I doubt if any of today's geosciences students or relatively new hires in the petroleum industry ever heard or saw on bumper stickers the slogan of the 1980s:
"Please just give us one more chance and we won't screw it up ever again.”
That slogan was commonplace around Houston, Tulsa, Midland and other petroleum centers shortly after a drastic drop in oil prices and a surge in layoffs, which occurred only about a year or two after the biggest hiring frenzy in petroleum industry history - anyone remember the 1982 AAPG convention in San Francisco, with multiple job offers on the spot?
The lesson was not learned, and this up-and-down story has repeated itself several times since then, as is the case in late 2014-15.
We read and hear a lot about the economic impact of this latest downturn. The news typically is expressed by reporting on lost jobs, lower corporate revenue and a number of other community/government issues.
Less publicity is given to the impact of these downturns on universities that are attempting to educate the next generation of petroleum industry geoscientists and engineers. Universities, too, have been severely impacted in the following ways, for the following reasons and with the following general results:
♦Companies are not hiring as many newly graduated geoscientists for fulltime employment.
As a result, more master's degreed students are applying for doctorate programs; this seemingly would be beneficial to university geoscience departments, but in reality it puts more pressure on professors and departments to find funds for these students in a difficult fiscal environment.
Also, although a student's grades may be good, not all master's graduates possess the natural inquisitiveness and patience that many professors feel are required for doctorate study. Drivers for students to return to school for graduate degrees may simply be a lack of viable alternatives.
Faculty are aware of this and there is the stigma, however valid or not, that a new doctorate student who was laid off by industry will quit the program and return to industry as soon as jobs become available.
♦Evidence of the industry environment's impact on student employment is the cancellation or downsizing of some "student recruiting expos”' around the country.
The expo program, initiated about 15 years ago in Denver by Susan Morrice, had become a favorite way for companies to recruit large numbers of students - all in one place and at one time - from different universities. Many of these universities were not recruiting locations for companies, so these expos provided an opportunity for employment interviewing that was otherwise unavailable to some students.
These expos have been extremely successful and beneficial to both students and companies for many years - but the current lack of hiring plans and of company donations to run the expos led to reductions.
♦This is the first time that I can remember when fewer graduate students have received summer industry internships.
In the past, students received full-time job offers after completing their summer internship - often one year ahead of their anticipated graduation date.
Also in the past, most companies have insisted on hiring only full-time graduates who have had the summer internship experience.
Although a lack of full-time summer employment may provide students extra time to work on their thesis research, it is not always perceived as a plus. Students who have no job awaiting them upon graduation may "linger” and draw out their program, hoping things will turn around. Only time will tell if students without this summer intern experience will still be employable when the downturn swings upward.
♦Funding by the petroleum industry for applied academic research has dropped dramatically since the 2014 downturn.
Unlike the old days when we gray-hairs were graduate students, todays' student expects financial help in the form of research or teaching assistantships and scholarships - and often shops for the university that provides the most assistance.
Most universities have seen major cutbacks by companies for teaching and research activities, even those that are in the upper tier of universities where companies recruit, such as University of Oklahoma, University of Texas and Colorado School of Mines, all premier petroleum-focused universities.
♦International students have been particularly hard hit by all of the above situations.
In this fiscal environment, companies are reluctant to go through the green card process for an international employee - nor do companies see any benefit to hiring an international student for an internship, because the company won't hire that student full time upon graduation.
This situation is exceptionally disappointing, because many international students are at the top of the list when it comes to genuine interest, grades, volunteerism, study habits and so on.
It has been my experience that many international students are not yet as touched by the entitlement society we read/hear about so much. I personally have graduated a number of international students who are all doing very well in their industry positions.
Failure to engage such bright international scientists in the industry will only set back an industry, which is increasingly global, and whose personnel mix would do best to reflect this fact.
So, what are some of the immediate or near-future impacts of the current downturn?
- Qualified employees leaving the industry for what are considered to be more stable careers.
- Loss of morale and enthusiasm among retained employees.
- Potentially qualified students not entering university geosciences programs.
- Professors reducing the number of graduate students they can handle due to less research funding.
- Reduction in numbers of departmental teaching assistantships, owing to the reduction in industry financial support.
- Loss of incremental and breakthrough concepts and technologies that can help the petroleum industry in the search for and recovery of hydrocarbons.
There are very few companies that have retained research facilities, and the bulk of research is outsourced through consortiums or individual grants to universities or service companies. Reductions in funding will ultimately mean less applied research useful to the industry.
Solutions to these problems and potential outcomes all seem to center around money, which is the first casualty of severe oil price reductions. However, history has proven us to be a cyclical industry, therefore it is assumed by many that a turnaround will naturally occur.
This may be true, but the world is far different now than 25-30 years ago, and oil and gas play a particularly significant role in global economics and politics as well as popular environmentalism.
In the United States, to maintain and even improve our leadership role as a world energy provider requires experienced and properly educated people to find the hydrocarbons and efficiently and effectively produce them in an environmentally sound manner.
Many companies in the past have stated "people are our most important asset.” This statement is invariably made during the good times and laid to rest during the down times.
Another statement heard frequently from companies after past downturn-upturn cycles is, "Where are the students that you universities are supposed to be educating for petroleum careers?”
So the old cliché "Please just give us one more chance and we won't screw it up ever again” seems to be revitalized once again.
As an academic, I see industry finances in a somewhat more naïve scope than company financial planners. For example, I wonder why a commitment cannot be made to a new employee for a decent salary at the same time a company is drilling $30-100MM wells?
In the same manner, I wonder why many companies laid off so many employees.
Perhaps the logic was that when times become good again, we'll just go out and rehire!
I cannot conceive of how much money is wasted by laying-off someone with experience who will be replaced in a year or so by someone who will have to be re-trained! Penny wise and pound foolish?
I suggest you read the brief comment by Marlan Downey in the August 2014 EXPLORER who also pointed out the value of the current lull in activity to allow employees time to "catch up and learn” rather than being laid off.
I also wonder how many employees would have been willing to accept pay cuts until prices rise, rather than being let go with virtually nothing. At least one state geological survey did this, so that no one was laid off.
For international employees, the layoffs had an even more devastating impact since it meant they had to leave the United States within weeks or a month of being laid off.
Old-schoolers in the oil and gas industry were trained to look at the longer-term view of their company's health. The company in turn treated such employees fairly. Thus, the employees came out of a university ready and willing to work for the company.
Those were the days of company loyalty. Somewhere along the line, there was a paradigm shift toward the short-term, immediate profit motive ¬- loyalty was lost and managers focused on quarterly reports as a measure of personal and corporate success.
Some companies have taken a longer view and were able to keep their operations going without layoffs, and in fact are using this relative downtime to review past projects that were shelved or deemed uneconomic at an earlier time.
Cutbacks were announced for annual bonus plans and promotions, thus avoiding layoffs - these are the companies that will be first choices of students when hiring begins again.
Unfortunately, too few companies used this approach.
This is not to say that the universities do not share some of the blame for the current situation. Tuition costs are skyrocketing well beyond the rate of inflation, funds allocated for specific purposes are being lumped in with the university's general fund, the ratio of administrators to faculty continues to rise in many universities and new mandates and rules are added distractions for the professor who is trying to do his/her job.
As an academic in a university with a rich heritage of petroleum education and research, I hope that given one more chance, it won't be screwed up again, and we can continue to educate students for a long-lasting, rewarding career in the petroleum industry.
We've all read and heard about the upcoming retirement boom as the industry ages. It is the young people who soon will be a critical component of the companies - and I refer to both American and international people.
To discourage these people at this time will have a longer-term negative impact on companies than today's short-term profit-loss statement.