The problem of how to best deliver energy products to markets around the world is forging a bond between C-level leaders in the energy and logistics sectors. The challenge lies in economically and efficiently moving products from the remote heartland of America to refineries in other parts of the country. Transport, processing and storage present challenges.
Logistics executives are bringing their expertise in high-tech and traditional intermodal systems to this booming sector which is aggressively exploring and processing frac sand, as well as other energy-related materials. Consider the following increases in the movement of crude oil, according to Railway Age:
- 2009: 11,000 car loads of crude were moved;
- 2011: 65,000 car loads;
- 2012: 235,000 car loads;
- 2013: 400,000 car loads.
This is a great dilemma, but there are leadership shortages in both sectors. According to one executive, significant steps are being made to address this situation.
“Highly skilled and motivated energy/logistics management teams are forming throughout the country,” said Brad Skinner, Chairman of OmniTRAX. “These new executives understand the importance of creating balance among return on capital, environment and public safety. The domestic energy revolution is occurring in 40 basins and 26 states of this country. If properly managed, thousands of previously outsourced manufacturing jobs will be insourced as part of a robust and dominant infrastructure that combines logistics and energy sectors.”
Energy Talent Shortage
Nevertheless, there is ground to make up because for the last few decades, the oil & gas industry has been experiencing a shortage of C-level talent. It began shrinking in the 1980s when roughly 25 percent of engineers and geologists left the industry. In the 80s, college enrollment for petroleum engineers and geology students dropped significantly, thereby starting a “perfect storm” that has resulted in the talent gap of today.
There weren’t jobs because oil reserves were hard to find in the U.S., and there was the initial talk of our planet running out of oil, and the notion of a world relying on alternative sources of power. But that has changed in North America. The bad news: According to one study approximately 22,000 engineers and geoscientists will retire from the industry by 2015.
It is known as the “Great Crew Change.” Statistically, there are few 40-50 year olds capable of running these companies. Universities are pumping out engineers and geologists, but it will be decades before they are ready to run these companies.
Today’s companies must develop strategies that groom and retain younger executives who can assume leadership positions in 15-20 years.
The recession of the last decade has resulted in changing retirement plans of many baby boomers. For the short-term, these executives are re-building damaged retirement portfolios as highly-valued consultants, buying time for the younger generation to mature and move into the C-suite.
Logistics Talent Search
The next challenge is for the energy sector to quickly build the infrastructure that can safely and efficiently move this valuable and highly volatile cargo. The hunt has started for executives who are well-versed in engineering, the transport of hazardous materials, and the inter-modal methods of transport, while keeping an eye on what can sometimes be razor-thin margins. After all, “time is money”.
They must understand the risks associated with moving products by rail, trucks and ships. One environmental disaster will compromise the future of these companies. New equipment, such as sophisticated rail cars and barges, are being developed. Warehouses are being built to safely store these materials while awaiting transport.
It’s also significant to note that oil & gas products leaving North America—as opposed to coming in—has resulted in domestic companies creating networks of transportation in other countries. We’re seeing this beginning to happen in Europe where countries are gradually pulling away from relying on Russian oil as part of the economic sanctions. The same dynamic will take place as countries pull away from purchasing oil from Venezuela.
Hybrid Help Wanted
These changes have resulted in C-level job descriptions including some of the following criteria:
- In-depth knowledge of mined materials;
- Familiarity with the properties of petro-chemicals, frac sand, and oil-field related products;
- Knowledge of issues related to environmental compliance;
- Experience in management services related to inter-modal and industrial switching operations.
These industries are positioned for remarkable growth and there is no evidence that they will plateau any time in the near future. With Middle East volatility at its peak and the Russian/EU political tension growing, countries will be looking to the U.S. for energy. The only thing conceivably holding these industries back is competent executive talent and leadership.
Juan D. Morales is the managing director of the Miami office for Stanton Chase International Executive Search (www.stantonchase.com), a global retained executive search firm with 72 offices in 46 countries. Morales, a former executive with DHL Worldwide Express and United Parcel Service, is also the firm’s Logistics & Transportation Practice Leader for the Americas. Rick Davis is a director with the Stanton Chase Dallas office and is the firm’s global practice leader for natural resources & energy. Brad Skinner, chairman of OmniTrax, a short-line railroad based in Denver, contributed to this article.