On the 1st of September, employees were returning from summer holidays, schools were starting the new term and economic conditions in the oil industry appeared as tranquil as they had done over any of the recent years.
For yet another month, Brent oil prices had started a month above the $100 mark and the fears of insufficient supply seemed our only real concern.
Then suddenly and seemingly from nowhere, sentiment changed with a series of economic and political clouds appearing on the horizon. A strengthening dollar, concerns over slowing economic growth – especially in China and Western Europe, and a divided OPEC pushed the price down by 20% to the $80 mark by mid-November.
Whilst this six-week turnaround has taken many by surprise, the majority of leading observers, including Arnaud Breuillac, Total’s Head of Exploration and Production, see the current situation as a short-term imbalance which will correct itself over the coming months.
The International Energy Association suggests that only 4% of the world’s daily output of oil requires a price above $80/bbl, meaning the price would need to fall a further 10% before we see projects on hold.
Assuming we avoid this, and the industry returns closer to its recent calmer outlook, pay trends in 2014 are likely to continue well into 2015. To understand what those trends are, we can look to Hay Group’s GCC Oil & Gas database of 173 industry organisations, which represent over 143,000 individual employees.
Analysis of the database shows a highly rewarded industry, and one where specific capability shortages – technical, geographical or those at specific organisational levels – can earn significantly above the already high salary bar.
Basic pay averages 34% higher than the all industry average across the GCC and up to 50% higher for those working in clerical or operations roles, an area where GCC nationals make up a significant proportion of the workforce.
Qatar remains the highest paying market with its small local population enjoying pay levels 33% ahead of its nearest comparator in the region. Although the pay levels and relative gaps close when looking at the larger expatriate population in Qatar, we still see salaries 10% above other countries in the GCC.
Executive management roles able to shape future direction have seen year on year increases in their basic pay of 11.3% across the GCC Oil & Gas market. We also see a more performance oriented culture at the top with annual bonuses comprising 17% of their pay mix. One level down and bonuses make up 12% of the total. This is not just a case of enhanced pay policy; total cash payouts were at 8% in 2014, double that of middle management.
Organisations in Qatar and Saudi Arabia are paying most aggressively for senior management positions at around 19 -20% of basic pay.
When it comes to the type of employer, working within integrated oil and gas companies remains the highest paying structure within the industry with a 35% higher pay than the general sector average. This grouping includes the majority of the regions NOC’s with higher levels of nati Zee Buckley – Sales Manager EMEA (right) onal employees. For standalone E+P companies the figure is still a healthy 16%.
Unsurprisingly, the more cost-conscious downstream and oil field service companies are paying approximately 8% below the average although it is worth noting that this is still comfortably ahead of the general market.
The ongoing shortage of petroleum engineers, and those in the geoscience professions, continues to guarantee them a place as the most sought after technical role. With global shortages of around 10,000 and 15% of these professionals due to leave the Middle East in the next 5 years, it comes as no surprise to see average premias hovering at approximately 10%.
However, for those with proven experience of around ten years, the market data indicates a 25% attraction over and above other industry roles at this same level.
A little more unexpectedly, we see senior HR professionals also attracting a premium of 7% above the average – perhaps reflecting the importance of those who shape powerful employee propositions that will attract and retain key resources.
Although short-term factors may distract attention, barring a further fall of $10 in the price of oil, expect to see the sector continue to lead the various GCC economies in the pay stakes as well as for those roles with perceived shortages. The temporary economic clouds will not dampen the outlook for long.
About Chris Shennan
Chris Shennan is Hay Group’s global oil and gas sector leader. He has worked extensively with industry clients including National Oil Companies and major international and service companies worldwide.
