Challenges and solutions for Middle East Energy & ResourcesDeployment of nationals in a post-oil economy

2 | Deployment of nationals in a post-oil economy

Deployment of nationals in a post-oil economy | 3

Never before have national oil companies (NOCs) in theMiddle East faced such a range of challenges as theyseek to increase their output, efficiency and contributionfrom a corporate as well as a country standpoint. Howdo they recruit, retain and develop the most diverserange of talent available in competition with otheremployers? How do they deploy technology in a waythat serves the business and extracts the greatest valuefrom the large volumes of data generated within theorganization? How do they broaden their corporatestrategy to take account of the wider stewardship rolethat is demanded of them by their host governments –to grow the private sector in a post-oil economy?

In a series of three whitepapers, three Deloitte MiddleEast contributors, each a specialist in their own field, will examine specific challenges and possible solutionsthat affect Middle Eastern national oil companies in theareas of human capital, technology and strategy. Thesechallenges and solutions are not theoretical; thechallenges are drawn from real life experience, thesolutions do exist and are capable of deployment to agreater or lesser degree, although the investment inpeople, processes and technology are substantial.

It is a virtuous coincidence that all three of ourcontributors are women, each with a passion for theirspecialism. The role and influence of women in Middle

Eastern national oil companies are increasing, not onlyout of necessity but out of desire. It no longer makessense to exclude a substantial part of the populationfrom thriving in the most important industry in theregion. In other parts of the world, the corporate andinstitutional benefits of female leadership are clearlyproven – the Middle East is realizing this too.

Three Deloitte Middle East contributors,each a specialist in their own field, willexamine specific challenges and possiblesolutions that affect Middle Easternnational oil companies in the areas ofhuman capital, technology and strategy

Foreword

Kenneth McKellarPartnerEnergy & Resources LeaderDeloitte Middle East

4 | Deployment of nationals in a post-oil economy

The energy and resources industry has been thebackbone of the Middle East’s economic developmentin recent years as a result of an increase in the global oiland gas demand and rising prices. The MENA regionaccounted for around 50 percent of the world’s globaloil reserves and around 40 percent of the global naturalgas reserves in 2013, which makes the region a keyplayer in the oil and gas industry worldwide. Theabundance of these precious commodities in the MENAregion brought several advantages to the oil and gas-rich countries as oil and gas exports were a majorcatalyst for economic development and wealthaccumulation. Oil and gas companies operating in thisregion also benefited from the increase in oil and gasdemand over the years, a situation that has presentedthem with challenges as well. The challenges that weaddress in this whitepaper include an ageing workforcein an oil and gas industry already grappling with anunderweight qualified junior talent pool, as well asnationalization pressures from governments to reduce

heavy, costly reliance on expatriates. The long termsustainability of the oil and gas industry will largelydepend on the ability and willingness to embrace thesechallenges through corporate and governmentalinitiatives. The oil and gas industry in the MENA regionand the world is facing a shrinking talent pool as older,more experienced oil and gas employees retire or leavethe industry, while a more junior workforce lacks thetechnical, vocational and soft skills required by theindustry. The Society of Petroleum Engineers estimatesthat up to 50 percent of skilled engineers could retirewithin the next five to seven years, presenting animmense human capital and talent managementchallenge to the oil and gas industry. Moreover, oil richcountries in the MENA region lag behind their globalcounterparts in the number of engineering and scienceuniversity students that graduate every year. Only 6percent of GCC students graduating in 2012 majored in engineering and science, compared to 24 percent inMalaysia. Despite being a highly automated industry, the human capital element remains critical as oil and gas jobs require a wide array of skills ranging fromhighly technical to operational and commercial.Acquiring expertise in these areas requires years oftraining and experience in ambiguous and challengingsituations, and such training and experience is lacking in the more junior workforce.

With companies in the MENA region facingnationalization challenges, oil and gas companiescontinue to face a dilemma of reducing their heavydependence on expatriates in the wake of a shortage in skilled and qualified nationals. What can be done todeploy national talent in the MENA region’s oil and gasindustry?

The challenges

The challenges addressed in thiswhitepaper include an ageing workforce in an oil and gas industryalready grappling with an underweightqualified junior talent pool, as well asnationalization pressures fromgovernments to reduce heavy, costlyreliance on expatriates

Deployment of nationals in a post-oil economy | 5

The solutions

There are a series of company-specific strategies andprograms that can be developed and implemented torelieve the pressure on oil and gas companies andprovide short- to medium-term solutions regarding thedeployment of national talent. These include:

Graduate programs: aimed at national undergraduatestudents. These typically last between two and fouryears, offering the chance to gain diverse experiencethrough systematic job rotations in different sectorswithin oil and gas, in upstream, midstream anddownstream. This program exposes candidates to avariety of challenges that develop their core, technicaland soft skills. At the end, candidates choose a sector tospecialize in, and are equipped with the required skills,gained through multiple rotations, to perform a jobsuccessfully. International oil and gas companies thatemploy graduate programs to hire and train graduatesinclude Shell, Exxon Mobil and Statoil.

Women’s integration programs: aimed at takingadvantage of an underexploited female talent pool byfinding creative ways to attract women to the oil andgas industry and developing their skills. For example, theWomen Building Futures (WBF) program in Alberta,Canada was founded in 1998 to provide women withtheory, technical training and workplace conditioningtailored to the construction and oil and gas industry.International oil and gas giants Shell and Suncor EnergyInc. have been key supporters of the WBF and offerprogram participants the chance to pursue careers innon-traditional, but much needed, roles. In addition tothe conventional training methods used to enhanceindustry-specific skills, such as workshops and on-the-job training, a recent survey by NES Global Talent foundthat 95 percent of female respondents said that the

presence of mentors and female role-models wasessential for career advancement. So, by establishingmentorship schemes to guide female nationals duringtheir career in addition to training, national oilcompanies (NOCs) will be able to attract and nurturefemale talent in a male-dominated environment.

Coaching programs for leaders: aimed at developingtechnical, commercial, and general leadershipcapabilities of NOC executives to help them navigatetheir companies through the dynamic and ever-changing nature of the oil and gas industry. Coachingprograms can even be extended to include middlemanagers of the different functional areas in order togroom next generation leaders, and ensure the smoothtransition and hand-over from retiring executives to theirup-and-coming replacements. Leadership coachingsessions take the form of workshops and/or one-on-onesessions with a coach with the objective of unlockingleadership potential that might otherwise go untapped.

By establishing mentorship schemes toguide female nationals during theircareer in addition to training, national oilcompanies (NOCs) will be able to attractand nurture female talent in a male-dominated environment

6 | Deployment of nationals in a post-oil economy

Partnering with universities: NOCs are partneringwith and/or sponsoring local and regional universities toreceive a steady stream of qualified national graduates.For instance, the Petroleum Institute (PI), a university inAbu Dhabi, is sponsored by Abu Dhabi National OilCompany (ADNOC), one of the biggest NOCs in theMENA region. All national students attending PI aregiven full scholarships and are guaranteed a job in oneof ADNOC’s group of companies upon successfulgraduation. Another example is Saudi Aramco whichhas a long history of partnering with King FahdUniversity of Petroleum and Minerals for researchpurposes, in addition to attracting talented Saudiengineering and science students.

Strategies and programs discussed above would helpNOCs individually. Nevertheless, a sustainable andnationwide solution needs to be created. Accordingly,there is a need to build an ecosystem that enables thedeployment of national graduates in the oil and gasindustry. Possible ways to achieve this include, but arenot limited to:

Revising the education system in high schools anduniversities in an effort to meet society’s demand in the MENA region and to support countries’ economicvisions. In other words, the conventional instructionalmodel has to be changed from one based on memoryto one based on application and initiative. With anincreased focus on laboratory sessions and workshops,students will be able to apply the theoretical knowledgethey have been taught to real-life situations, thus

developing their vocational skills and entrepreneurialspirit. Moreover, career guidance and counselingsessions should aim at attracting school students at an early age into science, engineering and technologyeducation and careers to meet the ever-growingdemand for a skilled labor force in the oil and gasindustry.

Funding scientific research and developmentinitiatives to spur innovation. Research and developmentspending in the MENA region is far behind those of thedeveloped countries around the world. For example, theUnited States of America spends 2.8 pe rcent of its GDPon scientific research and development compared to 0.2 percent in the Kingdom of Saudi Arabia. The aim ofscientific research and development funding will be toeducate and support engineers and scientists to advanceoil and gas exploration and production technologies inthe most effective and environmentally responsiblemanner, in addition to pioneering projects related toclean and sustainable energy technologies. Positivestrides have already been made in the MENA regionsuch as Masdar Institute, established in Abu Dhabi as anindependent, research-driven, graduate-level universitythat is focused on advanced energy and sustainabletechnologies. To date, scientists and engineers atMasdar Institute have completed several projects in theregion and around the world aimed at reducing carbonfootprints and implementing green technologies.

Developing human resources initiatives that cater to the industry’s increasingly critical requirements.Governments in the MENA region are responsible forfunding these initiatives which aim at attracting andretaining nationals in the oil and gas industry andensuring the establishment of succession plans toreplace the current leaders with skilled and qualifiednationals. In addition to this, governments could fundand sponsor technical trainings and leadership programsto fill the skill gap that currently exists in the industry.

There is a need to build an ecosystemthat enables the deployment of nationalgraduates in the oil and gas industry

Deployment of nationals in a post-oil economy | 7

Implementing nationalization is quite an ambitiousmandate across the MENA region. Deploying nationalsin a post-oil economy in particular is not going to be aneasy assignment. However, as Chinese philosopher LaoTzu once said: “The journey of a thousand miles beginswith one step.”

The challenges have been uncovered, thus allowing fora better way to plan for solutions. It is true that resultswill not be immediate as the solutions take time andeffort, and challenge the status quo. In fact, designing,recruiting for and executing a graduate program takesup to 36 months for an organization to start measuringits impact.

Nevertheless, oil and gas companies are impactful andthey can set the ground for new human capital andtalent management practices. Furthermore, they have astrong employee value proposition. Accordingly, theycan influence educational institutions that are interestedin sending their graduates for employment opportunitiesor for internship purposes.

Sometimes, we do not have to look at developedcountries for lessons learned and best practices. Manycompanies in the MENA region have led by example;their stories need to be told through their leaders, HRdirectors and successful women.

Joana Abou Jaoude is a manager with Deloitte Middle East based out of Abu Dhabi.She works in the Human Capital service line across industries and is particularlyinterested in Energy and Resources. Her focus is on talent management matters as well as on rewards and performance. She is a certified human resource professional via international institutions such as the Chartered Institute of Personnel andDevelopment (CIPD, UK) and the Society for Human Resource Management (SHRM,USA). She has developed national graduate programs in the Middle East and workedwith large organizations in the United Arab Emirates and across the Middle East for the past eight years. She would like to thank Sami Kahale for his valuable help andcontribution to this piece of work. Sami is an analyst in the same service line withDeloitte Middle East, Abu Dhabi office.

Concluding remarks

Joana Abou JaoudeManager Human CapitalDeloitte Middle Eastjaboujaoude@deloitte.com

Kenneth McKellar MA CA is a Deloitte Partner and Middle East Energy & ResourcesLeader. He has 30 years of experience in oil and gas, gained from working acrossprofessional services, investment banking and industry, and has been active in oil-andgas-related techno-economic projects in the Middle East for the past 10 years.Kenneth’s career at Deloitte has included leading Deloitte’s Petroleum Services groupfor eight years, managing 60 people in seven worldwide locations. Prior to joiningDeloitte he held executive positions in finance, including Executive Director at UBSZurich, specializing in oil and gas privatizations in Central and Eastern Europe and the Former Soviet Union, and Director at Noble Grossart Limited, Scotland’s leadingindependent merchant bank, based in Edinburgh. Kenneth McKellar is a graduate of Cambridge and Strathclyde Universities in the UK, a member of the Institute of Chartered Accountants of Scotland and Member of the Society of PetroleumEngineers. Kenneth’s areas of expertise are Strategy and Operations, Corporate FinanceAdvisory, Transaction Support, Risk Consulting and Management, and CorporateGovernance.

Kenneth McKellarPartnerEnergy & ResourcesLeaderDeloitte Middle Eastkmckellar@deloitte.com

8 | Deployment of nationals in a post-oil economy

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