The Capability Crunch

the battle for resources

23 November 2010 – Robin Pinchbeck

Agenda

• Petrofac
• Context for our industry
• Generation X & Y
• Our approach to recruitment & retention
• Petrofac’s employment proposition
Petrofac
• A leading provider of facilities solutions to international oil & gas industry
– 30 years’ experience supporting oil & gas production and processing
– Successful track record of several hundred projects
• We design and build oil & gas infrastructure; operate, maintain, and manage
facilities and train personnel
• Where we can leverage our service capability, we develop and co-invest in
upstream and infrastructure projects
• Our key markets are the Middle East and Africa, CIS and Asia Pacific and UK
Continental Shelf
– these markets account for 70% of the world’s proven oil reserves and 85%
of proven gas reserves
Focused on growth…

Revenue – US$ millions

• 13,000+ employees
• listed LSE
• market cap. approx. $8bn
‘02 391

Finding Petroleum: The Capability Crunch

Indexed share price performance since IPO

800
672%
700
609%

600

500
Indexed Price

400

300

200

38%
100 27%
7%
0
Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

May-10

Nov-10
Apr-06

Apr-07

Apr-08

Apr-09
Petrofac OSX Petrofac + EnQuest FTSE 100 FTSE 250

Source: FactSet as at 4 November 2010

Finding Petroleum: The Capability Crunch

 Operating locationsMilan Moscow Atyrau

Aberdeen Abu Dhabi

Sharjah

Sakhalin
Woking Bishkek
London Beijing
Algiers
Houston
Mumbai
Tunis
Khartoum
Chennai

Lagos Doha Kuala Lumpur

Ahmadi
Khobar
Jakarta

Damascus

Main operational centres

Other operating locations
Corporate services

Finding Petroleum: The Capability Crunch

Petrofac “DNA”

• entrepreneurial culture with leadership close to the detail

• a focussed business in terms of offering and geography
• high employee ownership, yielding high project ownership
• a willingness to take (and manage) commercial risk, beyond the appetite of
peers … AND to do things differently
• high confidence to deliver ‘on the ground’ where we work using:
- local resources and supply chain to deliver to international standards
- our contacts and cultural affinity
• risk identification and management followed by a relentless attention to detail
in execution

Finding Petroleum: The Capability Crunch

Industry and Social Context
Oil Industry
• Over half the world's energy is currently sourced from oil and gas and this
is forecast to rise towards 60% in 2030
• Even if the UK achieves its objective of sourcing 15% of its energy from
renewable sources by 2020, it will still rely on oil and gas for 70% of its
energy, roughly the same proportion as today
• The maturity of Western economies is linked to lower birth rates and fewer
graduates just as companies are striving to expand into new markets in
developing countries
• The whole industry faces some stark demographics:
– Around 50% of professional E&P staff are aged between 40 and 50
– Only 15% are junior recruits aged between early twenties and mid-
thirties
– Up to half the current workforce is likely to retire within the next ten
years
• Pressure to replace skills is most likely to be felt in the technical side of the
business, where shortages are more acute and the demands from the
business more intense

Finding Petroleum: The Capability Crunch

Social Context

• Whilst oil and gas industry people needs will continue to grow over next decade,
too few people have entered during past 25 years resulting in shortfalls of talent
• In particular there is now a critical shortage of middle managers in positions to
succeed those in senior leadership teams, who will be retiring in next 5-10 years
• Universities across Western world are not graduating enough engineers to take
care of their domestic needs, never mind producing a large expat population
• Need to look across world for future intakes as some countries are producing a
surplus e.g. China
• Industry faces critical challenges both in terms of:
– quantity of people in those locations where they are needed
– and quality of new entrants overall

Finding Petroleum: The Capability Crunch

Social Context

• The energy industry is unique in:

– diversity and scarcity of abilities and expertise needed to make things
happen, and
– far-flung locations where cream of those highly specialised skills are
required
• Energy projects commonly involve project management and design in one
location (often in the West), with construction in Asia, and final stages taking
place in Africa, China or Australia
• Consequently, project management and technical personnel must be able to
move freely between continents to execute each project phase
• Therefore companies servicing the oil industry require immigration and
employment policies that allow overseas professionals ease of passage

Finding Petroleum: The Capability Crunch

Demographic Challenges

• Generational differences have real implications on how employers and

employees interact
• Each generation brings a different set of attitudes to the workplace
• Organisations need to respond to these different attitudes if they are to
attract and/or retain talent from each generational group
• Generation X (those experienced professionals currently in middle
management positions looking to progress) are most notably in short
supply

Finding Petroleum: The Capability Crunch

Demographic Challenges
Traditionalists Baby Boomers Generation X Generation Y
(Born 1922-1945) (Born 1946-1964) (Born 1965-1980) (Born 1981-2000)

Work Ethic/Values Hard work Work efficiently Want structure and Multi-tasking
Respect authority Desire quality organisation Entrepreneurial
Adherence to rules Question authority Sceptical Goal-orientated

Leadership Style Directive Consensual Everyone is the same The young leaders’
Command and control Collegial Challenge others century

Interactive Style Individual Team player Entrepreneur Participative

Loves meetings

Communications Formal In person Direct Email

Written Immediate Voicemail

Feedback and Satisfaction in job well Don’t appreciate How am I doing? Whenever I want it at
Rewards done feedback Freedom = best reward the push of a button
Meaningful work
Messages that Your experience is You are valued and Do it your way Working with other
Motivate respected needed Forget the rules bright, creative people

Finding Petroleum: The Capability Crunch

Generational attitude differences

• Baby Boomers (born worldwide 1946-1964)

– Place more emphasis on work as an anchor in their lives
– Tend to be loyal and stay for long periods with one employer
• Generation X (smaller population born 1965-1980)
– Typically more organisationally cynical than the previous generation
– More likely to change jobs if they see more rewarding roles (compensation
and career progression)
• Generation Y (born 1981-2000)
– Nearly as large a group as the Baby Boomers but driven by different values,
life experiences and high expectations
– Technologically savvy, highly networked with friends and colleagues, and
used to instant communications
– Place more importance on job content, sense of purpose, career path and
training, communications and work/life balance

Finding Petroleum: The Capability Crunch

An example of our developing approach to
knowledge retention
 Petrofac Graduate Development Programme website

• Designed to be an online
base for the graduates
• They can hook up, share
information, discuss
topics, etc
• They can access it
whenever and wherever
they want to
• Track their progress and
learning

Finding Petroleum: The Capability Crunch

 Learning from Experience

The knowledge of the retiring generation is at

worst lost or at best captured in an
inappropriate or irrelevant way

Around 50% of E&P staff are between 40 and

50 years old and will retire within the next 10
years.

The pressure is on to up-skill younger technical

staff

Finding Petroleum: The Capability Crunch

 Learning from Experience

The Petrofac wiki on the Graduate Development Programme website is used as

a knowledge repository and is built, used and updated by the graduates

Finding Petroleum: The Capability Crunch

 Learning from Experience

The group meet with ‘experts’/senior staff and learn from their experience and
knowledge

Finding Petroleum: The Capability Crunch

 Learning from Experience

Each graduate captures what they have learnt and adds to the wiki to expand
upon what others have added

Finding Petroleum: The Capability Crunch

 Learning from Experience

Other groups can access the wiki, learn from others’ experiences, update/add to
the information and help the knowledge repository grow

Finding Petroleum: The Capability Crunch

 and share this knowledge on the Wiki

Finding Petroleum: The Capability Crunch

Petrofac’s business is competence provision

• We’re asset-light: our main assets really do leave the buildings every night
• Our growth is built entirely on people:
– recruitment and retention are absolutely critical and strategic
• All levels of management (including executive management) spend significant
amounts of time interviewing, selecting and enrolling talent
• We think our culture differentiates us
– and the only way this can be “sold” is movers and shakers looking
candidates in the eye

Finding Petroleum: The Capability Crunch

Petrofac’s employment proposition

• Petrofac is a pure meritocracy; no one nationality predominates and our

leadership is very diverse; there is no identifiable corporate nationality
• A large proportion of our employees (nearly one third) are shareholders
– we think this is fundamental, and we strive to increase
• We promote from within, but also require a lot of external mature recruitment
– and therefore, have to achieve rapid cultural assimilation
• We reward the creation of wealth & pay for performance
• We articulate clear values and these guide our recruitment and selection
processes, as well as the everyday conduct of business
• We believe individuals really make a difference

Petrofac is still led by founders, which differentiates us from many

competitors in the battle for talent;
Our challenge is to keep the core DNA intact and developing healthily

Finding Petroleum: The Capability Crunch