The challenges may look similar to the last growth period, but companies are giving early thought to meeting them
For most of the year we've been hearing that the next boom for Alberta is just around the corner. While some may be asking "which corner?" others are taking the prediction seriously.
They're investing money, time and other resources to make sure they're ready.
- Canadian National Railway (CN) is spending $10 million on its rail line from Lac La Biche, Alta., to Fort McMurray, Alta., to increase capacity to the oilsands region. CN's Fort McMurray yard gives customers direct rail access to major energy projects in development in Alberta's Athabasca, Peace River and Cold Lake oilsands regions.
- In announcing a $24-million addition to the Edmonton corporate campus in June, PCL Construction Management Inc. chief executive officer and president Paul Douglas made a point of emphasizing that the project was about positioning the company for the future. "We're tremendously confident in the province of Alberta and where it's going," he said. Building now makes sense, he said. "In a couple of years from now we believe the province is going to be back in that boom cycle and we're going to see escalation [of costs]."
- Estimates are that anywhere between $140 billion and $250 billion in oilsands projects are under construction or proposed. "Here in Alberta, we're gearing up for what could be unprecedented growth," notes Alberta Energy Minister Ron Liepert.
- Enbridge Inc. has $2.7 billion in pipeline expansions and new projects planned between now and 2014. Projects include the Norealis pipeline to serve Sunrise, Woodland to serve Kearl and the Wood Buffalo pipeline to serve Suncor Energy Inc. And Kent Cornelius, an Enbridge Inc. vice-president, told an oilsands conference in June that he expects a significant investment will be required for new and expanded infrastructure to support growth in the oilsands in the future.
Of course, all of this happened before August's wild stock market swings and renewed fears of another global recession.
But assuming that Scotiabank's prediction earlier this year that Alberta, buoyed by the oil sector, will lead western Canada's economic performance holds true, growth will average somewhere around 3.7 per cent.
Much of what is driving this is the increasingly important role Alberta's oilsands resource plays in the global energy picture.
Daily production from the oilsands is reaching 1.7 million barrels, according to the Canadian Energy Research Institute (CERI). Not only are the oilsands "making an increasing contribution to the close energy ties between Canada and the United States," CERI says, they are also playing a greater role in Canada's gross domestic product. And there is no sign of a let-up.
According to CERI, the estimated investments, reinvestments and revenues from operations of new oilsands projects will be $2 trillion between now and 2034. Of that, $253 billion will be "strategic initial capital." That's an important figure for this industry, as it includes construction.
But you don't need studies in Fort McMurray to tell you there is renewed activity in the oilsands. Talk to just about anyone there and they'll tell you that things are heating up. There's more traffic on the roads. And it's getting harder to find people for jobs.
Just ask Bruce McGee, president and chief executive officer of E-T Energy Ltd.
"We've been looking for an operations manager," McGee said during a recent tour of the company's pilot project north of Fort McMurray.
E-T Energy leases on 16.5 contiguous sections of land just north of Fort McMurray known as E-T Energy Poplar Creek. The company uses a proprietary technology called ET-DSP-short for electrothermal dynamic stripping process. Unlike other in situ production methods such as steam assisted gravity drainage, an electrical current is used to warm the bitumen so it can be pumped out of the ground.
Wells for the electrodes are drilled into the formation in a grid pattern. The spacing of the electrode wells is designed to provide the most efficient heating of the formation. Vertical production wells are then drilled into the formation to bring the heated liquid to the surface for storage.
There are no resulting greenhouse gas emissions and water use is minimized. The technique is already in commercial use in the remediation of contaminated soils in the United States.
McGee's goal is for E-T Energy to produce 10,000 barrels of oil a day at Poplar Creek.
In April, the company struck an agreement with Total E&P Canada Ltd. whereby Total participates in E-T Energy's field tests in return for financial and technical support. (McGee says he can't reveal how much.) The agreement also provides options for future cooperation in the development of ET-DSP. That includes a global licence of the technology for Total and a working interest in E-T Energy's operation at Poplar Creek.
While it is a company that bears watching, E-T Energy is one of the smaller players in an oilsands world dominated by giants like Suncor and Syncrude Canada Ltd. And while many of those bigger companies are spending to expand production, they are just as concerned about costs as the smaller ones.
Suncor president and chief executive officer Rick George told an oilsands conference in June that companies are taking a much more disciplined approach to spending now. Companies don't want a repeat of the cost inflation seen just before the last recession.
NO GOING BACK
"Believe me, none of us want to go back to that," George said. There will still be inflation but "this inflationary period will be different than the last one."
Inflation aside, concerns about having enough workers to get jobs done are also very real.
Speakers at TD Securities' unconventional energy conference in Calgary this summer raised the issue. Bill Lingard, president and chief executive officer of Flint Energy Services Ltd., shared what Flint has done to address the worker shortage. They include recruiting construction management staff from other industries and other countries. Flint has also accelerated apprenticeship programs. And it has improved control systems and workplace planning.
At the height of construction activity a few years ago, Flint had 450 temporary foreign workers out of a peak field workforce of about 3,000, he said.
"Even today we are experiencing shortages in certain trades," Lingard told the conference. "So we're using a small number of temporary foreign workers." Flint has about 100 temporary foreign workers out of a total of about 1,500 construction workers in the field.
Douglas, of PCL, said his company also needs qualified workers "to put our upgraders and big oil and gas projects in place.
"We've typically been able to pull a lot of people from eastern Canada, but they're busy. The resources across Canada are drying up, and we need to be getting our hands on the very best people right now and [are] looking to foreign recruitment and all the other things we've done in the past."
So how many workers is PCL looking for?