Middle East petrochemicals gear up to face skills shortage

Plugging the skills gap

14 November 2008 00:00  [Source: ICB]

A long-term shortage of qualified personnel in the Gulf means petrochemical companies rely heavily on foreign recruits. With this source potentially drying up, efforts to improve skills locally are being stepped up

THE MIDDLE East oil producing countries in the Gulf have for a long time been struggling with the problem of a shortage of skills among their local populations.

Despite the financial crisis, there is still the prospect that the scarcity of qualified personnel will become even more critical. There remain a large number of petrochemical, refining and upstream oil and gas schemes planned or under construction and due to come on stream over the next few years.

"There have been a flurry of projects, which can only worsen the supply/demand balance in skilled labor in the Gulf," says Raed Kombargi, a consultant in the Dubai office of management consultants Booz Allen Hamilton.

"What we have in the hydrocarbons sector is an ageing workforce, many of whom are close to retirement, and a lot of young, inexperienced engineers and other graduates, so there is an enormous lack of experience."

The skills dearth in the Gulf is "one of the great educational and intellectual challenges of the century," says Omar Saif Ghobash, deputy CEO of the Emirates Foundation, a public/private sector partnership backing initiatives in education, science and technology in the United Arab Emirates (UAE).

Governments in the Gulf Cooperation Council (GCC) states - Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the UAE - as well as the region's large oil, gas, refining and petrochemical companies have been pouring extra funds into education and training. Around one-quarter of national budgets are now being allocated to education.

But it may be too late to ensure a sufficient supply of local qualified staff over the next several years. As a result, the diversification of the Gulf's economy into specialty chemicals and downstream petrochemical-based products, such as plastics, may move forward much more slowly than planned.

The Gulf states, except Iran, which is not a GCC member, have typically been able to rely on migrant labor from Asia for the provision of both low and high-skilled workers.

Asians are helping to build new plants, operate them when they come on stream and staff emerging new downstream industries based on petrochemical derivatives.

EXPANDING MANPOWER

The Gulf Organisation for Industrial Consulting in Qatar, which advises the GCC on industrial strategy, estimates that from 2000-2006 the workforce in the Gulf's petrochemical sector grew by around 5%/year to 163,134.

Over the next four years, when $160bn (€126bn) is due to be invested in petrochemical projects and the region's ethylene capacity will be doubled to 20m tonnes/year, the growth in employment in the sector will increase substantially, with a large proportion of the additional workers coming from the Asian subcontinent.

There are signs, however, that due to the relatively strong growth of Asia's emerging economies, particularly India - even during an economic downturn - the supply of skilled Asian labor is beginning to dwindle.

The Bahrain-based Arabian Gulf Chapter of the Project Management Institute has warned that as a result of Asian workers staying at home because of improved wages in their domestic markets, the Gulf could soon face a labor shortage of as much as 5m workers. This is equivalent to 80% of all expatriates in Saudi Arabia, which, outside Iran, has by far the largest population in the Gulf.

The skills deficit in the Gulf has been partly blamed on the inefficiency of its education systems, which have failed to keep up with the extraordinary increase in the region's wealth, driven by high oil prices.

The GDP of the GCC states doubled between 2002 and 2007, raising their per capita incomes to the levels of the top 50 countries in the world, with Qatar at around $60,000 and Kuwait $30,000. But the educational standards in some key GCC states have remained below the international average.

"The problem in the Gulf is that human capital lags behind other countries and is much lower than it should be for a $30,000 per capita, high-cost, high-value economy," Marc Stephens, a lecturer at the UK's London Business School, told a recent conference in London on skills, which was organized by compatriot body the Middle East Association.

In recent Trends in International Mathematics and Science Studies analyses of school pupils, in which an international skills average index was 489, Bahrain scored 401, Kuwait 392 and Saudi Arabia 332. These were lower than those achieved by other, poorer Middle East countries, such as Lebanon, Jordan, Tunisia and Egypt.

Higher education institutes in science and technology set up in the Gulf provide skilled workers to the hydrocarbons sector, including the petrochemicals segment, and have had to establish their own schools to ensure that their pupils know enough about chemistry, physics and even mathematics.

At the same time, there has also been a bias against science and technology among young people. Figures from the World Bank show that up until relatively recently, less than one-quarter of university students in the GCC states, excluding Kuwait, were studying scientific, technology or engineering subjects.

"Most students wanted to go into jobs in which they could quickly make lots of money, like finance and real estate," says Kombargi. "The petrochemical, refining and other process sectors have suffered from this rejection of industrial careers. But the oil and gas industry has suffered the most."

Oil and gas has been more difficult to produce as wells have become deeper and the geological formations of reservoirs more complex. New technologies combining innovations in both engineering and chemistry have had to be applied by more qualified workers, some of whom have skills also needed for petrochemical production.

Abu Dhabi National Oil Company (Adnoc), a large producer of oil and gas and petrochemicals, reportedly needs to recruit around 3,000 chemical, petroleum, reservoir and other engineers a year.

In alliance with energy groups BP, Shell, Total and Japan Oil Development, the Abu Dhabi Petroleum Institute was set up by Adnoc to meet its need for qualified staff. But currently, it produces only 100 graduates a year.

State owned oil company Saudi Aramco, which has been expanding into refining and petrochemical production, is establishing the King Abdullah University of Science & Technology (KAUST) as a source of personnel. Instead of the Saudi education ministry, Saudi Aramco is responsible for building the campus, 50 miles (80km) north of Jeddah on the Red Sea coast, choosing its curriculum and attracting foreign academics.

The university, which is due to open next year, could have as much as $25bn in endowments, making it the world's second-richest university after Harvard in the US. KAUST, which is seen as a bid by Saudi Arabia to create one of the world's leading academic institutions in science and technology, will have 13 specialist research centers, for areas including catalysis, nanomaterials and nanochemistry, materials and terahertz technology.

Qatar has been spending large sums of money on building an Educational City with a science park to bring academia and business together. Dubai has constructed a Knowledge Village & Academic City in Dubai in which a number of Western and Asian universities have set up offshoots.

"After 9/11, Gulf students had difficulties getting visas to study in the US and elsewhere, so now the universities are coming to the pupils," says Kombargi.

WOMEN JOIN THE FORCE

Following a bid to encourage more women to enter the labor force, especially in science and technology, female students now outnumber male pupils in tertiary education in all GCC states. Saudi Arabia is due to open the world's largest all-women university in Riyadh in 2010.

"The GCC countries have embarked on a huge investment in education," says Professor Giacomo Luciani, director of the Gulf Research Center Foundation, in Geneva, Switzerland. "There is today a level of technical competence among GCC nationals working for the regional petrochemical companies, which is much better than 10 or 20 years ago, [but] there is still plenty to be done. The GCC countries are experiencing economic and demographic growth at such a pace that their reliance on foreign expertise will necessarily continue and probably even grow."

The fast expanding petrochemical and related hydrocarbon industries in the Gulf will hope that they can continue to attract foreign skills until the time when they can depend more on the knowledge and expertise of their own workforce.

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By: Sean Milmo
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