After falling prices, a generation gap is now plaguing the oil industry.

The demographic hangover of the last great industry downturn in the 1980s, when scores of drillers went out of business is causing a concern for U.S. explorers who are already contending with a global price slump.

Today the US oil industry is trying to replace the Baby Boomers who make up much of senior management just as the rout in the 1980s had driven a generation away from the business and left a shortage of workers in their late 30s to 50s.

The companies are trying to plug the gap by training younger employees, recruiting outside the industry and enticing veterans to hang on longer in what the industry calls the Great Crew Change — the looming retirement of thousands of older workers.

And as companies lay off thousands but try to hold on to hard-to-replace scientists and engineers, it’s also forced drillers into a delicate balancing act amid the current downturn.

“Everybody that’s going through the process of downsizing their business right now is faced with this extra complication. Decisions that get made right now on how you right-size the company are going to have a huge impact when the market turns,” said Robert Sullivan, a management consultant for New York-based AlixPartners.

According to the American Petroleum Institute, more than 1.4 million people were employed last year by the oil, natural gas and petrochemical industries.

The trade group sais in March that to replace departing and retiring employees, those companies will need to hire almost 30,000 workers annually over the next two decades.

In the 1980s, more than 6,000 U.S. companies disappeared when a glut of oil sent prices tumbling below $20 and the challenge is partly the residue of the industry meltdown then. The prices remained around $20 for 15 years or so.

In the cohort known as Generation X — roughly, those born between the mid-1960s and mid-1980s, oil looked like a lousy career path for new graduates by the early ’90s.

“There was a fairly significant amount of time when there wasn’t nearly as much recruiting as there should have been. Now there is a gap in leadership and management ranks across the industry as people retire,” said Robert Gruman, a partner at PricewaterhouseCoopers who advises companies on hiring.

By keeping on seasoned technical employees who may be hard to replace even if their paychecks are among the biggest is what companies are trying to do today and are being more judicious with layoffs, Gruman said.

By offering more flexible work schedules, on-site gyms or stripped-down medical plans with lower premiums, Companies have expanded benefits thought to attract younger employees which have also benefitted the millennial-age workers.

The lack of adequate talent in the industry is evident in the words of Dave Monk, Apache’s 61-year-old director of geophysics who has traveled the world helping companies vet petroleum reserves from Suriname to the North Sea.

“I’m trying to pass along some of the knowledge that I’ve gained over the years. Right now, there just aren’t enough people in that demographic who are ready to step in,” said Monk, who joined Apache in 2000.

(Adapted from CNBC)

Categories: Economy & Finance, HR & Organization