falling oil prices = layoffs? 1

[oil198]

I have an offer from a major EPCM company. I am concerned about the falling oil prices, and how this will effect their work. They have a lot of employees, mostly working on oil sands projects, refineries, etc.

With oil at around $70/bbl right now, with signs of declining further, it is the culture of EPC companies to begin laying off employees if projects are put on hold or cancelled. I guess this is true for almost any company if things get really rough, but the EPC atmosphere from what i've experienced in the past is dropping the axe when things get tough. What are your thoughts? Should I accept the job, it pays well but right now I am at an operating company which take care of their employees more.

 

[Unotec]

If you're happy where you're at why change? From your post I infer you are still young. You'll learn: the paycheck is only 50% of the pay

<<A good friend will bail you out of jail, but a true friend
will be sitting beside you saying ” Damn that was fun!” - Unknown>>

 

[oil198]

It has a lot to do with what i'm doing and happiness... The job at the EPC company is where I would like to work and has the projects I am interested in..the pay is just a bonus... in that sense I want to make the switch, the job security is whats bugging me, but I guess at the end of the day you just have to do what you think is right, since these things are not in your control....

 

[ash9144]

What uno said. If happy stay where you are. Never leave somewhere just for more money. Usually the worst places to work offer the most money. Even if it is a decent place to work your salary would be back to market price within a few years due to low pay increases or topping out in your scale.

 

[MiketheEngineer]

Anybody can lay you off at anytime.... Follow your dreams...

 

[TheTick]

Some of the best jobs come up during downturns. Twice I was hired during downturns. That tends to mean the position is necessary enough to fill. When business picks up, one is positioned better for emerging opportunities.

 

[macmet]

Can someone please tell me what EPC stands for? I have seen a few job postings lately requesting EPC experience. I googled it but am still not clear.

 

[civilperson]

Engineering, Procurement, and Construction, (EPC).

 

[Dirtguy4587]

I think the EPC consultants will be the ones to suffer most, especially in considering the oilsands. My opinion is that many of the "startup" companies may defer procurement and construction. This is especially likely given the oil prices, as well as the regulatory framework in Canada currently. While the Conservatives (in Canada) have less stringent environmental legislation, they haven't fully defined exactly what will be required of companies. I know for my employer, one of the biggest question marks thus far is how they will have to respond to climate change legislation. I think you're safer with an operating company - its unlikely that they will cease operating in this environment, and operating oil companies have survived lower oil prices than $70/bbl. EPC companies will be the first to street you, especially if you're new.

 

[ScottyUK]

On the other hand the EPC companies are trying to recruit experienced engineers from the same dwindling talent pool as other companies like the utilities. If a company has enough fat to carry staff through the hard times they may find it is a good time to recruit and come out the other side with some good people on the books who feel some degree of loyalty to the employer who didn't lay them off. Over here at least the job market for experienced engineers has shifted in favour of the employee and companies are either competing to recruit and retain staff or finding that they can't recruit to replace staff who leave. If a company is intending to still be around to come out of the current problems then they need to keep their staff.


----------------------------------

If we learn from our mistakes I'm getting a great education!

 

[moltenmetal]

The trouble with booms is that they're always followed by a bust!

Many of the EPC contractors function on the basis you've described: they staff up when they have large projects, and turf everyone except for a core staff as work dries up. Since their business model is selling man-hours, it makes little sense to keep people that they can't bill out to clients: there's nothing to pay their salaries.

So the OP's concern is well founded! The important question is when?

If you wait to be laid off, you'll be hitting the street with a lot of competition. If you jump pre-emptively, you may land somewhere you don't like and regret the decision. And you may never have needed to jump in the first place.

I'd say there's no rush. Things aren't going to dry up in a month or two: 18 months is more likely. I'd start looking for really good opportunities outside the EPC world and see what you can find. Don't be tempted to settle for something you don't find exciting based solely on fear of projects drying up. You spend too much of your life at work for it to be a drag! But also don't assume that EPCs are the only places offering exciting work!

EPCs are also not necessarily a good place to go right after school. Kids fresh out school need calibration for their commonsense that is very difficult to obtain in an office which does design only. You need some field or manufacturing work under your belt to help you understand the implications of your design decisions.

If you've moved to a boomtown, the other concern is what will happen to the value of your home, if you own one. Others have been burned big time on that score.

Best of luck to you.

 

[Taqwus]

I am in the same boat. I think there should be enough work for me due to the damage to the platforms in the Gulf of Mexico, but most of that is civil and I am mechanical.

 

[MechEng2005]

I'm not in the energy industry, and don't have any special expertise. However, I suspect that the cost of oil has less impact on the overall industry than might be expected. When fuel prices went up, demand did not decrease significantly (from my observations only). I suspect that the companies were doing roughly the same work 5 years ago as they were 5 days ago, regardless of the flucuations in oil prices. Sure, if oil is selling higher it becomes more reasonable to spend a little more to obtain it and could result in more projects. However, it seems to me that the price of oil doesn't necessarily reflect demand (as demand doesn't seem to vary much while prices do). This makes me think that the oil companies operate at about the same level, regardless of price (to the extents seen at least).

Again, I have don't have any specific knowledge of the industry, so take my comments for what they are worth.

-- MechEng2005

 

[KENAT]

MechEng2005, I'm not sure your logic holds. When price goes up, while the demand may not actually be increasing as much as the price might suggest, there is a big incentive to try and 'sell more oil' at the higher price. To sell it you need to pump it.

When price goes down a lot, even if demand goes down less, there's less incentive to go balls out to sell/pump as much gas as possible.

From people in the industry I got the impression price was a big issue, but maybe I'm wrong, I'm no expert either.

KENAT,

Have you reminded yourself of faq731-376 recently, or taken a look at

http://eng-tips.com/market.cfm?

 

[Dirtguy4587]

Oil and energy companies are after the BIG profit margins. Unconventional oil (such as oilsands) is very expensive to produce compared to conventional oil. When you are paying $30+ per bbl to produce oil from unconventional sources vs. $3/bbl from conventional sources, which would you choose? Additionally, the initial capital (and time required to repay that capital) is very high with unconventional oil production.

 

[moltenmetal]

Don't kid yourself: oilsands projects are going to be smacked upside the head by the drop in oil prices if they're sustained. It's actually a desirable slowdown to some extent, to take some of the pressure off. The development of the Alberta deposits has been going at a breakneck pace for quite a few years now. But these projects won't stop or even slow down overnight.

Yes, there's quite a bit of "elasticity" in the demand/supply situation for oil/gas. People can't decide not to drive to work or not to heat their homes on a minute-by-minute basis in response to the spot price of oil or gasoline or natural gas. But that doesn't mean that the demand for rapid exploitation of these unconventional reserves won't be fairly strongly tied to the selling price of oil- of COURSE the price matters as it affects the return on the (significant) capital investment involved in developing one of these projects.

And yes, the EPCs working on new, as-yet unbuilt projects will suffer sooner and (and to a greater extent) than the producers themselves, many of whom were happily profitable when oil was at $30/barrel.

 

[BigInch]

Don't trust an EPC farther than you can throw them.

As long as they have a contract, they're stable, but when the contracts get pulled, you're definately heading out the door. That goes double for the new kids on the block.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************

http://virtualpipeline.spaces.live.com/

 

[MechEng2005]

I had a discussion this weekend with a family member that brought up a different point of view... I still think that the price/supply/demand for oil is different than many other commodities. However, it was pointed out that when the economy is slow, businesses that make "luxury" products slow down. This means less shipping and transportation of products. In this sense, I certainly see the demand for oil products decreasing in a slow economy.

-- MechEng2005

 

[BigInch]

Most products, luxury or not, require transportation to market. So, anything that can't be transported via the internet, or by hand, horse, rolling downhill, wind, sail or running water, will affect the price of oil.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************

http://virtualpipeline.spaces.live.com/

 

[BigInch]

I suppose we can still pray for a cold winter.
Do you want it to go up or down?

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************

http://virtualpipeline.spaces.live.com/