement eligibility.

  • Workers, most notably seasoned ones, have left the industry 
    The long economic downturn has impacted the Canadian energy industry’s ability to attract and retain workers, as job seekers turn to industries perceived to have more employment stability. This has been particularly true for seasoned workers within the services sub-sector, yet this sub-sector faces the greatest pressure to ramp up its workforce as activity picks up. 
  • Decline in post-secondary enrolment in core disciplines; decline in international and interprovincial migration 
    The COVID-19 pandemic has contributed to an already shrinking labour pool with a lack of foreign students enrolling at Canada’s post-secondary institutions and decreased immigration into the country due to travel and other health restrictions. Students across Canada were already not pursuing diplomas or degrees in core oil and gas disciplines — like petroleum engineering, geology and geophysics — at the same rate they used to.  

Did you know?

The geology program at the University of Alberta has seen its enrolment numbers drop from 179 in 2012, down to 28 in 2020.

Source: Daily Oil Bulletin

Lastly, Alberta’s net interprovincial migration — where over 75% of industry jobs are located — has been slipping into negative territory since the downturn of the oil and gas industry. This “brain drain” has further reduced the labour pool. 

  • Industry attractiveness
    Challenges in attracting youth along with other new workers into the industry seem to be connected to perceptions of oil and gas, especially as they relate to innovation and environmental performance. A study by the Governance & Accountability Institute showed that 40% of millennials would take a pay cut to work for an environmentally responsible employer and 40% already selected their employer on this basis, compared to just 17% of baby boomers. World Economic Forum research into youth perspectives on energy transition also found that 41% of youth indicated an employer’s position on energy and environment are either a top or strong priority when determining career preferences. 
  • Talent shortages  
    The accelerated use of technology and digitization by the industry is increasing the need for specific IT occupations including information systems professionals, computer programmers and software developers. Based on PetroLMI’s Labour Market Outlook 2021 to 2023, information technology related occupations are consistently among the top 15 with the greatest net hiring requirements (the sum of job openings created from industry activity and age-related attrition) across all sub-sector. Overall, Canada’s oil and gas industry needs to fill more than 500 IT positions through to 2023, while competing with other industries for this talent. 

Other occupations expected to experience a tight labour market in the next three years include: 

  • Construction millwrights and industrial mechanics
  • Contractors and supervisors, oil and gas drilling and services
  • Geological and mineral technologists and technicians 
  • Geoscientists
  • Heavy-duty equipment mechanics
  • Industrial electricians
  • Information technology occupations
  • Managers in natural resources production, drilling and well servicing
  • Oil and gas well drillers, servicers, testers and related workers
  • Oil and gas well drilling workers and service operators
  • Petroleum engineers
  • Petroleum, gas, chemical process operators (no steam-ticket required)
  • Power engineers
  • Purchasing agents and officers
  • Regulatory and stakeholder relations occupations
  • Steamfitters, pipefitters and sprinkler system installers
  • Supervisors, petroleum, gas and chemical processing and utilities
  • Transport truck drivers
  • Welders and related machine operators 

Capitalizing on the opportunity

These labour supply shortages have created the need to pivot, both for companies and workers. For companies, it may mean modifications to their attraction and recruitment strategies, including the labour pools they tap into and the incentives they offer to retain workers. For job seekers, those who can understand the gaps and retrain, upskill or re-position their skills accordingly will have the advantage.  

There are opportunities for both companies and workers: 

  • Non-traditional talent
    Underrepresented groups in the oil and gas industry including youth, Indigenous Peoples, and women, stand to benefit in a tight labour market as companies broaden their attraction and recruitment strategies to non-traditional talent pools. Programs to support opportunities for those groups — like Women Building Futures, the Northeast Aboriginal Apprenticeship Initiative and NPower — are among hundreds available to help non-traditional talent receive the training, mentorship and skills they need to successfully enter the industry. Companies are also increasingly looking to this talent as part of their commitment to diversity and inclusion and improving their commitment to environment, social and governance (ESG).  
  • Rethinking skills 
    According to the World Economic Forum’s Future of Jobs Report, the top skills and skill groups in demand for the next five years include critical thinking and analysis; problem-solving; and skills in self-management such as active learning, resilience, stress tolerance and flexibility. This emphasis means workers will need to broaden how they position themselves beyond a focus on technical skills. Workers also need to think about whether their expertise is transferable to emerging industries like LNG or energy-adjacent sectors like geothermal energy and hydrogen. 
    Tech-savvy talent will also have an advantage in the industry. Approximately 52% of oil and gas workers need less than six months to reskill for a digital workplace (source: World Economic Forum).  
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