Jobs Go Begging as Oil Revives : Current Shortage Seen as Harbinger of Serious Problem

They started another class in fixing oil rigs here last week. Sponsored by employers, the 21 men are virtually assured good-paying jobs in just six weeks. What’s not assured is where Taft College will find enough would-be roustabouts for the next class.

“We can’t turn ‘em out fast enough to meet the demand,” said Greg Mudge, who runs the course in oil well servicing and maintenance.

At the University of Southern California’s department of petroleum engineering, recruiters from Mobil, Shell and Exxon arrived on the same day last month. Mobil alone wanted 10 engineers for its Denver office, but USC expects only six students to be available at spring commencement.

“The campus activity is hot. They’re looking for people, and we just don’t have them,” said Iraj Ershaghi, professor and acting chairman of the department.

It was barely a year ago that oil prices were plummeting toward $10 a barrel and the oil industry was shutting down wells and laying off employees by the thousands. Now, with oil’s recovery scarcely begun and drilling on a modest upswing, scattered shortages of blue-collar and even professional workers are beginning to appear.

The shortfall is concentrated in support industries, normally a leading indicator of what to expect at the oil companies themselves. Philip C. Crouse, a consultant in Dallas, predicts a need for 23,000 more people next year in the production end of the business. In 1987, 16,000 more workers were needed compared to 1986, according to the Labor Department.

Though today’s shortfalls are expected to be eased by higher wages and the pool of laid-off geologists and engineers, the abrupt shortage of workers is symptomatic of one of the industry’s greatest concerns as it slowly reactivates oil and gas exploration and drilling after the historic price collapse of 1986.

‘Sunday School Picnic’

It is already becoming clear in California and the other oil states that thousands of people who left the Oil Patch voluntarily or otherwise are now proving hard to find--or to lure back. And college enrollment in geology and petroleum engineering has nose-dived by more than 80%.

William L. Fisher, director of the Bureau of Economic Geology at the University of Texas, says this massive contraction--like the oil price run-ups of the 1970s--is uncharted territory in modern times because price and supply had been regulated for the 40 previous years.

“The crash that took place in the oil industry in 1986 makes last week’s stock market crash seem like a Sunday school picnic,” Fisher said. He said significant professional shortages are likely to crop up in two years, forcing the industry to hire a slew of “archeology majors with 15 hours of geology.”

“The oil companies are worried, and they should be,” Fisher said. “They’ll start offering $50,000 a year and people will show up, but it will not be as big a pool to draw from and apply the technology properly. That will mean an erosion of our ability to discover and recover oil. It’s an experience we’ve never had before . . . it is a substantial problem, a public policy question.”

The decline in oil prices that began in 1982 and accelerated in 1986 has not only dried up college enrollment in oil-related fields, but has driven people from both the blue-collar and professional levels out of the industry to more promising territory.

Many, such as Scott Blackhurst, a 24-year-old petroleum engineer, say they have no intention of returning. Until earlier this year, he was production engineer on a Tenneco water-flood project near Bakersfield--one of the oil-field technologies being counted on to forestall the steady decline of the nation’s oil reserves.

“It’s hard to describe what it’s like to scramble for a job in the first place and then not know how long you’re going to keep it,” said Blackhurst, who quit his job and is now a first-year law student at Penn State. “I liked the job a lot. But I’d seen nothing but really bad times in the oil industry.”

Another oil refugee is Greg Mudge’s 32-year-old brother, Steve.

He spent seven years working on oil rigs as a roughneck and then as a crew foreman in Long Beach and Bakersfield, sometimes earning $40,000 a year. Now he is studying accounting and computer programming at a trade school in Tucson while his wife works as a waitress. They have three children.

Blue-Collar Shortages

“They cut down on my hours so much I decided it wasn’t worth it anymore,” Mudge said. “I stuck it out as long as I could, but it got to where I was only working 20 hours a week.”

Since then, as the worldwide oil glut eased and the price of crude oil recovered about half of what it lost in 1986, it has become increasingly attractive to drill for oil. By late October, with the price of oil holding steady for now despite the stock market crash, the number of working U.S. oil rigs had reached 1,130, a rise of some 70% in 14 months. That remains low in historic terms, but the nearly 500 extra drilling rigs still require upwards of 5,000 more people.

The immediate shortages are mostly blue collar.

Texaco, one of the biggest players in Kern County, Calif., which by itself would be the fourth-biggest oil producing state, is reactivating most of the 1,200 wells it shut down early in 1986. But a Texaco official said the process has been slowed by worker shortages at the well-servicing firms that do such tasks.

“Our major obstacle is the manpower. It’s a detriment to bringing production back,” the executive said, asking that his name not be used.

California’s only training program for such workers is the Westside Energy Services Training and Education Center, or Westec, affiliated with Taft College. Supported with state and federal job-training funds, it has seen a sharp rise in demand from well-servicing firms but has had trouble finding enough students.

California Production Services is one of several firms awaiting Westec’s graduates. At CPS offices on the outskirts of Bakersfield, district marketing boss Pierce O’Leary points out five well-servicing rigs stacked around the back lot. Then he rushes off for a meeting with Texaco.

“We’re going to tell them we’ve scraped up another rig and crew. . . . Every one of these rigs would be in operation if we had the men,” O’Leary said.

At the Bakersfield Californian, help-wanted advertising in September jumped 20% above a year ago. Classified ad manager Robert Guyll said, “At practically every employment agency doing business with us, at least 50% of their ads are for oil-related people. In some cases it’s 100%. It all started in the last 30 to 45 days.”

Demand Increases Wages

Some of the skilled or semi-skilled people who normally do such work in the Bakersfield area gravitated to more secure, if lower-paying, jobs at places such as the big Frito-Lay plant that opened on the edge of town two years ago. Others returned to school.

As demand for such workers fell, so did their wages. Crew foremen who might have earned $17 an hour in 1981, the year oil prices peaked, have seen rates dip to $11. A crew member’s wages fell from the $11-$13 range to as low as $8 an hour.

Now, as demand rises, so does the wage scale. Pool Co. of Houston, the biggest of the nation’s well-servicing firms, recently boosted a crewman’s salary to $9.25 an hour from $8.25 an hour, according to West Coast personnel manager Dan Santillan.

“We had to do it because we were finding such a migration,” Santillan said. “It’s not a question of attracting new people, we’re just trying to prevent the people we’ve got from leaving.”

It is not only a California phenomenon. At Parker Drilling Co. of Tulsa, Okla., the world’s largest driller of deep gas wells, a spokesman said: “Very few of the workers we laid off are still in the market. We’re having difficulty finding experienced roughnecks and drillers, and we expect the problem to get worse.”

Consultant Crouse claims to know of one drilling company that tried to rehire 150 of its former workers, and only six responded.

Any sustained drilling increase would eventually drive up wages across the board, presumably attracting enough blue-collar people over time to support a recovery. Steve Mudge, for example, said that he would consider returning to the Oil Patch now that he has some accounting and programming expertise “as a cushion” against another slump.

But the return of the Steve Mudges would only take care of part of the problem.

At the professional level, experts warn that there might not be enough talented people to find oil in the first place or to devise better ways of squeezing more oil and gas from existing reservoirs--skills that are especially critical as the nation’s known oil fields are depleted.

To be sure, hundreds or even thousands of oil geologists and engineers who lost their jobs during the industry cutback are still eagerly looking for work. The jobless rate among petroleum geologists, estimated a year ago at 25%, remains high. At small oil-exploration firms such as SOPAC Energy of Los Angeles, President Mark Greenfield said that this has enabled him to hire better people than he could have otherwise.

But Michael Ayling, whose MLA Resources in Tulsa is an energy headhunting firm, said many larger oil companies are having trouble finding the right people.

“I could think of several hundred geologists looking for work, but the companies are looking for specific kinds of people and they’re having to struggle to find them,” Ayling said. He said he is “buried” with assignments from several large oil companies looking for geologists and engineers with exploration skills.

College Enrollment Down

“A year ago, nobody was looking. Now, companies have decided to go exploring, but the handful of people they retained aren’t enough. And the source of these people is going away. There are some very bitter folks who won’t come back to the oil industry.”

The professional shortages appear to be scattered or confined to highly specialized fields. Some major oil companies, for instance, might not be satisfied with the credentials of geologists laid off by smaller, independent firms. And as many as half the 10,000 who recently left petroleum engineering jobs took early retirement and have “gone fishin’ or died,” according to Crouse.

Meanwhile, the falloff in college enrollment has been dramatic, indeed.

The number of college freshmen in petroleum-related studies neared the vanishing point last year in lock step with oil prices. At USC’s department of geological sciences, there were “three or four” freshman majors last year versus the usual 25 or 30, according to Chairman Robert Osborne.

A University of Texas survey of eight leading geology schools, including Stanford, showed that undergraduate enrollment has plunged about 70%, to barely 700 students, from the peak levels reached in 1982. Nationwide, enrollment in petroleum engineering stands at 1,900, compared to more than 10,000 in the 1982-83 school year.

The big problems are expected to begin in a couple of years. But because those enrollment declines began several years ago, when oil prices began a more gradual slide from their 1981 peak of $40 a barrel, a crunch has already arrived with this year’s senior classes--despite the oil industry’s relatively low current level of activity.

“The majors are back in the market,” said the University of Texas’ Fisher.

Notwithstanding the availability of experienced geologists and engineers, USC’s Ershaghi notes that the starting scale of about $33,000 for a BS in petroleum engineering means an oil company can get two for the price of one by hiring freshly trained students instead of veterans accustomed to earning $60,000 to $90,000.

Ershaghi delivers what seems to be a plausible sales pitch: “This is the ideal time to get into the field.”