Oil and Gas Industry Training Issues

The UK Commission for Skills and Employment (2014) has established that there is a global shortage of key skills in the oil and gas industry. Data from major companies in the global oil and gas sector shows that there is a shortage of at least 3,200 skilled professionals in the areas of petrochemicals and engineering. Other occupations within the oil and gas industry that are experiencing skill shortages include marketing and leadership, general management, technical operations and financial administration. The shortage of skilled workers is likely to cause the reduction of output volume and productivity of the existing workforce, which necessitates the examination of issues facing technical and vocational training institutions (TVET).

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Problems in TVET could suggest anomalies in the mental accounting of the people being trained for jobs in the oil and gas industry. Shafir and Thaler (2006) show that mental accounting can help consumers minimize the negative impact that the pain of paying has on a consumers enjoyment of a good or service. The pain of buying is in fact greater when buying luxury goods compared to necessities. With a reduced pain of payment, a consumer increases their expenditure on luxury commodities. Specifically, mental accounting helps reduce the pain of paying when the framing of resources and expenditure results in the decoupling of an expense from consumption (Shafir and Thaler, 2006). For a consumer to decouple an expense from consumption, they must purchase a commodity with the intention of storing it for later use.

When this happens, they frame this expense as an investment rather than consumption. This perception results in the expense not being subject to the intense pain of paying. The same reasoning explains the tendency of consumers to increase their expenditure on luxury commodities when the pain of paying is lower. When a consumer frames a luxury as an investment rather than consumption, they get a good reason to justify expenditure on a commodity deemed a luxury. During the subsequent consumption of a commodity that was purchased but not used immediately, a consumer may feel that they got it free as they do not have to pay further. The psychological impact of the initial costs of the commodity declines significantly, making its consumption seem less costly.

Besides prepayment, additional factors influence the decoupling as an aspect of mental accounting. These include the method of payment, the relationship between expenses and benefits received, and individual differences in consumption and purchase behavior (Shafir and Thaler, 2006). Some payment methods predispose a purchase situation to decoupling more than others do. For instance, paying for a commodity using a credit card is conducive to decoupling whereas using cash is not. When a single expense results in multiple benefits, or where several expenses relate to a particular benefit, it becomes difficult to match a specific benefit to a particular payment. This situation facilitates decoupling. A consumer may not enjoy all benefits at once or immediately after payment, implying that some of them will accrue later without additional expenses.

Personal differences among consumers influence their tendency to decouple consumption from payment. Frugal consumers are less likely to undertake decoupling compared to spendthrifts. Payment depreciation is a phenomenon resulting from payment decoupling; over time, consumers adapt to historic costs, making the impact of sunk costs on the consumption of pending benefits less severe. The psychological sunk-cost pressure decreases as the time-delay between the payment for a commodity and its consumption increases. A consumers motivation increasingly moderates the coupling of mental accounts. When a consumption activity seems unattractive, a consumer is more likely to decouple transaction costs from the activity strategically, which enabled them to reduce the pressure resulting from sunk costs. On the other hand, when a consumption activity seems attractive, a consumer is likely to couple the transaction costs and the consumption activity strategically. The strategic coupling results in the consumer experiencing high levels of sunk-cost pressure, which increases the likelihood of consumption. Thus, the sunk-cost pressure that a consumer is motivates them to couple or decouple transaction costs and consumption.

Skiing offers an example of a product whose consumption is influenced by the pressure from sunk costs. The utility of skiing depends on the weather condition. Ideal conditions increase its utility whereas poor conditions reduce it. Therefore, when conditions are ideal, to maximize the utility following a transaction, a consumer will try much as possible to minimize delays in consumption. They will therefore couple the transaction and consumption activity, raising the sunk-cost pressure, which motivates immediate consumption. In poor conditions, on the other hand, a consumer may try delaying skiing until the conditions improve. As such, they will decouple consumption activity from the transaction, reducing the sunk-cost pressure, which motivates them to delay consumption.

Another factor moderating a consumers tendency to decouple consumption from payment is the extent to which they deem the consumption activity virtuous. The less a consumer perceives consumption as virtuous, the more they are likely to undertake decoupling. Less virtuous consumption activities relate to luxurious goods whose purchase seems wasteful, resulting in the consumer experiencing some kind of guilt. In such cases, decoupling helps reduce this guilt, as the consumer will not make payments when using the commodity later. Expenditure on goods and services perceived to be necessities, on the other hand, results in virtuous consumption. No guilt arises from this kind of consumption, making mental coupling attractive as a mechanism of enhancing the economic efficiency of the consumers decisions. This phenomenon also helps explain the version of mental accounting where consumers more easily allocate certain resources towards hedonic consumption, which is another term for less virtuous consumption. Kivetz and Simonson (2002) established that when consumers have a choice between earning cash and an equally valued luxury item, the pre-commit to luxurious goods and services, which leads them to allocate money to hedonic experiences. Perceptions of prospective students are important in the analysis of the issues facing applied learning providers.

Skills challenges continue to bedevil the oil and gas industry, calling into question the effectiveness of the programs in technical and vocational training (TVET) institutions in addressing the needs of the oil and gas industry. The ageing workforce has amplified the problem, just as the migration of experienced and skilled personnel to other countries has done. Experienced workers who have exited the industry have not been replaced at an appropriate speed. At the same time, graduates from science, technology and mathematics (STEM) fields have note joined the oil and gas sector in adequate numbers, making it difficult to balance the effects of the loss of experienced personnel.

The issue of an ageing workforce is prevalent in every subsector of the oil and gas industry. Research has shown that within the next decade, up to 70% of the current nuclear personnel will have gone into retirement (Energy Institute, 2012). Industry estimates suggested that there would have to be at least 1000 new recruits annually to sustain the output levels in the oil and gas industry. Empirical evidence also shows that there will be a year-on-year increase in the number of workers going into retirement up to the late 2020s. In addition, the oil and gas sector has an older workforce compared to other sectors of the economy. The Labor Force Survey (ONS, 2014) showed that up to two-thirds of the workforce in the oil and gas sector is older than 50, which is the same as that in other industries. However, the oil and gas sector has fewer women part-time workers compared to other sectors; women working part-time comprise only 4% of workers compared to the average of 20% of other industrial sectors. A contemporary concern for the stakeholders in the oil and gas industry, including TVET institutions and applied learning providers, is the inefficient succession planning. Succession planning has been difficult in recent years because of the rapid changes in the oil and gas landscape; peaks and troughs in labor supply and demand cause quick alterations in the projections for workforce needs. The industry has witnessed inconsistency, where large firms cannot address the major problems and embed planning, and they attract most of the new entrants to the oil and gas sector.

Smaller, less visible firms face more vulnerability and have to struggle in recruitment as well as proactive planning. The elimination of the mandatory retirement age has conflicted with the issue of an ageing workforce, making it very difficult for oil and gas firms to carry out succession planning. Employers in the oil and gas sector have expressed concerns on the effect of an ageing workforce because it takes long to train and develop personnel in an industry with a high degree of regulation. There are additional concerns on whether applied learning providers are doing enough to promote the oil and gas sector to young people pursuing further education, and if the career information that they are disseminating is appropriate for attracting entrants to the sector. Young people are not getting early education on the oil and gas sector, and those attending applied learning institutions barely know the opportunities in the sector. Stakeholders have thought that the oil and gas sector does not have sufficient visibility among young persons, which has made it necessary for firms to develop initiatives for providing comprehensive information on the oil and gas industrys career prospects to the youth at an early age.

Applied learning providers have not done enough to change the negative perceptions of the oil and gas industry. Young people think the oil and gas industry does not provide adequate progression opportunities, and its occupations entail working long unsociable hours away from home. It is imperative for the applied learning providers to increase the attractiveness of the oil and gas industry to new recruits, including increasing awareness of the benefits of pursuing a career in the industry. They also have to be at the forefront in the provision of career information, guidance and advice. There have been attempts by oil and gas companies to work closely with applied learning providers to address issues such as poor sector image, which, in turn, increases the attractiveness of the sector to new recruits. Another issue for the oil and gas industry is that STEM skills are inadequate. There are no enough individuals pursuing STEM subjects at both the postgraduate and undergraduate levels because of inappropriate perceptions among young individuals. Young people deem the costs of studying a STEM degree high, besides thinking that cheaper training options exist in other countries, which makes them stay overseas once they attain qualifications in STEM fields.

Some young people find the entry requirements to STEM programs quite prohibitive, whereas others think the STEM subjects are difficult. However, there is no imbalance between people possessing STEM qualifications and the available openings for STEM occupations. Research has shown that while there is no shortage of graduates from STEM fields, at least 40% of recent graduates from the STEM disciplines pursued employment in non-STEM occupations. Lucrative sectors such as financial services ar...