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Oil & Gas Sector Booming

In just 2 weeks, Firmsconsulting has seen six clients withdraw from the interview process to accept lucrative energy industry offers. Three had written offers in hand from BCG, Bain and McKinsey. The geographical scope of the offers, range of degrees affected and that such poaching has happened since at least June 2011 warranted us discussing this trend in more detail.

Consulting firms are, therefore, even more desperate to find oil and gas talent since they are losing so many consultants, candidates in the interview process and interested profiles.

For context, since mid-2011, a client has withdrawn from our program every single month to accept an energy industry offer. That our clients span over 60 countries and the trend keeps increasing indicates the energy sector is far from its peak in hiring. All degrees have been positively affected, though MBA’s with heavy construction and/or energy experience and PhD’s with energy backgrounds are the dominant group.

Consulting firms are, therefore, even more desperate to find oil and gas talent since they are losing so many consultants, candidates in the interview process and interested profiles.

We can easily see why this is happening. In just 4 short years, the energy sector has become a dramatically segmented sector with each of the segments showing steep growth with even more room to grow. This is not about splintering of a finite sector, but the expansion of 4 major sub-sectors.

In our recent travels across Asia, we have seen first-hand the impact of energy development. Previously struggling regions like Mongolia, Azerbaijan, Kazakhstan etc. are swimming in cash, jobs and opportunities. Mongolia alone, posted a 17% GDP growth rate last year, though it is currently driven more by mining, though export coal is a major business.

Gas

Gas which was always big, is gaining new life via major finds in Brazil, Israel and perennial producers, the Central Asian Republics. Fracking, has completely transformed parts of North Dakota, Pennsylvania etc. and these are just for the well-known Bakken and Marcellus sedimentary formations. Many other formations are under development, and some are potentially larger. Australia is laying the groundwork to develop the massive Gorgon gas fields off the North-West coast and needs people. Angola, Indonesia and Vietnam are all working to develop potentially lucrative fields. Consulting firms are developing new offices in at least Vietnam and Indonesia, while Angola tends to be served from Portugal and Brazil.

Consulting firms are developing new offices in at least Vietnam and Indonesia, while Angola tends to be served from Portugal and Brazil.

Aging state-owned or state influenced facilities in Mexico – Pemex – and Russia – Gazprom – stand out as well for another reason. Here, it is not about new fields, but fixing aging assets. Although Russia has proven gas deposits that will last for at least 80 years, the conventional fields are depleting and investments are needed just to maintain production lost on a sieve-like pipeline network. Most pipelines are relics of the Soviet era and at least 18 years old. That equates to lots of leaks to plug.

Oil

Oil is also seeing a revival. Previously underperforming oil fields in Angola, Nigeria and Iraq are all seeing tremendous growth. Shell is on the verge of gaining permission to drill in the barren coasts of Alaska and the Norwegians and Russians are bound to get involved as well. Russia alone expects to spend billions of dollars to develop its fields.

Coal

Coal is the dark horse. Barely mentioned in all the fracking excitement, it is not dead thanks to some unusual technology developed but never perfected, thankfully, by Hitler. Fischer-Tropsch technology, perfected by Sasol, could open up huge untapped low grade coal reserves in Central Asia and likely see the development of a new >$2B industrial complex in the heart of South Africa. Qatar, China and Turkey are all looking to use the technology to generate oil-from-coal and oil-from-gas. Not to be outdone, Chevron and Exxon are also exploring this area.

Carbon Sequestration

Carbon sequestration is the unlikely 4th leg here. All those carbon emissions have to go somewhere and firms like BCG and McKinsey in particular have built a concerted strategy around developing analyses and ideas on carbon sequestration best-practices and the economics of achieving them. This is an innovative strategy since such engagements afford access to local, state, and provincial governments as well as the major energy players – in other words, it gets the right type of attention.

All those carbon emissions have to go somewhere and firms like BCG and McKinsey in particular have built a concerted strategy around developing analyses and ideas on carbon sequestration best-practices and the economics of achieving them.

In this space we have also seen engineering consultancies like Schlumberger, SNC Lavalin, Parsons, and Mott etc all vying for more influence by either partnering with the major consulting firms or bidding against them. In more than one case, the engineering consulting firms have won. It is unlikely they could do the work as well, but that will have to be proven out.

***

These four energy sub-segments are driving up property prices in some interesting parts of the world.

Calgary

Calgary in Alberta, Canada is one such place. In Canada, if you cannot find gainful employment in Toronto, Montreal or Vancouver, you can head to cowboy territory where the Premier’s office expects the population to increase 40% in the next 10 years. Salaries are high and there is not enough talent to go around. Rental vacancies sit at a scary 4% and there is a lot of construction underway to close this gap, including redeveloping the downtown area. McKinsey runs an office out of Calgary and BCG is planning an office shortly. Canada is deeply searching for oil and gas skills and the region is immigrant friendly. We have found it easier to place clients here, but much easier if they are Canadian or American, or at least with strong international experience.

Perth

The tiny city of Perth in Australia continues to gain, probably needed, attention. This is the home of McKinsey’s implementation group and the center of their oil and gas work in the region. Moreover, BCG’s efforts in carbon sequestration are based here as well, having done work for both the federal and state government. Australia is the mirror image of Canada when comparing skills shortages and immigration policies. It has better weather too.

Central Asia

We are not going to pick anyone place in Central Asia to highlight. They are all growing with a scary shortage of skills. If you have talent in oil and gas and want to make money, this is the place to be. The culture is nice, people are friendly and the natural tourism opportunities are rarely discussed but can easily rival any major destination – though as a consultant you will not get much opportunities to travel. From Baku to Astana to Ulan Bator we are seeing a huge commodities driven development cycle. Beyond Mongolia, the rest are mainly energy driven. We regularly receive questions from candidates we have placed asking our advice on pursuing engagements in these regions.

Definitely an exciting place to be, but a fair amount of operations work, not to mention public sector work since many energy assets are state-owned and run.

Definitely an exciting place to be, but a fair amount of operations work, not to mention public sector work since many energy assets are state-owned and run. Consultants serving these regions are most likely to be staffed from London or Moscow, and sometimes the Middle East. Speaking Russian tends to be an important, but not a critical requirement. We have placed clients into these regions as a result of their technical backgrounds, even with weak Russian. We do believe that candidates must, however, have a good understanding of the region, sector and possess strong reasons to work here. This is an important criterion that we need check carefully.

Brazil

Bain’s operations in Brazil employ about 200 consultants. That is a large number of consultants, and they are gunning for more work at Petrobras – as is everyone else. McKinsey, BCG, Deloitte, ATK, Booz, Roland Berger etc. are all hoping to either work at Vale or Petrobras. The crown jewels of Brazil. The nice thing about Brazil is you can work out of major centers while serving these clients. At the moment, McKinsey is by far the dominant firm at Petrobras, while the Deloitte Oil and Gas team has built what is probably the most comprehensive analytical database on oil and gas fields worldwide. I am just not sure how they will use it. Brazil has always been easier to place clients given the huge skills shortage we see.

Secunda

Sasolburg and Secunda must be some of the most interesting towns in South Africa. One is named after one of the world’s most innovative and successful energy companies, though both the town looks like time left them behind. Restaurants close at 9pm on Saturday’s and there are just a few bars in town. That said, this region attracts most of Africa’s top engineering talent, and great minds from around the world. The region cannot find enough engineers and 4 of our previous clients left consulting positions to take up management positions at Sasol – usually in business development or engineering management – small town, a little boring and great salary. Until recently South Africa was tough to place clients since only McKinsey had a presence. ATK closed down some time ago while Booz and Roland Berger never had a permanent presence – Booz did have a satellite team advising on the early privatizations which took place. This has now changed with both Bain and BCG opening offices and searching for talent in a country with severe skills shortages. Getting a visa is easy if the relevant “special” skills requirements are met, though McKinsey is now trying to only hire local South Africans. BCG and Bain are still in the phase of hiring mainly foreign degree consultants to impress local businessman.

Iraq

Iraq is back. We were on a call yesterday discussing the merits for a previous client to take up an engagement which would see her travelling into Iraq to benchmark operations. She did not seem happy about this at first. The country recently surpassed Iran in oil production and there is a huge demand for operations skills. At the moment, engineering firms have an advantage over the traditional consulting firms since they were there first. That is changing. The client did take the project and I received some interesting photos in my inbox. Who would have guessed that Saddam’s presidential palace would one day come to life as a hotel for Hugo Boss wearing Ivy League graduates? No one is hiring for Iraq though. Based on recent discussions with various partners, I believe that will change in the next 6 months. An office is still some time away, but flying in teams is already happening.

I have left out other regions like China, Mexico, Nigeria etc since they are growing, but not at the rate of the regions briefly profiled above.

***

Candidates have been receiving generous offers to leave their consulting dreams; high base salaries which easily exceed a Bain package by about 40% to 70% in some cases. We have seen huge signing bonuses and in a few cases they have been tax free. Relocation packages have been offered as well as guaranteed bonuses for meeting time commitment targets in specific regions. I suppose anyone would need a bonus to brave the harsh north-Alaskan winter – and maybe summer as well.

All of our clients who were approached, or whom we helped approach an energy company, had unique knowledge which allowed them to immediately deploy this skill to further a multi-billion dollar energy investment. Having a McKinsey or BCG offer certainly impressed the oil companies. Just being in the process of interviews was enough in some cases.

In several cases, packages for children’s education and travelling allowances, to visit family, have been offered. In my 11 years as management consultant, I have never seen any consulting firm be this generous. The packages cannot be matched.

So which candidates are getting these offers?

All of our clients who were approached, or whom we helped approach an energy company, had unique knowledge which allowed them to immediately deploy this skill to further a multi-billion dollar energy investment. Having a McKinsey or BCG offer certainly impressed the oil companies. Just being in the process of interviews was enough in some cases.

A client from McKinsey spent just a few months at the firm before leaving to join a state-owned energy concern. Her unique knowledge; working for a few years previously in the office of the national energy regulator.

Another client was scooped right out of his PhD due to his unique knowledge about shale gas and its impact on Asian development. He withdrew from his consulting interviews.

A very young client declined an existing BCG offer to return and joined a Chinese multinational exploring for gas in Uzbekistan. His unique knowledge; in his MBA internship he developed the business case for a western oil major to partner with a Chinese state-owned oil major. When the deal went through, it was the Chinese firm who made him an offer on the last day of the negotiations.

The most important skill was that these clients could hold a deep and well-structured discussion on the subject. In other words, they did not merely rely on their resumes to secure the offer. I can recall many, many conversations asking them to go back and rethink their achievement stories, leadership stories and points-of-view on key trends in the sector. All were smart, but needed help on getting their message across.

For consultant, even a partner, the Holy Grail is one day obtaining a P&L and becoming CEO. Preferably of a Fortune 500 company. If this path gets them there sooner, it could be a better choice.

It comes down to the candidate when deciding among offers. It is very hard to turn down offers which exceed consulting counter-offers by up to 100% in some cases, and large parts of the bonus are guaranteed. In some ways, maybe it is the best choice. We have trained them to think in a deeply analytical and structured way, and this can only set them apart from their industry peers. As well, a talented person can succeed anywhere. They might as well be paid well to work in a sector they enjoy. The holy grail of management consulting is not the partnership. The same way you do not go to university to be the best final-year student. It is just a stepping stone. For consultant, even a partner, the Holy Grail is one day obtaining a P&L and becoming CEO. Preferably of a Fortune 500 company. If this path gets them there sooner, it could be a better choice.

Everyone is different and clients need to think carefully about the choices they make and the consequences. In several cases, where we felt the offer would not help a candidate, we have strongly encouraged them to accept their consulting offers. In you understand the time-value-of-money concept, a few tens of thousands of dollars is not going to matter in the long term. And your career should be a long-term play.

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