The global oil and gas industry faces severe stagnation, with projects shelved and millions of dollars lost, unless urgent action is taken to solve the growing recruitment crisis, warns 3i, Europe's leading private equity and venture capital company.

Governments, educationalists and industry representatives must join forces now to encourage new blood into an ageing workforce or face the consequences, says Graeme Sword, partner and head of oil, gas and power, 3i.

Mr Sword''s comments are revealed in the company''s third annual report on the state of the global oil and gas industry, published today.

Entitled "Shifting Sands - the future of the oil industry," the 3000 word report examines the widespread changes currently being experienced within the hydrocarbons industry and the key global challenges that will determine its survival in the years ahead.

The report explores the very latest issues affecting the oil and gas industry, from service companies and independents through to the majors, super majors and national oil companies.

Including input from companies such as Petrofac, Vetco International and Salamander Energy, the report analyses the key trends that are transforming the oil and gas industry today - trends that will have major ramifications for oil companies, contractors and governments. It identifies four main issues that will create opportunities and challenges for the hydrocarbons industry and for investors:

1. The growing demand for oil in spite of high prices, particularly from China and India
2. The changing relationships between international oil companies (IOCs) and national oil companies (NOCs)
3. Resource constraints on the supply chain, reserve replacement challenges and mature field decline rates
4. The chronic shortage of skilled people in the industry and how the situation could be resolved

Mr Sword said: "For years we have heard that capital is the main constraint on projects being undertaken, but now it is manpower.  Across the board companies are saying that they could do much more work if only they had more people. Everybody seems to recognise that there is a very real problem, but the question is: what are we doing about it?

"The industry has to improve how it markets itself to potential recruits, we have to improve the training and development of staff across the board and we have to embrace a cultural change, away from the boom and bust mentality, so that employees are more confident that they have a long term future."

Mr Sword added: "The global oil and gas industry is moving into a period of dramatic change which could see a restructuring and shake-out on a massive scale.

"Oil companies must find fresh crude reserves to replace declining output from existing fields; the supply chain is at full stretch with a chronic shortage of people and an ageing asset base; prices are high and demand is continuing to rise. 
 
"However, all of these challenges provide opportunities and the industry needs to take advantage of the momentum of change. To succeed in the future, innovation and development of new business models will be more important than ever."