Managing Workforce Uncertainty in US Oil and Gas with Deel

Despite the US oil and gas industry’s importance to the national economy, it remains beset by current and future workforce challenges. In 2022, US oil production averaged 11.9 million barrels daily, making it the world’s largest oil producer. Its share of world oil production stood at 14.7%, well ahead of the second largest producer, Saudi Arabia, at 13.2%. The US oil & gas industry supports roughly 10 million jobs or 5.6% of US employment. However, remaining competitive requires effective workforce management. Challenges hindering the industry include the growing skills gap among its workforce. Automation, AI, and sustainability will impact the industry’s long-term prospects. This article will examine factors impacting long-term workforce trends in the US oil and gas sector. Additionally, we’ll highlight opportunities to leverage innovative workforce solutions such as Deel US PEO and Payroll to help companies navigate the challenges ahead.

ExxonMobil’s definitive merger agreement with Pioneer Natural Resources, the Permian Basin’s largest producer, for $59.5 billion and an uptick in M&A activities will have implications for the US oil and gas workforce.

ClearSky 2100 Ventures, Exxon Mobil(October 11, 2023)

• Commodity Prices: Rising US oil demand is expected to outstrip supply over the near term, with record oil and gas production forecasts for 2023 and 2024. Spurred by better well activity and higher commodity prices, US daily oil production in 2023 and 2024 is forecast at 12.8 million b/d and 13.1 million b/d, respectively. The US’s dominance as the world’s leading oil producer will continue as record production is expected for 2023.
• Geopolitical Tensions: Additionally, we expect ongoing geopolitical tensions to persist, supporting higher commodity prices. We forecast WTI to remain range-bound between $75-90/bbl into 2024. In the near term, the expansion of the geopolitical tensions across the Middle East since October 2023 and fears of a wider conflict may see oil test the $100/bbl level according to some analysts.
• Technological Advancements: The industry has increasingly incorporated technological advancements such as automation, data analytics, robotics, blockchain, etc. Despite the promise presented by technology, many projects fail to move beyond the pilot phase. Moreover, global consultants McKinsey report that over 70% of digitization projects remain stuck in the pipeline due to workforce challenges.
• Environmental and Regulatory Focus: The global shift towards cleaner and more sustainable energy sources presents a significant challenge for the oil and gas industry. As a result, companies are investing in renewable energy projects, carbon capture and storage technologies. Consequently, the industry’s workforce must keep pace with these trends as green jobs increase. In the US there are currently 900,000 green jobs with another 114,330 expected to be added by 2030 as $500 billion is deployed in climate-related solutions.
• Shale and Unconventional Resources: The rise of shale and unconventional resources, such as shale oil and gas, has created new opportunities in regions like the Permian Basin and the Bakken Formation. US shale producers have indicated no plans to drill less according to recent reports.

The long-term trends impacting the sector over the long term also reveal the difficulties in managing a workforce to meet the industry’s future needs as the skills gap begins to emerge. More importantly, these challenges disproportionality will affect the independent oil & gas producers. In the US, over 90% of US oil & gas production is supplied by around 2,200 companies. Many of these companies produce less than 20,000 boe/d. The impact of the independent producers cannot be understated. In 2018, for example:

• The independent’s combined share of oil and dry natural gas/NGL production stood at 83% and 91%, respectively.
• Influence on US $1.2 trillion of US economic activity in 2018.
• An average wage of $325,585 in 2018 and is expected to rise to $493,581 by 2025.
• Contributed to 4.5 million jobs in 2018, forecasts will rise to 6 million by 2025.
• Independent producers are located across 33 states with an average of 12 FTE.

Some of the key jobs in sector include

• Geoscientists
• Petroleum engineers
• Petroleum pump system operators
• Roustabouts
• Wellhead Pumpers

Demand for specialized talents currently outpaces the availability of qualified professionals. This gap arises from rapid technological advancements, an aging workforce, and shifts toward renewable energy sources. As the industry evolves, there’s an increasing need for workers with expertise in digital technology, data analysis, automation, and sustainable practices.

70% of oil and gas workers are considering leaving the industry within the next three years

Bain & Company(2023)

• US Compliance: Deel’s US PEO and Payroll product ensures businesses remain compliant with US labor laws and regulations, helping them avoid legal issues and penalties. Deel US PEO Solutions provides registration support in all 50 states, allowing for efficient tax filing and payment.  
• Efficient Payroll Processing: With Deel’s user-friendly interface, businesses can easily manage payroll processing, ensuring accurate and timely employee payments.
• Comprehensive Benefits Support: The product offers various benefits, including health insurance and retirement plans, allowing businesses to attract and retain top talent. Deel benefits solutions include medical and dental, 401K, accident, and gap insurance. Benefits solutions comply with federal, state, and local benefit laws and ACA and COBRA insurance programs.
• Minimized Administrative Burden: Deel handles HR administration tasks such as onboarding, offboarding, and employment contracts, reducing the administrative workload for businesses. The company provides instant access to in-house support with a dedicated CSM and 24-7 in-chat support.  
• Data Protection: Deel provides tight security and data protection in its US and global solutions. The company is SOC2 and ISO 27001-certified. These certifications are among the most robust for information security management. They also offer GDPR-compliant solutions and work with multiple SSO providers.

Ultimately, the decision to partner with Deel depends on your business’s specific needs and circumstances. We recommend you evaluate your business needs as well as your competitive environment to determine if this solution aligns with your goals. Some of the pros and cons of a partnership with Deel include:

1. Efficient HR Management: Deel offers comprehensive HR services, including payroll, benefits administration, employee onboarding, and compliance management. This allows businesses to offload time-consuming HR tasks and focus on core operations.
2. Access to Benefits: PEOs often pool together employees from multiple small businesses, enabling access to more competitive employee benefits such as health insurance, retirement plans, and other perks that might otherwise be cost-prohibitive for individual companies.
3. Expertise and Compliance: PEOs are well-versed in employment regulations and compliance requirements. They can help businesses navigate complex labor laws, reduce the risk of legal issues, and ensure that HR practices align with current regulations.

1. Loss of Control: When partnering with a PEO, the employer relinquishes some control over HR functions. Also, the PEO may influence employee policies, benefits offerings, and HR processes decision-making.
2. Possible Costs: While PEOs can offer cost savings through shared benefits and streamlined operations, fees are associated with their services. These fees might not always be lower than handling HR functions in-house. Consequently, it’s important to understand the fee structure and weigh the value proposition carefully. 
3. Employee Relationship: There can be confusion among employees about their reporting structure and employer. Additionally, some employees may feel a disconnect between the business they work for and the PEO that manages certain aspects of their employment.

The long-term outlook for the US oil and gas industry is marked by a complex balance between traditional hydrocarbon extraction, technological innovation, environmental imperatives, and shifting energy demands. As such, companies that effectively adapt to these challenges are more likely to remain competitive and resilient in the face of evolving industry dynamics. Consequently, companies must embrace sustainable practices, diversify their operations, and invest in cutting-edge technologies. Workforce challenges present a clear bottleneck to achieving these goals. However, companies such as Deel and their US PEO and Payroll services can support companies in meeting the challenges that lay ahead. As the energy transition unfolds, the industry’s ability to strike this complex balance will be pivotal in shaping its future trajectory.

For more information, head over to Deel to book a demo, or contact us at ClearSky 2100 to learn more. Also, be sure to follow us on LinkedIn.

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