Drilling ramp up could get snagged on labor problems

HOUSTON – Oil markets may have pulled out of the worst price collapse in decades, but it could still take years for U.S. shale drillers to fully rebuild the energy workforce after deep payroll cuts.

Getting the shale business working again could depend on companies hiring 80,000 to 100,000 workers over the next two and a half years, Goldman Sachs said in a recent report, after shedding nearly 150,000 jobs across the nation.

But ramping up energy employment could prove much more difficult than in the early years of the oil boom, which began just after the national recession in 2009 when people were scouring the job market. Now, the economy is improving and the two-year oil bust has pushed former oil workers into other industries like manufacturing and technology.

“Attracting the pool of talent back to this volatile and cyclical industry is going to require time and money,” said Bill Herbert, an analyst at Houston investment bank Simmons & Company International. “You’re not going to be able to generate quick and significant growth at the same time.”

A resurgence in shale drilling would be expensive. Putting an idle rig back into the field costs some $50,000 to $75,000, and retraining drilling crews could cost anywhere between $27,000 and $189,000, on top of labor expenses of $540,000 to run a rig for about two months, Goldman Sachs estimates. Those expenses come as banks become more reluctant to lend money for drilling.

Drilling rig jobs would probably be easier to fill than other positions with transferable skills. And while the oil industry pays employees generous salaries compared to the national average, the long duration and severity of the oil-market crash has extinguished much of the industry bravado that came with $100 a barrel oil.

“Every time this happens, it sends a shockwave through the oil and gas business and some candidates leave the business permanently,” said Keith Wolf, managing director of recruitment firm Murray Resources in Houston. “We’ve spoken to a number of people who say they can’t take another one of these cycles.”

But some oil field services companies will undoubtedly get a boost from a recovery. Hydraulic fracturing pumps have become more stressed as oil companies double the amount of sand or proppant they use to blast open shale rocks. Much of the industry’s fleet will have to be rebuilt over the next two years, Herbert said.

“That’s a significant call on capital,” he said.