Energy and Utilities
If the "peak oil" proponents are correct, today's energy and
utilities industries are soon going to die a not-very-distinguished death.
Peak oil theorists claim that the amount of oil that we can extract from
the Earth has already reached, or is soon to reach, its peak—and that,
within decades after that peak, the world's oil supply will in effect
run out.
The coming scarcity of fuel, plus the mounting demand for energy (from both
the First World, which needs energy to run its increasingly complex
technologies, and the Third World, which is using more energy as it
modernizes) mean that the energy and utilities industries are in need of
innovation. Both need to take more risks—whether to uncover new supplies of
oil, run giant wind farms, produce cheaper solar cells, develop
next-generation nuclear energy facilities, or focus on alternative energy
sources.
The industrial revolution started with the steam engine and remains
dependent on energy produced from natural resources. The process begins
when energy companies extract fossil fuels such as oil, coal, and natural
gas from Mother Earth. These natural resources are turned into electricity
and delivered to the consumer's door by power utilities companies, or
they are processed into fuels, such as gasoline, propane, heating oil, or
industrial coke for making steel. They are supplemented by water-powered
hydroelectric generators and nuclear generators powered by uranium. In any
case, the result is the energy on which industrial countries depend.
Without it we could not run our home appliances or our factories, travel by
car or airplane, talk on the phone, or watch television.
Conflicting forces will shape the future of the energy industry.
Deregulation, initiated by the 1992 National Energy Policy Act, is
transforming energy companies from regulated monopolies to free-market
competitors, changing the face of the utilities industry. Continuing
expansion of industrial development across the planet will spur increased
global consumption of energy. However, that will cause worsening pollution
and the depletion of natural resources, raising the question: Can we
continue using energy as we have been? Probably not.
While Bush administration policies seek to increase the supply of oil and
other fuels, the rest of the industrialized world has signed up for the
Kyoto Protocol that limits greenhouse gas emissions caused by burning
fossil fuels. In the near term, though, neither environmental concerns nor
volatile oil prices are likely to threaten the U.S. energy and utilities
industry's role as a major energy consumer and supplier of technology
and expert services. It enjoys annual revenues of hundreds of billions of
dollars and a demand that could double by 2020.
Consolidation
To enhance economies of scale and increase energy reserves, the big have
been getting bigger of late in the energy industry. First, British
Petroleum merged with Amoco, in 1998, to form BP. Then, Exxon acquired
Mobil, in 1999, to form Exxon Mobil. Also in 1999, France's TOTAL
acquired Belgium's PetroFina, to form TOTAL FINA. In 2000, BP acquired
the Atlantic Richfield Company. In 2001, Chevron acquired Texaco. In 2002,
Conoco and Phillips Petroleum merged to form ConocoPhillips. Then Shell and
Royal Dutch Petroleum merged in 2004, to form Royal Dutch Shell. Finally,
in 2005, Chevron acquired Unocal. The point: If you go to work in the oil
sector, don't expect to serve the same corporate master for your entire
professional life.
Biodiesel
Biodiesel has been getting a lot of press of late. President Bush pointed
to it in his 2006 State of the Union speech as a particularly promising
alternative energy option. Meanwhile, country musician Willie Nelson has
started a company to make and sell biodiesel fuel, hoping to popularize it
among the public. But some observers say the potential market is
limited—that biodiesel is a cost-effective alternative as long as it relies
on recycled vegetable oils (refuse from restaurants, and the like), but
that it will never become a mass energy source because growing enough plant
life to produce enough vegetable oil to support a mass market in biodiesel
will be prohibitively expensive.
Terrorism and Political Unrest
The war in Iraq. Terrorist bombings in Lebanon and Saudi Arabia. The
never-ending violence between Israel and Palestine. It all adds up to
massive uncertainty for energy and utility companies. Will oil prices
remain steady, allowing the companies to predict oil revenues (for oil
companies) or costs (for utilities) and create business plans they are
confident in? Or will violence on a large or small scale suddenly cause oil
prices to skyrocket? The energy and utilities industry, like the world in
general, is a very volatile place these days.
Hurricane Katrina
In 2005, Hurricane Katrina showed the world that energy supplies and prices
can be affected in a huge way by natural disasters. Katrina took a variety
of sources of oil offline for weeks and even months, and energy prices in
the U.S. skyrocketed as a result. Terrorism isn't the only
unpredictable variable that can upset the steady supply of energy.
Turning Disaster into Profit
U.S. oil companies had a banner year in 2005. Because of the war in Iraq,
there has been less oil available on the world market than there would have
been otherwise; this has put upward pressure on oil prices. Hurricane
Katrina, when it struck east of New Orleans, caused further price
increases. Those higher prices translated to record profits for oil
companies. Whether that's a good thing depends on whether you own
oil-company stock.
Alternative Energy
Despite the fact that the current government seems determined to drill its
way out of any energy sources whatsoever, alternative, renewable energy
sources are not being ignored. In the case of wind power, solar energy, or
biodiesel, tax breaks and other government subsidies play an important role
in making these still-expensive energy sources competitive. A number of
states have adopted standards that require utilities to buy a set portion
of their electricity from renewable sources. In Southern California during
peak electricity demand in summer, railroad locomotives sit still with
their massive electric engines hooked up to the electrical grid instead of
pulling freight. Clean-burning biodiesel made from vegetable oil and other
substances allows the locomotives to power 100,000 homes and makes the
freight yards smell like French fries. General Electric expects to earn
about $2 billion in revenues from wind-manufacturing assets it bought from
bankrupt energy trader Enron. Even nuclear power is getting another shake
as those concerned about the environment weigh the risk of a nuclear
accident against the certainty of increased greenhouse emissions from
burning fossil fuels.
Playing Politics
The oil companies don't retain armies of lawyers and lobbyists—or make
huge political contributions—for nothing. Because there are strong
ecological arguments against oil extraction in places like Alaska, the oil
companies depend on legal and political clout to ensure that they'll be
able to continue exploiting oil finds. The best example of the importance
of political clout is Florida. The federal government agreed to purchase
the rights to oil fields off the Gulf Coast from oil companies to prevent
drilling there. Meanwhile, Halliburton received enormous contracts to help
rebuild the oil fields of Iraq after the U.S. invasion in 2003—without even
having to submit bids for the new work.
New Demand from Asia
China's factories produce much of the world's consumer goods, so it
should come as no surprise that at 5.5 million barrels a day China is
already the world's second largest consumer of oil. An International
Energy Agency report predicts that by 2030 China will import as much oil as
the United States.
America's energy companies are clustered in the Oil Patch region of
Louisiana and East Texas, though many have major offices in Los Angeles and
other coastal cities. The Big Oil companies are global; Exxon Mobil alone
has a presence in more than 100 countries. By contrast, utilities are
generally more local in nature, usually doing business in a single city or
region—though with deregulation, this is beginning to change. The vast
industry can be broken down as follows.
Integrated Oil and Natural Gas
We have John D. Rockefeller and his Standard Oil Company to thank for the
vertical integration of the world's largest oil and energy companies.
His empire has long since been dispersed, but its legacy remains in the
form of giants like ChevronTexaco, Exxon Mobil, and ConocoPhillips, which
are involved in every phase of petroleum production and sales—from the
extraction of crude oil through refining and shipping all the way to the
gas pump. Big Oil is a major force in the world's economy (not to
mention politics), but it is susceptible to global surpluses and plummeting
oil prices when members of the Organization of Petroleum Exporting
Countries (OPEC) cannot agree to restrain production.
Consumption and production of natural gas have grown far more rapidly in
recent years partly due to gas's environmental advantage over oil.
Also, natural gas is relatively less expensive as an electricity-generating
fuel—an advantage that has been magnified by the competitive nature of the
electricity industry since deregulation. While Big Oil is increasingly
involved in the natural gas business, there are still specialists such as
Questar Corporation.
Equipment and Service
Companies such as Schlumberger and Halliburton provide the equipment and
services that make it possible for the oil, coal, and gas companies to
extract those products from the ground. This once-booming sector took a
hard hit in the late '90s due to overproduction. While the largest
companies will certainly survive, boutique concerns such as Dawson
Geophysical (a technology expert) are more vulnerable.
Coal
Coal is primarily used for electricity generation and in a few
manufacturing industries. It is increasingly in demand as developing
countries such as China and India wire themselves for electricity. However,
environmental concerns may put a damper on the use of coal. The 1990 Clean
Air Act called for cuts in high-sulfur coal production, and there are
growing worries about global warming caused by burning fossil fuels. Even
if coal consumption continues at current levels, reserves will last only
another 200 years. Despite these concerns, the near-term future of coal
production and consumption should continue to be robust.
Utilities
More than 3,000 utilities in the United States deliver electric power to
individual homes and businesses. Major players include the Southern Company
(the nation's largest investor-owned utility) as well as regional
giants such as Pacific Gas and Electric in California and Consolidated
Edison in New York. The balance of the industry comprises federal agencies
such as the Tennessee Valley Authority; local, publicly owned utilities,
which are usually run by municipal or state agencies; and rural, nonprofit
electric cooperatives, which serve small communities.
Nonutilities
Though they're in the business of electric power generation and
distribution, nonutilities serve large individual clients—mostly utility
companies that need extra electricity—as opposed to cities or regions.
Though they only account for about 10 percent of power generation,
nonutilities—such as Duke Energy—represent the fastest-growing sector of
the industry. In the wake of deregulation, smaller-scale generators are
freer to sell energy to big distributors, and small, efficient producers
can be quite profitable.
According to the Bureau of Labor Statistics, the number of jobs in the
utilities sector is expected to grow very slowly in coming years. Even
worse, the number of jobs in the oil and gas sector is projected to shrink
between 2004 and 2014, at least in the United States. There are several
reasons for this. The first is that the spate of recent mergers and
acquisitions in both sectors has resulted in more than a few layoffs. The
second is that technological advances have and will continue to result in
productivity gains. Finally, most sources of petroleum in the United States
are already tapped out.
At the same time, the number of jobs is projected to skyrocket in the water
supply and sanitary services of the utilities sector, while the job outlook
for folks like petroleum engineers and geoscientists looks good for those
willing to work abroad.
In the energy sector, job seekers face a particularly unstable market as
prices (and profits) fluctuate drastically. But don't throw away your
geology or petroleum engineering degree yet; recruiters at Big Oil
companies are anxious to hire qualified candidates. Entry-level jobs for
engineers will be the most plentiful. Firms primarily recruit new engineers
from the undergraduate level. Although fewer in number than engineering
opportunities, entry-level business jobs should be available mainly in
support roles such as accounting and human resources. Companies typically
favor internal candidates who started as engineers to fill higher-level
positions, but firms do recruit MBAs and some midcareer candidates, if in
small proportion to the number of engineers in their ranks. The fact that
many long-time industry pros are entering their retirement years is a major
contributor to industry demand for new workers.
The deregulation of the utilities industry also means brand-new
opportunities. With competition comes the need for expanded marketing,
sales, communications, and PR departments. In addition, many utilities,
suddenly free to diversify their business interests, have entered the
telecommunications industry, with the Southern Company and American
Electric Power leading the way. Such seismic shifts in the industry are
sure to open up new opportunities for young, ambitious employees, as
formerly stuffy, hierarchical organizations are forced to entertain new
ideas.
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Meet a Need
Unless we collectively forgo the sports utility vehicle in favor of the
horse and buggy, the energy and utilities industry is here for the long
haul. Work in this industry and you'll help provide a product
that's absolutely indispensable to modern life—that powers hospitals,
runs factories, heats homes, and cooks food. And if the world's energy
demands double over the next two decades as expected, profits are likely to
follow suit.
Change Is Good
Deregulation has the utilities scrambling to compete. That's good news
for young, resourceful employees, who can now make a difference in
organizations that were once barely discernible from state bureaucracies.
"People are really beginning to see how their work ties in with a
company's end goals," says one insider. "We're looking
for employees who can think independently, even in entry-level
positions." Utilities are also expanding into new businesses from
trading energy to providing telecommunications products, and that spells
good news for job seekers who combine technological expertise with business
acumen.
High-Tech Heaven
Everyone in the energy business recognizes the need for innovation.
"Even Big Oil knows the future is limited unless they expand into new
areas," says one insider. Companies are constantly seeking to use
technology to cut costs and increase efficiency. And many—mainly integrated
oil companies—are rich enough to support cutting-edge research into
alternative fuels and other exciting projects that could transform the way
the world powers itself. If you're interested in the practical
application of your technological skills, this may be the industry for you.
You're the Problem
While in the United States we're still debating whether global warming
exists, the rest of the world knows it does. If you work for a natural gas
company, you can go to sleep with a relatively clean conscience. But if
you're pushing oil or coal, or electricity produced with them, you
might find yourself listening with a fake smile as strangers at cocktail
parties let you know just what they think about your line of work.
Drop in the Bucket
Historically, energy companies have tended toward vastness; the same goes
for utilities. After all, you cannot wire a city and meet its energy needs
with a dozen people on your staff. With size comes a feeling of security,
but also the frustration of bureaucratic inertia. "Energy companies
are so large and have so many organizational layers that it's
frustrating when you actually want to get something done," says an
insider.
Social Darwinism
Once upon a time, energy and utilities employees punched a clock, did their
work, and received a paycheck. Today, that's changing, as competition
forces companies to cut costs and increase efficiency. Some might like this
new dynamism, but as a result of it, competition among employees can be
fierce and job security is on the decline. According to an insider,
"To succeed you must be good. Without the right set of skills, you can
expect a lonely and short career."
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|
Top Energy & Utilities Companies, by 2004
Revenue
|
|
Rank
|
Company
|
Revenue ($M)
|
1-Year Change (%)
|
Employees
|
|
1
|
Exxon Mobil Corp.
|
328,213
|
24.3
|
85,900
|
|
2
|
BP plc
|
295,242
|
3.6
|
102,900
|
|
3
|
Royal Dutch Shell plc
|
265,190*
|
31.5*
|
112,000*
|
|
4
|
Chevron Corp.
|
184,922
|
29.4
|
56,000
|
|
5
|
ConocoPhillips
|
162,405
|
36.8
|
35,800
|
|
6
|
Valero Energy Corp.
|
82,162
|
50.4
|
19,797
|
|
7
|
Koch Industries, Inc.
|
80,000
|
100.0
|
80,000
|
|
8
|
Marathon Oil Corp.
|
58,596
|
29.8
|
27,007
|
|
9
|
Sunoco, Inc.
|
31,166
|
34.4
|
14,200
|
|
10
|
Hess Corp.
|
22,747
|
35.9
|
11,610
|
|
11
|
Halliburton Co.
|
21,007
|
2.7
|
106,000
|
|
12
|
Duke Energy Corp.
|
16,746
|
-25.6
|
21,500
|
|
13
|
Exelon Corp.
|
15,357
|
5.8
|
17,300
|
|
14
|
Occidental Petroleum Corp.
|
15,208
|
33.8
|
7,209
|
|
15
|
American Electric Power Co., Inc.
|
12,111
|
-13.8
|
23,033
|
*2004 numbers.
Sources: Hoover's; WetFeet analysis.
|
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Electrical Engineer or Gas Engineer
These are the people who design or maintain power plants or natural gas
delivery systems, or ensure the smooth operation of the complex grid that
connects power plants and individual homes and businesses. A BS in
electrical or gas engineering is generally required. New grads can expect
to begin by performing technical support and analysis. More experienced
engineers can move on to project planning and management, where duties
range from cost analysis to the evaluation of new products and
technologies. Salary range: $45,000 to $110,000.
Mechanical Engineer/Civil Engineer/Architect
These engineers design and oversee industry construction projects—offshore
oil rigs, dams, and coal mines built by energy and utilities companies. A
BS in engineering or architecture is a minimum requirement. Recent grads
handle the nitty-gritty of design and structural analysis; experienced
people move on to project planning and management, where duties range from
the planning of future projects to management and cost analysis once work
is underway. Salary range: $45,000 to $100,000.
Computer Systems or Telecommunications Specialist
Jobs range from technical support and troubleshooting for existing systems
to the planning, purchasing, and implementation of new systems. The best
positions require at least a BS in computer science or a related field;
strong communications skills and project management experience are big
pluses. Salary range: $35,000 to $120,000.
Petroleum Engineer or Geologist
These are the people responsible for the discovery and development of new
oil deposits. Geologists, geophysicists, and geology engineers form the
team that figures out where and how deep to drill; petroleum engineers
handle the drilling itself, plus the production, processing, and transport
of the extracted crude. Minimum requirements include a BS in petroleum
engineering or a geology-related field; a higher technical or
business-related degree will help you move from technology support
positions into project management. Salary range: $60,000 to $110,000.
Chemical Engineer
These are the people responsible for turning the raw materials into salable
products—for example, the transformation of crude oil into gasoline. Recent
grads with a BS in chemical engineering provide support for day-to-day
operations; experienced chemical engineers can expect to participate in
project management as well as the planning and development of future
projects. Salary range: $45,000 to $105,000.
Project Manager
For candidates who combine technical training with excellent business and
communication skills, project management is the way to go. Stress levels
can be high, but so are the pay and the sense of accomplishment that comes
with the work. These jobs require at least a BS in engineering, as well as
an MBA or an excellent industry track record. Salary range: $70,000 to
$150,000 or more.
Lobbyist
The utilities industry is still in limbo, half-regulated and
half-deregulated. That means that lobbying and public relations are key to
determining the future of the industry. Candidates with JDs are
particularly attractive for these positions, though excellent communication
and people skills and lobbying experience are often sufficient to get the
job. Salary range: up to $150,000 or more.
Marketer or Public Relations Specialist
Marketing people must have a solid understanding of both the client's
energy needs and the utility or energy company's ability to meet them.
Candidates who combine technical and marketing backgrounds have the edge.
Salary range: $30,000 to $150,000.
Trade Representative
Traditionally, people in these positions handled the sales of oil and other
energy products in the futures markets. These days, electricity is becoming
as much a commodity as oil; as a result, utilities now offer these types of
positions as well. Candidates should have degrees in either engineering or
business and marketing, plus proven negotiation or communication skills.
People with both technology and MBA degrees can expect to do particularly
well. Salary range: $50,000 to $150,000.
The first thing to do before you apply for a job is study the changes that
are rapidly transforming energy and utilities companies; if you do,
you'll be better prepared to ride the wave of change washing over the
industry, and impress your recruiters with your knowledge. Here are some
other tips for your job search:
-
Highlight your technical expertise. Energy and utilities companies are
highly dependent on advanced technology, and they need people who can
design, build, and maintain technology systems. As a result, companies
are willing to hire and train people with proven technical aptitude, even
if you don't have experience with the specific technology you're
being hired to use.
-
Work on your communication skills. Even engineers and technical people
must be able to communicate with their colleagues; in fact, one insider
estimates that 50 percent of a new engineer's work involves
communications—an experienced engineer with project management duties
sees the proportion increase to 90 percent. Recruiters know this, and
they'll be watching how well you listen and communicate.
-
Play up your business acumen. "All our employees need to be aware of
our company's business drivers," says a recruiter for a large
utility company. Even if you're in a specialized field, recruiters
will be impressed if you understand what makes a company profitable and
how your work adds to the bottom line. You'll also want to emphasize
your leadership skills. As the market tightens for certain engineering
positions, recruiters can afford to be pickier. High grades are great,
but if you can demonstrate leadership and project management skills, a
company is more likely to consider you for the long term.
-
Network, network, network. Call any contacts you might have to
demonstrate your strong desire to work for a particular company. If
you're a student, participate in on-campus recruiting. Most big
energy and utilities companies come to campuses, so take advantage of
their presence.