Why are there so many oil and gas consultant firms?

Here's an interesting one, why are there so many oil and gas consultants, and small companies formed around groups of specialists? I can completely understand the benefits for the consultants because consultants earn much higher day rates, usually tax-free. They have control over where and when they work and are highly respected in the field.

The real question is, why do drilling companies and majors pay these really high rates? Surely with companies that have thousands, even tens of thousands of employees... There'll be plenty of employees with the right skills? Why would they pay half a million a year, when they could pay $150k?

Is it because there aren't enough specialists that want to work for a company full time?

When looking online, on searches and on LinkedIn, I see a ton of oil and gas companies that basically consist of 2-10 consultants.

Comments

  • edited July 3

    Hi Tony, as you rightly say, it's understandable why individuals choose to be consultants and it's not just about money. Whilst there's an element of risk in not securing continuous work, there is also the element of freedom when working for yourself. Starting a business, and/or teaming up with some people in a similar situation happens in all industries. Consultants also tend to set up companies as a way of getting paid since it's a solution to some employment laws and rules. There are companies that would require an invoice from another company that is subcontracting to them.

    I also wonder how many large companies started as a handful of consultants...

    As for why there's a demand, I can think of a few reasons...

    Why 'oil and gas consultant companies' are in demand:

    1. Whilst the larger oil and gas and drilling companies have staff for every aspect of the business, they might have them in the wrong locations. The existing experts might be busy, or unwilling to relocate to where they're also needed.
    2. Some problems are rare, or new to a company. For example, a major or national oil company might win a contract to drill in the Arctic, or in ultra-deepwater. They might want to bring in a consultant who is the best in their field, to teach current staff, or create a drilling plan.
    3. Production and distribution are ongoing and stable from the point of view of labour requirements. Other jobs are short-term, such as workovers or emergency well control situations. Ad-hoc staff are perfect for short-term projects and challenges where it might not make sense to keep someone on the books full time.
    4. Sometimes the right person for a job has chosen to be a consultant. The value of having this specialist would be balanced against the higher day rates that they command.
    5. For a challenging project, an oil company might need to find someone who has faced the exact same situation in the past. They'll know about the previous pitfalls and lessons learned. Many suitable people will be working for competitors. From the available choices on the job market, it might be that a consultant is the only one available.
    6. Employing an outside consultant has advantages in that they're not part of the company culture. They come with a fresh attitude and viewpoint, and can be highly motivated and results driven.
    7. Due to new frontiers and technology, the industry is getting more complex. The chances of having an available in-house expert have been getting lower.

    While digging around for information about oil and gas consultants, I found this YouTube video by Mike Rasco:

    Mike used to post some really funny stuff on Oilpro.com which has now closed its doors. Mike, if you stumble across this page, maybe you have something to add?

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