Drilling ramp up could get snagged on labor problems
February 14, 2017
“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.