Richard Hemingway Quoted in Energy Intel-Finance on Worker Shortage and Drilling

“Will Shortage of Workers, Rigs Slow Drilling Recovery?

“This has been a very deep and very sustained downturn, and there is no question that it will take some time to ramp back up,” Richard Hemingway, a veteran energy attorney at Thompson & Knight in Houston, told EI Finance. “For a lot of the younger workers, they have never been through a downturn like this before. They are gun shy. When they move on, they’re gone.” Hemingway said the labor woes will be less pronounced in places like Texas and Oklahoma, where the industry can tap a larger regional labor pool. Yet he suspects that a substantial percentage of blue-collar workers who lost their oil-field jobs have moved on to other manufacturing gigs where their skills are transferrable — including in the downstream energy sector that has not been hit nearly as hard. “The great unknown is, would they be willing to leave those jobs and jump back in? My hunch is that quite a few would,” Hemingway said, given that oil and gas jobs tend to pay a lot more when services companies are in active recruiting mode. “There is a big difference between $40,000 a year and $75,000 a year.” Nevertheless, before making that decision, workers would probably spend some time thinking about the volatile nature of the oil and gas market and the tenuous nature of the current recovery.

How quickly workers are needed will largely depend on the speed of the commodity price recovery. Hemingway and Wood Mackenzie senior analyst Ryan Duman told EIF that if prices settle in at $55 to $60 per barrel and gas at $3 per million Btu, the ramp-up would be gradual and relatively easy to manage. However, if oil were to surge to $70/bbl and producers felt compelled to seize the opportunity immediately, “that could pose some challenges,” Hemingway said.