Skip to main content
Survey Report

Energy and Natural Resources Compensation Trends 2018 – United Kingdom

Compensation Strategy & Design|Total Rewards
N/A

January 10, 2019

Find out how 2018 trends affected pay and benefits in the energy market.

After a number of years characterized by weak demand, low prices and oversupply, the Energy market seems to be seeing brighter days. There is a generalized consensus across business leaders and analysts that the sector is in better conditions than it was a year ago and as we reflect on the data from our 2018 UK Energy and Natural Resources Compensation Survey and start planning for the year ahead, we have highlighted 4 themes that are broadly shaping the industry and are likely to have an impact on your agendas in 2019.

Rebalancing

After a global recession, and a period of too much supply and too little demand, the Energy market fundamentals are normalizing. Thanks to a change in policy from OPEC countries and despite a considerable increase in US production, the slack in oil stocks and the crude oil price are back to normal averages. From an almost record low of $28 per barrel in 2016, the oil price has reached triple digits in 2018 and it is forecasted to stabilize in the region of $60-$80 until 2022.

Development, exploration, rig activities and spending are also on the rise, even in traditional basins like the North Sea, and, although at a slower pace, the global energy demand is expected to grow for the next 20 years.

Not surprisingly, the industry has bounced back from a labour market perspective too. Although it remains unclear whether the employment rate will get back to pre-crisis levels, overall the Energy job market has increased in value by 4% compared to last year and against an actual salary increase budget of 2.9%. When comparing these numbers against 2017, they represent an increase of 3% and 0.4% respectively and a considerable boost after years of lower than General Industry increases:

line graph showing percentage on salary trend increase between 2011 and 2019 with general industry
Figure 1. Energy and Natural Resources Salary Increases trends

Source: 2012-2018 Willis Towers Watson Global Salary Budget Planning Report

This broad picture is confirmed across various sub-sectors: although in fact the Geosciences and Natural Resources Exploitation/Operation/Production jobs carry the scars of the re-shaping of the industry, they also show the signs of rebalancing. After challenging years, 2018 data reports market values that are in line or higher than 2017 and 2016 and that remain much higher than overall Energy figures across the various spectrum of grades:

bar chart showing growth between 2016-2018- best growth showing as year 2017
Figure 2. Geosciences and Natural Resources Exploitation/Operation/Production Functions

Source: 2016, 2017, 2018 Willis Towers Watson Energy and Natural Resources Compensations Survey United Kingdom

bar chart showing growth and percentage increase of the Eop and GG rollup between 2016 and 2018
Figure 3. Geosciences and Natural Resources Exploitation/Operation/Production Functions

Source: 2016, 2017, 2018 Willis Towers Watson Energy and Natural Resources Compensations Survey United Kingdom

Is it heaven on earth? Not quite. There are challenges – but also opportunities – on the horizon for the Energy sector starting from an increasingly diversified Energy mix.

New Energy (mix)

As we approach 2020 and the targets set by the Paris agreement become more ephemeral by the hour, the industry remains committed to transitioning to a low carbon world: transportation, industries and emerging markets continue to electrify with the Electricity demand ging four times faster than all other fuels, the Natural Gas demand rises faster than oil and coal and, as the cost of non-fossil power generation falls to a record low, Renewables become the fastest-ging Energy source (+7% p.a.).

But not the fastest-ging job function. The Renewable Power Generation job market seems in fact to have stabilized and reduced its rhythm of growth from the boom of 2016: Renewable jobs are still priced higher than Energy overall market values but are somewhat far from 2016 figures across the board.

colour coded bar chart showing the percentage changes of the egr and gg rollup over 2016 to 2018
Figure 4. Renewable/Alternative Power Generation Function

Source: 2016, 2017, 2018 Willis Towers Watson Energy and Natural Resources Compensations Survey United Kingdom

The Energy industry is re-inventing itself under the strikes of governmental policies, enhancements in technology and more eco-friendly social and consumer preferences. If the low commodities price forced organisations to become more resilient, lean and financially disciplined, the increasingly diverse energy supply mix will urge them to adapt their portfolio to a lower carbon world. In the long-term and amid uncertain scenarios, there will be one constant: change. To navigate through it and be ready to whatever form the market will take, organisations are likely to focus on efficiency.

Efficiency

Even if the commodities price is now more stable and trades at higher rates, the full effects of the crisis are yet to be discovered. Years of investments at historical lows and capital discipline have effectively cleared the crude oil inventories but also created less potential supply available for the years to come and if organisations don’t significantly re-ignite their production and focus on future growth, a supply gap is likely to present itself and disrupt the market in the next decade.
To such an uncertain scenario, organisations are likely to respond with efforts to reduce inefficiencies and concentrate on market share. Learning from their retail and banking peers, Utility companies are creating efficiency by focusing on their customers: far from being just an operational concern, Energy distribution efficiencies and smart metering techniques can in fact translate in lower bills, a more direct interaction with clients and a better service altogether. Higher than Energy overall market values for Energy Delivery and Distribution jobs, specifically at technical and supervisory/managerial levels, can be an indication of this new focus:

bar chart showing the percentage decline of the edd and gg rollup between 2016 and 2018 for the energy delivery function
Figure 5. Renewable/Alternative Power Generation Function

Source: 2016, 2017, 2018 Willis Towers Watson Energy and Natural Resources Compensations Survey United Kingdom

In this new phase of the Utility sub-sector, Digital and increased Data analytics capabilities will be key. Utility companies will be challenge to hire or develop employees skilled with Cloud computing, Data handling techniques, Digital and Computer science background.

Amid decline in new discoveries, higher volatility, instable geopolitical landscape and, perhaps more importantly, a human capital transformation, the sector is changing and so is its talent pool. Although traditional jobs and engineering skills are still key, the quest to efficiency driven through technology will likely transform the industry and the profile of the employees working in it at their fundamentals.

Digitalisation

In this Digital Transformation, HR will need to help organisations transition to a new demographic era and ensure that companies can attract innovative, digital and data savvy talent.

It will not be an easy task as our researches show that these jobs are actually amongst the hardest to attract and retain positions in the global job market and if 2018 marks the year that sees the consolidation of the digital skills across industries, these roles are likely to grow in market value even more as we approach 2019:

To generate efficiencies and help overcome the scarcity of such skills, organisations are likely to create Digital SME teams in centralised functions, ready to be deployed across projects and at the same time ensure that digital and data analytics processes and techniques expand across the whole organisation and integrate avoiding duplications and silos.

Also, these companies are expected to offer Digital employees dedicated Reward initiatives, mostly non-monetary (e.g. flexible schedules and remote working locations, personal development and growth and challenging work assignments) and yet, compensate them above market median.

As the Future of Work becomes present, the Digital Transformation offer itself as an opportunity to rethink the way Energy companies operate and treat their workforce to deeply transform the industry talent profile in ways that are yet to be fully determined.

Sources:

2018 Willis Towers Watson Getting Compensation Right Survey
2018 Willis Towers Watson Modernising Total Rewards Survey
2018 Willis Towers Watson Global Salary Budget Planning Survey
2018 Willis Towers Watson Energy and Natural Resources Compensation Survey – UK/
EIU Global oil market: What to expect after OPEC's June meeting
FT.com Wood Mackenzie warns of oil and gas supply crunch
FT.com North Sea assets up for sale top $8.8bn
FT.com UK confirms plans for doubling offshore wind capacity in next decade
FT.com New investment drives revival of North Sea oil and gas
FT.com North Sea oil downturn has cost 120,000 jobs, industry claims
FT.com Oil majors can give birth to green energy businesses
PWC Oil and Gas Trends 2018–19
PWC Energy 2020 Becoming digital normal
BP Energy Outlook 2018 Edition
McKinsey Global Energy Perspective: Reference Case 2018