Energy Job Functions and Company Types

Which Job Function? 

In order to pursue a job in the energy sector, your first decision is what type of position you want – in other words, what functional role you want to play. Your function has a lot more impact on the nature of your job than does the type of company in which you work. You can have a wide variety of business jobs in the energy sector: 

•  Asset development 

•  Corporate finance 

•  Quantitative analytics, risk management 

•  Trading, energy marketing 

•  Investment analysis 

•  Consulting 

•  Business development 

•  Banking 

•  Strategy and planning 

•  Economics and policy analysis 

Different companies can have widely varying names by which they refer to these roles.  For example, “marketing” in one company involves advertising and product promotion, whereas “marketing” in another can mean commodities trading.  Similarly, “business development” can be more akin to sales in one company, or synonymous with strategic planning in another. 

What Type of Company? 

Job functions and company types intersect in numerous ways – for example, you can do corporate finance in a large oil company or with a small fuel cell manufacturer, or choose between asset development and trading within a given utility.  See Figures 2.1 and 2.2 for a complete list of the job functions available at each type of company.  Below, we have summarized the characteristics of each of the major energy sector employer types: 

Oil companies 

Oil companies engage in exploration and production of oil (“upstream” activities), oil transportation and refining (“midstream”), and petroleum product wholesale and retail distribution (“downstream”).  The largest companies, known as the “majors,” are vertically integrated, with business operations along the entire spectrum from exploration to gas stations. Smaller oil companies, known as “independents,” are often exclusively involved in exploration and production.  Upstream is considered the glamorous place to be, where all the big decisions are made.  Upstream jobs also involve heavy international work, with many employees sent off to new postings around the world every 3 years or so.  We should also note that E&P businesses are fairly similar in nature among oil companies and companies mining other natural resources like uranium or coal – moving among these types of firms during a career can be a logical path. 

The majors are known for excellent rotational training programs, and a fair number of people take advantage of those programs and then jump over to independents for good salaries.  Oil companies pay well in general, but jobs are not necessarily as stable as one might think.  When oil prices drop, company operating profits are dramatically impacted, and layoffs are fairly common.  American oil jobs are overwhelmingly concentrated in Houston. International hot spots include London, Calgary, and the Middle East. 

Some oil companies focus exclusively on midstream and downstream activities.  They operate refineries to distill crude oil into its many 

commercially useful petroleum derivatives, like gasoline, jet fuel, solvents, and asphalt.  Refineries are, in theory, built to last 40 years, but some have been around for as long as 80 years.  That means that new refineries are rarely built, and the refinery business is mostly about managing the razor-thin margins between purchased crude oil inputs and revenues from refined product outputs.  

Oil services companies 

Oil services companies provide a very wide range of outsourced operational support to oil companies, such as owning and renting out oil rigs, conducting seismic testing, and transporting equipment.  The fortunes of these companies follow the price of oil: when oil is expensive, oil companies drill a lot and make a lot of money, so business volume and revenue increase for their oil services contractors.  Working for an oil services company probably means working in Texas or internationally, and can feel very much like working for 

an oil company, given the similarity in issues and activities.  

Pipeline operators 

Pipeline operators own and manage tens of thousands of miles of petroleum products and natural gas pipelines.  Many of them also operate oil intake terminals, engage in commodities trading and energy marketing, and own natural gas storage facilities or petroleum refineries as well.  Unlike the major oil companies, pipeline operation companies are not household names – nonetheless, the largest ones take in several billion in annual revenue, comparable to the scale of a medium-sized oil company. 

Utilities 

Utilities are, by definition, located all over the country...everyone has to get their electricity and gas from somewhere, of course.  However, as a result of massive consolidation among utility holding companies, the corporate offices for your local utility may not necessarily be that local.  There are presently about 50 investor-owned utilities in the country, but industry insiders predict that in a few years mergers may leave us with as few as 10.  The “graying” of the utility industry is a well-documented trend; 60% of current utility employees are expected to retire by 2015 – meaning there’s lots of opportunity today for young job seekers. 

“Utility” is actually a loose term that we use to succinctly refer to gas utilities and all types of power generation companies: investor-owned utilities, government-owned utilities, municipal power companies, rural electric co-ops, and independent power producers (IPPs) or non-utility generators (NUGs).  Utilities differ greatly in terms of their lines of business: some have sold off most of their generation assets and are primarily distribution companies with power lines as their primary assets; others may own large amounts of regulated power plants, and may also own non-utility generators or individual independent power plants.  As the electricity market fell apart starting in 2001, most IPPs sold off their assets piecemeal to large utility holding companies or financial institutions.  

Transmission grid operators 

Transmission grid operators, known as Independent System Operators (ISO) or Regional Transmission Operators (RTO), provide a power generation dispatch function to a regional electricity market.  They don’t own the transmission lines, but coordinate how much power is generated when and where, such that supply and demand are equal at every moment.  This is an extremely complex process, and necessitates the analytical skills of electrical engineers and other generally quantitative and analytical operations staff.  

Equipment manufacturers 

Equipment manufacturers make turbines, boilers, compressors, pollution control devices, well drilling and pipeline construction equipment, software control systems, pumps, and industrial batteries.  Many of them also provide engineering services and construction/installation of their equipment.  The major gas turbine manufacturers, for example, also offer engineering, procurement and construction of entire power plants.  Oil-related equipment makers are often characterized as “oil services” firms (above).  The equipment manufacturers in the energy industry are not particularly concentrated in one geographic area, though of course many of the oil business-oriented ones have major offices in Texas. 

Investment funds 

Investment funds are a diverse bunch:  mutual funds, private equity funds, and hedge funds.  As a whole, the investment fund world is fairly concentrated in Boston, New York and San Francisco, but there are small funds dotted all over the country as well. Mutual funds hire stock analysts primarily out of MBAprograms to track, value, and recommend stocks in a particular sector (e.g. energy, natural 

resources, consumer products) to the fund managers.  However, there are a lot of other finance-related positions inside these massive firms where undergrads are sought after as well.  

The number of hedge funds in the U.S. has been growing at a phenomenal rate in the past few years, but they are still notoriously difficult places to get jobs.  Hedge funds often hire people out of investment banking analyst programs.  They tend to not hire people out of the mutual fund world, given that their valuation approach is so different, their investing horizon is so much shorter, and their orientation many times is towards short-selling as well as buying stocks.  While some hedge funds may focus exclusively on energy, most are generalist and opportunistic with respect to their target sectors. 

Private equity funds invest money in private (i.e. not publicly traded) companies, often also obtaining operating influence through a seat on the portfolio company’s board of directors.  As a result, an analyst’s work at a private equity fund is vastly different from that at a mutual fund or hedge fund.  You are not following the stock market or incorporating market perception issues into your valuations and recommendations; instead, you are taking a hard look at specific operating issues, identifying concrete areas where the portfolio company can lower costs or enhance revenue.   A few private equity firms specialize in energy investing, and many more do occasional deals in the energy space as part of a broader technology or manufacturing focus.  Private equity firms hire just a few people straight out of college or MBAprograms, and many others from the ranks of investment banking alumni.  

Banks 

Banks are primarily involved in lending money to companies, but they also have their own trading operations, private wealth management, and investment analysis groups.  Commercial and investment banks arrange for loans to energy companies, as well as syndicate loans (i.e. find other people to lend the money) for them.  Investment banks manage IPOs and mergers and acquisitions (M&A) activities as well.  The banking world is overwhelmingly centered in New York (and London), with some smaller branches in Chicago and San Francisco. 

Consulting firms 

Consulting firms offer rich opportunities for those interested in the energy industry.  Consulting on business issues (rather than information technology or technical, scientific issues) is done at three types of firms: management consultancies, risk consulting groups, and economic consulting shops. Consulting firms are often interested in hiring people with good functional skills rather than requiring specific industry expertise, and provide a broad exposure to energy sector business issues, as well as good training.  Business consulting firm offices are located in most major cities, but much of the energy sector staff may be located in Houston, Washington D.C., and New 

York. 

Nonprofit groups 

Nonprofit groups are tax-exempt corporations (pursuant to IRS code 501(c)3) engaged in issue advocacy or public interest research.  Advocacy groups may focus on developing grassroots support for public policy changes, publicizing public interest issues or problems through direct actions, or working to influence politicians to enact or change legislation.  Most of the energy-related advocacy groups focus on environmental topics, though some also cover corporate financial responsibility and investor protection issues.  Think tanks are public policy research institutes, staffed mainly by PhDs who generate research and opinion papers to inform the public, policy-makers and media on current issues.  Interestingly, the think tank is primarily a U.S. phenomenon, although the concept is slowly catching on in other countries. Some think tanks are independent and nonpartisan, whereas some take on an explicit advocacy role.  Nonprofits are funded by individual donations and grants from foundations, and accordingly a substantial portion of their staffs are dedicated to fundraising.  Most energy nonprofits are based in Washington, D.C., where they have access to the federal political process, but many of them have small regional offices or grassroots workers spread out across the country. 

Government agencies 

Government agencies at the federal and state levels regulate the energy markets and define public energy and environmental policy.  Federal agencies are mostly located in Washington D.C., and each state has staff in the state capital.  Jobs can include policy analysis, research project management, or management of subcontractors.  The energy agencies tend to hire people with environmental or engineering backgrounds, and are lately following a policy of hiring people with general business and management education and experience. 

Energy services firms 

Energy services firms help companies (in any sector) reduce their energy costs.  Working for an energy services firm is similar in many respects to consulting-except that you go much further down the path of implementation. Typically, an energy services firm first conducts an energy audit to understand where a company spends money on energy:  electricity, heat, and industrial processes.  Then, the firm actually implements energy-saving measures “inside the fence” of the client company.  This can involve investments and activities such as putting lightbulbs on motion sensors, upgrading the HVAC (heating, ventilation, air conditioning) system, negotiating better rates with the utility suppliers, or developing a cogeneration power plant adjacent to the factory.  Often, the energy services firm receives payment for these services in the form of a share in the net energy cost savings to the client.  These firms are located across the country, with a few of the largest clustered in Boston.