The Permian Basin Has a People Problem

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The so-called “great crew change” had been whispered in oil and gas circles dating back to at least 2014. By 2015, those conversations began taking form in places other than the water cooler. The industry attempted to train a new generation of workers before it lost thousands of years of knowledge to retirement.

Then a double black swan event ended all hope of a smooth transition.

First, in early March 2020, OPEC+ found itself in an impossible spot. Its two largest producers, Russia and Saudi Arabia, could not agree on production quotas. The backdrop, of course, was a softening market as COVID-related demand decline was in its early stages.

Second, just days later, the U.S. began canceling international flights, and most states began rolling out lockdowns. The one-two punch of the Saudi versus Russia price war and COVID lockdowns started a downward price spiral that would see oil prices briefly go negative.

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Many who were a few years away from retiring left the industry. The great crew change happened but in more ways than one. Not only did older workers retire, younger workers found other industries that would pay similar wages but without the travel.

Now, on the backside of 2020, the industry is trying to find its way again—this time, it’s finding it harder to fill those jobs than before.

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While companies have tried to work with employees to accommodate them, many oilfield jobs require manpower in the field. This puts the industry against an emerging work-from-home movement.

According to the Mckinsey American Opportunity Survey, 58% of Americans have the option to work from home at least one day a week, and 35% have the chance to work from home five days a week. Even more troubling for companies looking to put people in the field, nearly 87% of workers will choose the ability to have the work-from-home option rather than be forced to go to the office every day.

Service companies are trying to weave in a hybrid model when they can, but it’s not practical for most jobs.

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“It’s getting harder to convince people to come out here. Permian operators assumed that people would be willing to work out here because of the higher likelihood of long-term work,” Pope said. “The Permian is playing catch up to the other basins, particularly the Haynesville in northern Louisiana. Add to that many of the qualified supervisory workers live in Louisiana—the Haynesville is much closer to home.

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The news isn’t all bad.

According to Goldman Sachs, insiders expect the price of WTI to average $100 in 2023. Regardless of inflation, $100 oil is a price operators can make money on and expand their drilling programs.

“As long as prices stay above $80, we expect there to be plenty of work,” Pope said. “At some point, if producers want to keep putting money in their investor’s pockets, they will have to ramp up production. We expect work to pick up a bit for the rest of 2022.”

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