Rising world population and growing human prosperity will contribute to surging demand for vital resources like energy, water and food. In this speech in Astana, Kazakhstan, Hugh Mitchell explains why meeting that demand and addressing the associated environmental stresses will require the bright ideas and dedication of a new generation of technicians and business leaders. He talks about what companies can do to respond to the challenge of recruiting and training this new cadre of talented workers.
Managing talent to address energy challenges
Mar 14, 2013
Speech given by Hugh Mitchell, Chief Human Resources and Corporate Officer, Royal Dutch Shell plc, at the Samruk Kazyna HR conference in Astana, Kazakhstan on March 14, 2013.
Managing talent to address energy challenges
Thank you and good afternoon. It’s a pleasure to be back in Kazakhstan. I am always struck by the sense of vitality here.
I’d like to explore three themes today before handing over to you for discussion. They are:
- the significant resource challenges society faces in the coming years;
- how the world’s surging need for energy and other vital resources presents a human resource challenge, particularly in fast-developing places like Kazakhstan;
- and finally, what companies can do to attract and develop the talented workers they need to succeed in this rapidly evolving context.
But first, to give you a sense of my perspective on these challenges, let me give you some background about Shell, where I am the Chief Human Resources and Corporate Officer.
Shell is a global group of energy and petrochemical companies with about 87,000 employees in more than 70 countries and territories. If you include contractors and our retailers, about 1 million people work on Shell’s behalf every day.
There are about 44,000 Shell-branded service stations worldwide. We serve nearly 10 million customers every day. Shell refuels an airplane every 12 seconds somewhere in the world.
Our business starts with finding and producing oil and gas. Indeed, we have exploration activities here in Kazakhstan and are major participants in joint venture companies developing the giant Kashagan oil and gas field in the Caspian Sea.
Our business extends all the way through to refining and delivering to customers fuels, lubricants, chemicals and other high-value products. We earned $27 billion last year. And we invested nearly $30 billion in energy projects worldwide
Now, when it comes to energy and other vital resources, powerful forces are shaping the future. Last year the world’s population passed 7 billion. Every day more than 200,000 babies join the human race. At that rate, the planet will be home to 9.5 billion people by 2060. Much of that growth is occurring in Asia.
Moreover, millions of people are climbing out of poverty for the first time. They are buying their first cars or refrigerators and enjoying a standard of living their parents could only dream about.
Clearly, the world will need more life-sustaining resources, including water, food and energy. Indeed, world energy demand will double by 2060.
At the same time, society must address the stresses of a growing population on our planet. That includes the threat of global warming. To avoid the worst effects of climate change, governments, companies and individuals will need to find ways to reduce carbon dioxide (CO2) emissions.
Shell has a 40-year history of using scenario planning to explore possible future landscapes and aid strategic decision-making. Our latest look into the future explores two possible ways the 21stcentury could unfold, with dramatically different implications for society and the world’s energy system.
One scenario, named Mountains, sees cleaner-burning natural gas becoming the most important energy source globally by the 2030s. It also sees early action by governments to limit carbon dioxide emissions. The other, named Oceans, sees solar becoming the top source by about 2070, but with slower action to address the threat of climate change.
Regardless of the scenario, in order to meet surging demand, the world will have to develop all energy sources, from renewables to fossil fuels. Solar and other renewables will grow dramatically from today’s relatively small base. And fossil fuels will continue their role as the world’s primary energy sources for many decades to come.
Kazakhstan, with its energy riches and its location near Asia’s growing markets, is poised to be an important player in meeting that demand. Indeed, surging demand will be a major opportunity – both for energy-producing countries and for the global energy industry.
But that opportunity also comes with huge challenges. The age of easy-to-access oil and gas is over. We face increasing technical and environmental challenges in developing new sources of oil and gas. Much of the world’s undeveloped energy resources are in places like deep oceans and the frozen Arctic. And the remaining oil and gas increasingly contains impurities that make them difficult to extract and process.
The Kashagan field is a prime example. It is one of the world’s largest and most challenging energy projects. It is located in shallow water and is covered by moving ice five months of the year. The oil and gas in the field are under extremely high pressure and must be handled safely. And the field contains high concentrations of toxic and corrosive gasses that must be separated and treated. Moreover, the Caspian Sea is an ecologically unique and precious body of water that must be protected.
Human resource challenges
So how will society and companies meet surging energy demand while also addressing environmental stresses?
We will need to harness the innovative ideas and advanced technical skills of a new generation of talented and energetic people. Many more of these people will be needed in places where the energy industry is growing rapidly, but where the pool of talent is still forming. Places like China, India, and of course Kazakhstan.
This is an opportunity for countries endowed with rich natural resources. Experience shows that over time, a country’s workforce can become experts in new fields -- particularly for the special challenges they face locally. Just look at Aberdeen, in my home country, Scotland. Until the mid-1970s the local economy focused mainly on fishing and paper-making. Then oil was discovered in the North Sea. Today it is a bustling centre for a thriving offshore oil industry. Companies based there now offer their expertise to offshore operators around the world.
I feel confident Kazakh workers will one day apply their know-how to help develop fields around the world that pose similar challenges to Kashagan.
In the context of the challenges I’ve outlined, the human resources function plays an important role in ensuring the right people with the right skills are in place to address them. There are two key elements to that role:
- Recruiting talented people with the necessary technical skills in the locations they are needed most.
- Giving them the experience and training that allows them to function at the top of their profession.
The highly skilled nature of many jobs in the energy industry makes finding the right people a particular challenge. Last year Shell recruited about 9,000 people worldwide. Two-thirds of them had technical backgrounds. About 3,500 of them were experienced professionals in mid-career.
I expect we will maintain a similar pace of recruitment this year, and to continue to focus on people with the necessary technical expertise.
Over the past few years, our recruitment efforts have shifted toward regions where our business is growing. For instance, last year we began construction on a new technical centre in India that will house up to 1,500 experts, adding a third main technology hub to our existing centres in Europe and North America.
This reflects a strategic shift toward Asia, where future energy demand will be strongest.
In China, where we are developing hard-to-reach natural gas resources with national oil companies, we recruited more than 500 people last year, up from less than 100 in 2009.
A look at Shell’s global recruitment over the last five years underscores the shift eastward. Five of the top 10 countries were in the Asia-Pacific region. Of course, we continue to hire people in our traditional bases in Europe and North America. But the trend is clear.
Now, if you are not familiar with the energy business, you may be surprised by our long time horizon. Major energy projects can take 5 or 10 years to complete. And then they may operate for 30 years or more. With that long-term perspective, we have learned to recruit right through the economic cycle. For instance, during the recent global economic downturn, Shell continued to hire between 800 and 1,000 young graduates every year. That included during a period of corporate restructuring that removed 7,000 jobs worldwide.
The energy industry hasn’t always been as consistent. In the 1990s when the price of oil hit $10 a barrel, we cut our technical staffs significantly, then found it difficult to scale up again when the market recovered.
To ensure we have a steady pipeline of young talent coming into the organization, we maintain strong relationships with about 100 top universities around the world. They include Cornell in the USA, Imperial College London, and Southwest Petroleum University in China. For most of these top universities we set up teams of about 10 Shell “ambassadors” who are alumni, or have some other connection to the school. They meet students and discuss the amazing things we do to safely unlock energy.
Once we’ve recruited good people, we ensure they get the training and experience they need to do their challenging jobs effectively and deliver on strategic priorities. We do a careful segmentation of our work force, looking at which types of jobs and skills are likely to give us a competitive edge.
We can then focus on developing people with the most critical skills for achieving our strategic goals. That’s especially true for about 10,000 technical specialists in Shell, including geoscientists and project engineers. The human resources function at Shell plays an important role in managing their careers, from recruitment to pay and performance management. That requires an in-depth look at the needs and priorities of the people in these skill pools.
One priority in recent years has been on improving our people’s project management skills. To give you an idea of the challenge and scale of modern energy projects, look at our Pearl plant in Qatar. It takes natural gas from the world’s largest gas field and transforms it into high-value products, including cleaner-burning liquid fuels and oils for premium lubricants.
We invested a total of $18 billion to $19 billion in the plant. At the peak of construction, more than 50,000 workers from over 50 nations swarmed over a site the size of 350 football fields.
The plant is a technical wonder. It took three decades to fully develop the technology and Shell holds about 3,500 patents associated with the production process.
And Pearl is just one project. We currently have about another 30 projects under construction worldwide. They are part of a four-year capital spending programme of $120 billion to $130 billion.
In 2006 we set up the Shell Project Academy to bolster project management skills. It teaches the technical and commercial skills our people need to be first-class project managers. So far, about 5,500 project engineers have attended academy events. About one-third of them have subsequently completed an internal assessment to validate their skills. That assessment is linked to industry-wide professional organisations that provide independent accreditation of skills. All of this helps Shell complete complex projects on time and on budget.
We continue to improve the programme. In 2012, an independent benchmarking of high-technology companies that develop major projects ranked the Shell academy second only to the National Aeronautics and Space Administration (NASA) in the USA.
In addition to formal training, another key element in individual development is on-the-job training. We manage our work force globally, sending talented workers on foreign assignments to gain critical experience.
That includes sending local hires on short-term assignments in other locations. For example, we sent Chinese engineers to Houston to gain experience and know-how in developing natural gas resources that are trapped in dense rock. The industry in the USA has pioneered the drilling techniques necessary to unlock this abundant resource. We are working with our Chinese partners to learn from that success and unlock their own resources.
We also maintain an extensive programme of long-term foreign assignments that allows our people to gain valuable experience in a variety of operating environments. Currently, almost 8,000 people, or more than 8% of Shell’s global workforce, is on assignment outside their home country. Nearly two-thirds of them are technical staff.
During their careers, many of our people get the opportunity to live and work literally all over the world. For instance, right now almost 30% of our expatriates are in the Asia/Pacific region, while more than 20% are in the Middle East.
Sharing best practice
Increasingly, we are extending these talent management best practices to our partners. That includes joint ventures where we have a significant presence, but do not have management control -- such as here in Kazakhstan.
This helps our joint venture partners raise skill levels. It’s a win for us and it’s a win for local communities, where the workforce becomes more able. This is one way we support local development, which is often a priority for the countries where we operate.
Again, our experience here in Kazakhstan provides a good example. We have made a strong contribution to an international posting programme associated with the Kashagan project. Under this programme, KazMumayGas Kashagan nominates Kazakh candidates for international development assignments.
So far we have arranged international postings for 14 Kazakhs. They have been on two- or three-year assignments in Shell operations in the Netherlands, the United Kingdom, Australia and the USA. Two people have already returned to Kazakhstan, bringing with them a wealth of experience.
Another step was to share our people-management processes and systems with the joint venture North Caspian Production Operations Company, which was created in 2009. This provided an HR backbone that allowed the joint venture to quickly adopt best practices. The systems included resources to manage individual performance and identify skills gaps.
We had a good deal of internal debate about handing over systems and processes we spent years building and refining. In the end we decided that there were benefits for all, including for Shell. For us this is a test case for sharing HR best practices and systems with non-operated joint ventures across Shell. So far it is going well.
To close, let me summarise. The world faces tremendous resource challenges in the years ahead. These challenges represent an opportunity for resource-rich countries like Kazakhstan and for global energy companies like Shell.
Addressing the challenges and making the most of that opportunity requires building a work force with the special skills to get the job done. That means recruiting bright people and providing the training and experience that allow them to create value for their companies, their communities and themselves.