At best a skills shortage will inflate wages and salaries; at worst there will not be the required skills available to develop business opportunities here in New Zealand.

Tena koutou katoa. Nga mihi mahana ki a koutou.
(Hello everyone. Warm greetings to you all)

I’d like to thank Transfield Worley for the invitation to speak today, on what I believe, could well be one of the biggest issues facing our industry over the coming years. Warm greetings, too, to the many business leaders represented here at this Leading Practice Forum. It’s a privilege to be with you all.

Today I’m going to talk about the looming skills shortage in the engineering and energy sector, and what we can do about tackling it, if we take a strategic, collaborative approach, starting now.

It’s a busy time for our industry here in New Zealand and even more so across the Tasman, where several multibillion dollar projects are due to ‘kick-off’ over the next few years.

I’m going to talk this morning about why we need to adopt a long term approach, in tandem with creative solutions and partnerships, to ensure our businesses are not exposed because of a skills shortage.

At best a skills shortage will inflate wages and salaries; at worst there will not be the required skills available to develop business opportunities here in New Zealand.

The fields we operate through our joint venture company STOS - Kapuni and Maui - have been successfully operating for more than 40 and 30 years respectively. It would be unacceptable if our strategy to maximise returns from these fields, using enhanced technology while at the same time exploring new opportunities, was put on hold, because of a skills shortage.


Before I get into the meat of the speech, I of course, also have to show you this cautionary note with which I am sure you are already very familiar. In essence it’s a legal way of saying that you shouldn’t take everything you hear at face value.

Shell in New Zealand

Allow me to begin, by giving you a quick overview of our current business.

Shell is celebrating 100 years in New Zealand in August this year.

From our first investment in New Zealand in 1911, in the Kotuku oilfields in the South Island, to our 50 years of operations in Taranaki, we have played an important and pioneering role in this country’s energy supply.

I believe that during this long period we have built up very good relationships, deployed lots of cool technology, employed and trained many Kiwis, and contributed to meeting New Zealand’s energy needs in a responsible manner.

While we sold our downstream business as a ‘going concern’ in April last year we continue to be a major contributor to this country’s economy, with our operated gas field’s producing about 70% of New Zealand gas supply.

We currently employ around 350 staff, a majority via STOS which not only operates the Maui and Kapuni gas fields but also provides operating services for the Pohokura field.

STOS outsources many activities worth millions of dollars to local, national and international companies. Perhaps its biggest and certainly longest lasting contract, is an extensive, broad based, integrated services contract with Transfield Worley.

Many of our staff, including myself, joined us in the early days of Kapuni and Maui as trainees, apprentices and new graduates. We were relatively inexperienced in the oil and gas industry but many of us have now been with the company for more than 20, even 30 and in some cases more than 40 years.

Of course we supplemented local staff with experienced expertise from around the Shell Group and we continue to do so today. However, we have always had a strong focus on developing our own expertise through training, cross-postings, progression and the like.

I for instance, started as an engineering cadet in the late 70s and, with the support from STOS and Shell, I completed my NZCE, then my Mechanical Engineering degree in the early 80s and my MBA in the early 90s. This formal external training was supplemented with extensive internal training, both locally and overseas, as well as lots of on-the-job training and development.

Perhaps an area peculiar to our industry is our very strong focus on safety, health and the environment. Oil and gas exploration and production, is inherently a hazardous business, but from day one we felt strongly about managing the hazards, protecting the environment and keeping our staff and contractors safe.

While of course we haven’t retained all our staff, our retention rates until recently have been extremely good. In fact some might argue too good. However, as a result of growing our ‘own timber’ which has served us very well over many many years, we have a very experienced and in many ways highly sought after, cadre of staff.

A growing energy sector in New Zealand

Let me turn now to the anticipated growth in New Zealand’s energy sector.

According to the Ministry of Economic Development, there are some 1048 billion cubic feet of gas and 55 million barrels of oil, still to be recovered from 20 petroleum licences in Taranaki. And this figure does not include reserves from non-producing fields which are also believed to be significant.

This coupled with New Zealand having the fourth largest exclusive economic zone in the world means our industry is only likely to grow from what is already a substantial base. A recent report by Venture Taranaki suggests the energy sector, directly and indirectly, contributes around $2.5 billion to GDP and directly employs around 3700 predominantly highly skilled, full time equivalents.

Shell NZ has been investing in the New Zealand energy sector for many years and continues to do so today.

We have, for instance, recently completed drilling programmes on both the Maui B and Maui A platforms, and committed significant sums to a new exploration well called Ruru, south and adjacent to Maui.

We’ve invested in new technology to conduct New Zealand’s first oil and gas, electromagnetic survey of the Maui field. And we have a major tight gas pilot project planned for Kapuni.

Of course we are by no means the only company to do so, with significant new developments like Kupe, Maari, Tui having come into production over the last few years. Then there’s the significant emerging interest in exploration, not only from established players like us, but also from global giants like Anadarko and Petrobras.

To mature business opportunities such as these, requires a broad range of highly skilled and experienced staff such as engineers, sub-surface experts, operations, maintenance and safety workers.

At the same time there is growing demand for such skills globally and more particularly in Australia.

While, as I noted earlier, we have and continue to grow our ‘own timber’, this takes time and can be costly, especially when recently trained staff decide to leave for greener pastures.

It is also often not enough to meet the immediate and emerging needs, in part due to a lack of skilled talent, in part due to competition for such scarce resources and in part due to a lack of knowledge and perceived attractiveness of our industry.

New Zealand skills status

So what is the current status of skills in the New Zealand engineering and energy sector?

The global recession took the pressure off and enabled industry to implement various short term marketing, training and development initiatives.

Auckland and Victoria University now host specific petroleum engineering and geology related programmes. The Taranaki polytechnic, WITT, has developed a pre-employment training programme for operators.

The Petroleum Skills Association (PSANZ), which was set up to respond to the looming skills shortage challenge, has done some great work and is to be commended for what has been achieved so far.

Funded and directed by eight member organisations, including representatives from the energy sector and an Industry Training Organisation, its task is to identify and implement activity that will support a long term skilled workforce for the sector.

In 2007, the report “Exploring the Challenge” was commissioned by the Petroleum Skills Association which outlined projected skill shortages.

The “Producing the Talent” report was the response, essentially an industry skill action plan which has and continues to be implemented.

However, the results from these initiatives while positive will not be enough. In fact I fear they will not come anywhere close to meeting the potentially rapidly and significantly growing demand, particularly from our cousins across the ditch.

Australian growth

Indeed our neighbours across the Tasman, have been, but more worryingly will continue to, drive up the demand for skilled workers.

Australia is entering a new ‘boom’ phase in oil and gas development which is likely to have significant impact on the New Zealand workforce.

Rapid growth is expected over the next few years, especially in Queensland and Western Australia.

According to Australian government figures in October last year, there were 72 advanced mineral and energy projects in Australia, with 60% of that figure in the oil and gas industry, amounting to a total spend of A$86 billion, which incidentally is nearly four times what Shell spends annually on a global basis.

Since 2000, employment in the Australian energy sector has grown by almost 400% and if that wasn’t concerning enough, the demand for skilled staff in Australia is only expected to increase.

Queensland is a good example of the type of growth expected. There are currently eight coal seam gas/LNG projects planned for this state alone.

Forecasts predict the current operational workforce is likely to grow by four times by 2020 which equates to 4000 new jobs, according to Energy Skills Queensland, and this scenario is based on ‘moderate economic’ growth only.

Demand will be high for both sub-surface and surface engineers across most disciplines, as well as for drillers and wire-line technicians, well engineers and of course for skilled operations and maintenance staff. In other words for the very staff that form the life blood of our business and who we need to run, maintain and grow our own operations.

The 'brain drain' to Australia

I believe that given our close links, our relatively close proximity and the ease of working across the ditch, it is a given that the Australian energy industry will continue to actively recruit Kiwi staff.

You only have to look in the newspaper to see the constant adverts from Australian companies seeking skilled Kiwi workers.

The Australian Workforce Development Plan seeks to source skilled migrants and New Zealand is perceived as an ideal target. There are few, if any restrictions for Kiwis to work in Australia, and despite what we Kiwis might like to joke about, Australia is not too bad a place to live!

We know that generally the cost of living in Australia is somewhat higher than New Zealand. For instance, a 2010 survey by Mercer reveals that for every $100 spent in New Plymouth you would need to spend $130 in Western Australia and only slightly less in Queensland.

However, we also recognise that higher wages in many cases compensate for this, and significantly more so, for sought-after skills groups and less attractive working situations. Indeed, many skilled Kiwis have already been lured to Australia by seemingly attractive salary packages.

Even if you don’t like living in Australia, there are many flexible and convenient ‘fly-in, fly-out’ arrangements available, especially to construction and operational staff.

These types of arrangements are only expected to increase as the demand for skilled workers grows in Australia.

Strategic approach

I’ve outlined the looming skills shortage this morning, now it’s time to focus on possible solutions.

It’s apparent the New Zealand energy sector needs to develop a sustainable strategy as we head into a period of significant and sustained skills demand.

Poaching off each other from a limited pool of workers is clearly not the answer. Strategic and creative solutions are required, working with a broad range of partners across the spectrum.

I envisage something like a ‘Super Group’ where government, industry, training organisations and migration services, take a long term strategic view on this issue.

Planning and training

There are a myriad of options we can consider to address this issue.

It would seem prudent, as a natural starting point, to update the data and information from the initial 2007 Petroleum Skills Association skills shortage report.

This could be conducted via the preparation of a workforce development plan to inform both individual companies’ workplace planning and the Petroleum Skills Association 2011/2012 project plan.

Once the baseline data is updated, consideration should then be given to long term planning.

First and foremost, I believe we need to recruit, perhaps over-recruit, additional apprentices, trainees and graduates, to supplement our experienced workforce. Clearly this will need to be supported with education about the industry, its opportunities and rewards.

We might, for instance, consider targeting high school students with information about the industry to encourage them to either take up apprenticeships or continue training in the skills areas that support our industry, such as engineering.

We also need to ensure that training courses at polytechnic and university level are closely aligned to the energy industry skills needs.

And perhaps the sector can provide mentors and familiarisation visits as part of these relationships.

We should also consider more on-the-job and mature age apprenticeships.

Attracting skilled migrants

And then of course there is immigration.

According to Immigration NZ, the New Zealand energy sector gained around 3500 skilled immigrants from around the globe in the last decade, the majority from Great Britain, followed by South Africa.

Of this number, only 300 were women, so arguably there is a fantastic opportunity to get skilled females into our workforce with the right incentives and flexible work arrangements.

Given the economic climate in the land of the Euro, it should also be possible to attract skilled staff from there.

We know the Australian energy industry invests substantially in offshore marketing to attract skilled migrants via various international exhibitions. It may be timely for New Zealand to re-look at a similar approach.

The obvious answer is proactive marketing during the Rugby World Cup and linking into the Government’s ‘Come, Play, Stay’ campaign.

In a similar vein, further thought needs to be given to ‘selling the lifestyle’ as part of the incentive, to attract and retain quality staff here in New Zealand.

Small populations, good infrastructure, the great outdoors and family-friendly living, should all be part of the offering.

We must be wary, however, that some immigrants simply look at New Zealand as an easier entry point to moving to Australia. We, together with the authorities, need to find ways to make this transition less easy and attractive.

Finally I believe we will also need to face up to the fact that for some highly sought after skills we may need to adjust the remuneration packages.

Shell's response

Finally let me talk about what Shell is doing to address the looming skills shortage.

We will continue to recruit and develop talented New Zealanders for a career within the Shell Group, both at home and abroad. And we’re looking to increase this effort.

We are proactively supporting the Petroleum Skills Association via a series of initiatives including:

  • the Taranaki Polytechnic (WITT) pre-employment operators course, taking on two students this year
  • a robust apprentice recruitment strategy, taking on five to ten positions annually.

We will continue to raise our external profile and market the positives of our sector to a non-industry, national audience.

And we would strongly support a ‘Super Group’ of government, industry, training organisations and immigration services to take a long term strategic view on this issue.


I’d like to finish today by acknowledging the many individuals and groups we work with.

I look forward to talking with you personally, about how we can adopt a long term strategic approach, of creative solutions and partnerships, to ensure our businesses are not threatened in the future because of a skills shortage in the New Zealand energy sector.

At Shell we don’t have all the answers but collectively we can find the right solutions.

As I said earlier, we are excited about using technology to maximise returns from Maui and Kapuni, while also proactively exploring new opportunities such as Ruru.

But we need to address the very real issue of the looming skills shortage, if these business opportunities are to be realised.

Together we can tackle this threat which has real potential to halt development and ultimately the energy sector’s significant economic contribution to New Zealand.

By focusing on this issue now, Shell looks forward to its next 100 years in New Zealand, with optimism.

Thank you very much for your attention today.