Production companies continue to produce, there are many companies in development and exploration commitments must be met, so activity does continue albeit in a more tempered way.

Ian McIntosh KRG Ministry of Natural Resources

in figures

Local staff level in 2016:77.1%

Reduction in foreign workforce from 2015 to 2016:31%

Personnel matters

June 15, 2016

TOGY talks to Ian McIntosh, a technical adviser at the Ministry of Natural Resources (MNR), about the factors affecting the local workforce development over the past year. The ministry works with oil companies individually to follow their local development progress, but a more formal Local Development Policy has been drafted to strengthen the ministry’s influence. … <a href="https://theenergyyear.com/interviews/personnel-matters/" class="more-link">Continue reading <span class="screen-reader-text">Personnel matters</span> <span class="meta-nav">→</span></a>

TOGY talks to Ian McIntosh, a technical adviser at the Ministry of Natural Resources (MNR), about the factors affecting the local workforce development over the past year. The ministry works with oil companies individually to follow their local development progress, but a more formal Local Development Policy has been drafted to strengthen the ministry’s influence. This will be introduced in 2016.

What did the MNR accomplish in the past 12 months in local workforce development?
The local workforce development programme is an initiative to encourage the more than 20 operators in the Kurdistan Region to recruit and develop Kurds for the oil and gas industry. While this programme has continued, the further development of the local workforce in the oil and gas industry has had mixed fortunes. The local staff component of operators’ total workforce has increased in percentage terms from 72.7% to 77.1% over 12 months, but in absolute terms the size of operators’ total local workforce has fallen by 12.5%.

 

How have Islamic State, low oil prices and the regional economic crisis influenced the local workforce in the oil and gas industry?
Those are indeed the three reasons that oil exploration and development activity has suffered a setback in the past two years. The impact of low oil prices is a massive reduction in revenue for IOCs worldwide, meaning their investment options get reconsidered. This has high-level implications for their Kurdistan business but also creates a lower level squeeze on training and development.
Oilfield service companies or OSCs, which employs significantly more local staff than operators do, is more aversely affected in terms of total local employment drop. Industry data reported early this year shows that worldwide, OSCs suffered almost 50% reduction in workforce compared to 19% among exploration and production companies. Operators in Kurdistan reported an overall reduction of 18% in total workforce.
Low investment in local staff development when times were ‘good’ means operators still carry high foreign personnel costs. In this cost-cutting environment, investment in local staff development is currently not a high priority, so local workforce development is slow. Due mainly to business activity reduction, IOCs have significantly reduced their foreign workforce. We have seen a 31% reduction, to just under 1,100, over the period of 12 months.

How has it impacted employment prospects in the coming year?
Employment prospects in the oil and gas business for school leavers and graduates are not good. New staff need supervision, mentoring and training. While salary costs of local staff are a fraction of foreign workers’, it generally requires experienced foreign workers to develop new local staff. But, production companies continue to produce, there are many companies in development and exploration commitments must be met, so activity does continue albeit in a more tempered way.

What are the MNR’s requirements and policies for companies to develop the local workforce?
Operators have contractual obligations to develop their local workforce to replace their foreign workers, but there is no general target or timeframe. Each operator submits a plan and the MNR stewards their progress against that plan. Almost all operators have failed to achieve their (own) goals.
The MNR attempts to facilitate the development of local staff through training boards, university outreach and competency modelling, but the absence of government funds for such programmes has limited their progress to what operators have been willing to do. The MNR recently drafted a Local Development Policy to formalise certain expectations of operators, including making the work permit process for foreign workers more rigorous and more directly tied to local recruitment and development commitments.
Also, the recently introduced approved vendor listing system is designed to encourage local recruitment and development for services companies and permit the gathering of workforce statistics from this sector.

How have IOCs mitigated job losses?
The data suggests that IOCs have overall not reduced local staff disproportionately while they have cut back their workforce, but there are a number of situations where there have been significant losses of local staff, mainly due to IOCs relinquishing their licences following lack of exploration success, but also some due to production failures. These are the facts of life in oil and gas. But there are also IOCs who have not maintained their commitment to develop local staff. In one situation, an IOC has foregone the opportunity to strengthen their local workforce following the merging of two operations.

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