Future Manpower Needs of the UK Oil and Gas Industry

Future Manpower Needs of the UK Oil and Gas Industry Order Instructions: This is the continuation of job #114727. I will upload the Data Analysis of :
1) Indirect, Direct, Induced employment vs Oil price.

ii) Indirect, Direct, Induced employment vs Years.

iii) Production vs Years

iv) Capex(cost) vs Years

Future Manpower Needs of the UK Oil and Gas Industry Sample Answer

Quantifying the Impact of the Drop in Oil on the Future Manpower Needs of the UK Oil and Gas Industry

CHAPTER 3: METHODOLOGY

  • Introduction

The dramatic and drastic decline in the oil and gas prices in the UK over the years has significantly impacted on the future workforce needs of the country’s gas and oil industry.

Future Manpower Needs of the UK Oil and Gas Industry
Future Manpower Needs of the UK Oil and Gas Industry

The instability of oil and gas production which has been orchestrated by the declining prices has heightened this devastating effect on the future workforce needs in the UK’s oil and gas industry. This is attributed to the fact that, the consistent decline in oil and gas prices has created an unsuitable environment for the oil and gas industry to continue its growth through production expansion, and this has subsequently led to a negative impact on the future workforce drivers and needs. As a result, quantifying the impacts of this decline in gas and oil prices on the future workforce needs of the UK is imperative in order to enable formulation and implementation of corrective as well as mitigation measures for  minimizing or effective management of these effects of declining oil and gas prices (Dixon & Rimmer, 2012).

Therefore, the research design and methods adopted in study strive to ensure that the objectives of the study are achieved. Thus, using the appropriate research methodology will enable the five research objectives of this project to be achieved based on the quantitative data collected about the stipulated research variables both independent and dependent. The specific research objectives of this study are as follows: 1) To demonstrate how the dramatic and unexpected drop in gas and oil prices affected the UK upstream oil and gas workforce; 2) To describe the types of skills profiles and demand in the upstream oil and gas workforce; 3) To evaluate the skills set of those have been most impacted; 4) To demonstrate the future Manpower needs of UK upstream workforce by using statistical graph based on probability of production, and 5) To discuss or analyze the effective responsibility of UK’s oil and gas industry human resources towards employment.

As a result, the aim of this study is to quantify the impacts of the dramatic drop in prices of oil and gas on the future workforce needs of the United Kingdom Oil and Gas Industry. The study will use the dynamic Computable General Equilibrium (CGE) model in order to effectively quantify the impacts of dramatic fall in oil and gas prices on the future workforce needs of the UK Oil and Gas Industry as an appropriate research strategy to ensure that the research objectives are achieved. This research method has used oil and gas price scenarios to enable measurement of the trends of declining oil and gas prices impacts on the future workforce needs in the UK relative to the baseline.

  • Research Philosophy and Design

Research philosophy and design have been widely applied in studies as a guide to achieving the research objectives. Saunders, Lewis, and Thornhill (2009) noted that mainstream researchers had been commonly applying two main research philosophies such as positivist and interpretive. According to Lewis and Thornhill (2009), the wide application of these two research philosophies has been attributed to their significance in guiding the research studies as well as the nobility of research in demanding researchers to adopt them and ensure that they are in conformity with the objectives of the study.

In this research study, positivist research philosophy has been applied in order to quantify the impacts of the dramatic drop in prices of oil and gas on the future workforce needs of the United Kingdom Oil and Gas Industry based on the dynamic Computable General Equilibrium (CGE) model. Hill (2003) noted that the reason why positivist philosophy is commonly used because of its recognition and adherence to the norms and rules in the business environment. As a result, for the application of positivist research approach, a researcher is required to rely on the businesses’ background environments and use the appropriate scientific methods to enable the determination about the nature of such business scenarios subsequent to their quantification. This is the reason that justifies why this choice of research approach was selected in this study.

In addition, the study also a quantitative research because the variables were chosen for quantification such as oil prices, the number of employment (indirect, direct and induced), production levels as well as capital investment in oil and gas production requires a collection of quantitative data. This is mainly because the study particularly involves quantification of the impacts on the future of workforce needs in the UK’s oil and gas industry if crude oil prices continue to drop or there is a change in this trend and crude oil prices begin to rise. This means that the research is a projection study. Furthermore, based on the outcomes or findings obtained from the quantification of the impacts of the drop in oil prices on the future workforce needs in the UK’s oil and gas industry, the researcher attempts to devise the appropriate course of action for the oil and gas industry to implement in achieve sustainability in relation to Manpower.

  • Research questions

The research will focus on answering the following questions, by which they will act as the blueprint of all the analysis:

  • Has the number of employees differ significantly?
  • Is there a significant decrease in the price of oil in the United Kingdom?
  • How does the dramatic and unexpected drop in gas and oil prices affect the UK upstream oil and gas workforce?
  • What type of skills profiles and demand in the upstream oil and gas workforce?
  • Which skills set have been most impacted mostly?
  • What is the future manpower needs of UK upstream workforce by using statistical graph based on the probability of production?
  • What effective responsibility of UK’s oil and gas industry human resources do towards employment?
    • Research Model

The Dynamic Computable General Equilibrium (DCGE) model used in this study adopted various variables both independent and dependent in order to make sure that the research objectives were achieved (Cardenete, Guerra & Sancho, 2012). In this case, the independent variable Brent’s crude oil prices in dollars while dependent variables were the number of employment (indirect, direct and induced), production levels as well as capital investment in oil and gas production. A DCGE Model is without any doubt one of the quantitative research methods that are most rigorous and cutting-edge in evaluating the impacts of policy and economic shocks, particularly price shocks as well as policy reforms in the economy, whether in entirety or one sector. Because of this nature of DCEG Model, this tool is of significant use for the quantification of the impacts of a drop in oil and gas prices on the future Manpower needs in the UK’s oil and gas industry (Mitra-Kahn, 2008).

Thus, through DCEG modeling the most possible realistic status of the economic impacts to be quantified can be reproduced, particularly by simulating the structure of the economy, whether in entirety or one sector. Therefore, this is imperative in quantifying the nature and status of all economic transactions done by various economic agents, including households, productive sectors, and the government, among others (Piermartini & The, 2005). Furthermore, data analysis based on DCEG Research Model compared to other available tools or technique is able to capture a broader range of economic impacts already derived or anticipated from a global price shock or formulation and implementation of a particular policy reform, specifically on the employment dynamics, in particular, the future workforce needs to be considered for this study (Mitra-Kahn, 2008). In that sense, it is useful to adopt the DCEG research model approach, especially when the anticipated impacts of global price shock are complicated, and their materialization occurs through a variety of transmission channels.

To achieve the objectives of the study, a DCEG model was used to assess the impacts anticipated from future changes on the prices of oil on the economy of UK, particularly in the context of three alternative scenarios. The model is used to quantify the estimates of how the UK economy will possibly react to changes in prices, technology, the policy as well as other external factors by focusing on the envisaged interactions between varied industrial sectors, the government, households and the rest of the world (Piermartini & The, 2005). The justification for using this model is informed by the fact that, these models have been considered as the standard tool in conducting economic analysis empirically, and have enjoyed wide recognition and utilization by international financial organisations such as the OECD, the World Bank and the IMF as well as central banks, national governments and the European Commission (Piermartini & The, 2005; Mitra-Kahn, 2008).

The simulation was done by reducing prices of output in the economic sector of oil and gas extraction industry and the prices of inputs from other economic sectors, which is done carefully by taking into account the different sectors’ relative oil intensity and the assessment during the period to 2020 were done. Different case study scenarios of an oil price shock have been simulated of the UK economy based on DCEG model to quantify the impacts of the dramatic drop in prices of oil and gas on the future workforce needs of the United Kingdom Oil and Gas Industry. A three projected oil and gas price scenario based on a disparity both magnitude and persistence of oil, and gas price’s shock against 2016 baseline have dominantly been used for research studies. However, three projected oil and gas price scenario has been structured to provide the statistical analysis of the future oil and gas price’s trends and the United Kingdom trade position in oil and gas industry to provide generate study reliable and valid research findings and the results.  Scenario 1: Oil and gas price set at a low level ($50/barrel), Scenario 2: Oil and gas price in 2020 increases gradually to $73/barrel. Scenario 3: Gas and oil price in 2020 gradually to$108/barrel. The baseline is assumed to be inconsistency with the projected workforce growth for the gas and oil industry in the UK published in July 2015.

This study has applied the available statistical analysis tools in order to carry out the analysis of the collected data to obtain results of the entire study. As such, quantitative data on the research variables will be collected and analyzed while taking note on the positivist approach in this study in addition to anchoring it through the review of existing literature studies. Thus, the researcher will gather relevant information concerning the included variables in order to ensure that the research objectives are achieved. Therefore, the data analysis in the study is mainly done based on Microsoft Excel as well as the Statistical Packages for Social Sciences (SPSS). This means that, the Dynamic Computable General Equilibrium (DCGE) model is an imperative research tool that serves as a guiding tool in addressing the study objectives through assessment of the impacts of declining oil and gas prices on the future workforce needs in the UK’s oil and gas industry (Dixon & Jorgenson, 2013).

Future Manpower Needs of the UK Oil and Gas Industry Data Analysis and Findings

The analysis of data collected from 2010 to 2016 on variables such as Brent’s crude oil price in dollars, total employment levels (direct, indirect and induced), crude oil production per year in thousand barrels and capital investment per year in billion ₤ has been present in the tables shown below ranging from Table 1 to Table 4.

Table 1: Employment- Headcount
Year 2010 2011 2012 2013 2014 2015 2016
Direct 32,000 32,000 35,840 36,600 41,700 38,200 34,000
Indirect 307,000 307,000 300,000 198,100 201,000 160,600 151,500
Induced 101,000 100,000 112,000 206,200 211,100 170,800 144,900
Total Employment
440,000 439,000 447,840 440,900 453,800 369,400 330,400
Table 2: Employment and Brent Crude Oil Price ($) .
Year 2010 2011 2012 2013 2014 2015 2016
Direct 32,000 32,000 35,840 36,600 41,700 38,200 34,000
Indirect 307,000 307,000 300,000 198,100 201,000 160,600 151,500
Induced 101,000 100,000 112,000 206,200 211,100 170,800 144,900
Price 79.61 111.26 111.63 108.56 98.97 52.32 46.64
Table 3: Production of Crude oil (Thousand barrels) per Year
Year 2010 2011 2012 2013 2014 2015 2016
Production 62,962 51,972 44,561 41,101 40,328 45,698  
 

Table 4: Capital Investment (Billion £) vs. Year

Year Cost (Billion £)
2010 10.7
2011 19.2
2012 11.4
2013 14.4
2014 14.8
2015 9.0
2016 10.1

To answer the first research question, a chi-square test was performed to determine whether there was a significant change in the number of employees. The results are:

Table 5: Chi-square test

Data
Level of Significance 0.05
Number of Rows 3
Number of Columns 7
Degrees of Freedom 12
Results
Critical Value 21.02607
Chi-Square Test Statistic 184145.2
p-Value 0
Reject the null hypothesis
Expected frequency assumption
       is met.

The results suggest that the distribution of the number of employees is not the same. Therefore, we can state that there was a decline in the number of employees with time, which is illustrated by a bar plot below.

Figure 1: Employment headcount versus Year

The Linear 0, shows a decreasing trend in the total employment.

For the second research question, the regression test was carried out and the results were as follows.

Simple Linear Regression Analysis
Regression Statistics
Multiple R 0.6332
R Square 0.4009
Adjusted R Square 0.2811
Standard Error 23.7035
Observations 7
ANOVA
  df SS MS F Significance F
Regression 1 1880.2608 1880.2608 3.3465 0.1269
Residual 5 2809.2823 561.8565
Total 6 4689.5431
  Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 16582.8146 9017.3237 1.8390 0.1253 -6596.9539 39762.5832
Year -8.1946 4.4795 -1.8293 0.1269 -19.7097 3.3204

The significance F value suggests that there is no significant association between the price of the crude oil and the year. This is because the p-value is greater than the level of significant .05. This means that although there was a decline it was not attributed to time.

Additionally, a DCEG approach analysis based on a UK economy’s model for the quantification of the impacts envisaged to possibly arise from the declining prices of oil in three alternative scenarios both in permanent and temporary reduction show varied results. For instance, a permanent reduction in oil prices, the price of around $50 per barrel was settled at and the UK economy in terms of GDP increased by approximately 1% on average relative to between 2015 and 2020 baseline. The same report indicated that by 2020 employment levels would increase by around 90,000, while a peak boost to levels of employment would be realized in 2016 by around 120,000. In contrast, smaller impacts are observed where there is a temporary decline in the prices of oil and gas: depending on how fast and far oil and gas prices rebound, there could be variations in the boost to GDP from 0.25 to 0.5% and the increase in employment levels by 2020 could also vary between 3,000 and 37,000.

Future Manpower Needs of the UK Oil and Gas Industry Discussion

Although, there is an envisaged negative impact on the future workforce needs in the UK’s oil and gas extraction industry because of the declining prices of oil and gas, other sectors such as transportation, oil-intensive manufacturing, agriculture, and refined petroleum manufacturing sectors are expected to significantly benefit from these scenarios of the decrease in the prices of their key inputs. This would play a fundamental role in boosting both capital investment and job creation in these sectors, and the oil and gas industry can considerably improve their revenues by expanding their downward operations by widening their collaborations within the supply chain and service delivery. As a result, the human resources in the oil and gas industry in the UK have a responsibility towards employment, including the to hire people who possess the right or appropriate qualifications and skills on the job, which would subsequently lead to improved performance as well as the creation of more employment opportunities. Moreover, the goals and objectives of companies in the UK’s oil and gas industry should be aligned towards creation of more jobs by ensuring that they achieve improved employee performance, which is attainable by embarking on carrying out regular employee performance evaluations, as well as organizing routine career training and professional development programs (Hsin-His, 2012).  Furthermore, human resources can also fulfill their responsibility on employment through appropriate changes in companies’ organizational cultures, style of leadership, workplace environment, motivation, organization structure, as well as job satisfaction among others (Al Muftah & Lafi, 2011).

4.1.Conclusion and recommendation

The research has pointed out that there is a change in the number of employees in the oil and gas industry in the UK. In fact, this has a detrimental effect on the economy as well as the social life of the citizens. The results support that there has been a decline in the number of employees in this sector which requires UK government intervention to improve the condition as well as create more jobs. As earlier stated to improve this condition some adjustments need to be made like, employing highly qualified personnel, carrying performance evaluation more often, as well as ensuring that the human resource in this sector executes their mandates as required. Although, it was established that the price of the crude oil and the variable year, it is imperative for the prices of the UK oil and gas to be considerably low to benefit other sectors. This is because, if the oil and gasses’ prices are set at minimal, the cost of production, transportation, agriculture among others will intensely benefit. Thus, it is within the UK’s government mandate to ensure that the petroleum prices are consistently low to boost oil dependent sectors, which improves the revenue generation, production and service’s delivery. To make this a reality, the UK government will continue subsidizing the fossil fuel. Through this, the government will ensure that they reap maximum returns from this sector, such as job creation, improved service delivery, generation of revenue among others. The dynamic Computable General Equilibrium pointed out that when the oil and gasses’ prices are low, there are increases in the UK GDP. Therefore, there is a great urge to keep the prices of the oil and gasses low to boost the GDP of the country. Therefore, the government should set up strategies that ensure that the oil and gasses are low, like eliminating intermediaries in the supply chain, subsidizing the oil and gasses sector, or not taxing these products.

The research was successful since the objectives of the research have been achieved. Given another chance in the future, I would make some adjustment on the research. For instance, an increase in the sample size of the data to increase accuracy. This can be achieved by using monthly data instead of annual data. Also, since literature shows that from 2010 to mid-2014 the prices were steady and after that the prices declined. A test of whether the two-period prices are significantly different would be carried out. This will help in testing whether the claim that there is a recent decline in the oil and gasses’ prices.

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