Sept/Oct 2007

Oil sands

Industry overview

By D. Zlotnikov

Fort Hills | Photo courtesy of Petro-Canada

The oil sands sector in Alberta is a booming, growing business, with expectations of continued long-term growth. Already accounting for over half (58 per cent) of oil production in the province back in 2005, the oil sands are predicted to account for as much as 80 per cent of that total by 2020. A presentation by Natural Resources Canada states that between 2005 and 2020, oil sands production is expected to quadruple.

That much growth in one place, however, is not without its challenges.With 35 major companies already active and investing in Alberta’s three oil sands regions, and $150 billion worth of new projects (both planned and under construction), the shortages being felt by mining companies worldwide are particularly acute here. The first and foremost of these, according to communications and research specialist of the Alberta Chamber of Resources (ACR) Lloyd Dick, is the growing demand for qualified construction workers.

An industrial construction project workforce graph, available on the Construction Owners’ Association of Alberta (COAA) website, lists 53 projects expected to be under construction by 2011. Virtually all of the projects are related to oil production and will, at the peak of demand (predicted to be around the first quarter of 2009), require 34,000 workers. To put things in perspective, Dick said that “right now, the graph puts the demand at around 18,000 workers, which is pretty accurate, and that’s barely able to fill that.”

If all the projects listed on the graph reach the production stage, and do so on time, the demand will almost double in two years.

Brad Anderson, ACR’s executive director, added that “the graph is just the tip of the iceberg. It only lists the mega-projects, those worth over $100 million. That doesn’t include hospital or road construction, since they’re usually less than that.” With such a sharp spike in the near future, it is hard to disagree with Dick’s prediction that “labour costs are going to go up.”

With the anticipated cost increase, as well as recent events on the political front, it is no surprise that Anderson is concerned for the well- being of the industry.

“Oil sands oil is the hardest and most expensive to get out of the ground, and always will be,” he said. “Once it is out of the ground, this oil is the hardest and most expensive to do anything with, and always will be.” This is no surprise to the companies working the oil sands today, who know that there will be a need for greater, longer term investment in these projects. It takes, as Anderson put it, “sticktuitiveness.”

Anderson pointed out that the success the oil sands industry is seeing today is not luck, as some have suggested to him. “It’s pure sweat equity” that got the oil sands to their current stage. Anderson’s experience includes working with AOSTRA (Alberta’s Oil Sands Technology and Research Authority), the organization formed by then-premier Peter Lougheed.

“He said,” Anderson recounted of Lougheed, “‘go and figure out how to produce and upgrade the oil sands from each of the deposits in Alberta.’At the time,AOSTRA was the largest focused research project in the country.”

At its peak, AOSTRA’s research budget was $100 million with the amount matched from the industry side, despite the project being considered high risk and a long shot. The results of that, said Anderson, are the oil sands of today. AOSTRA’s successes include the Underground Test Facility, where Anderson said the SAGD technology was first developed and tested. Despite a history of working with the industry and most commonly on industry-initiated projects, AOSTRA did not get much initial support for its SAGD research. Only towards the end of the project, when the positive results were produced, did the industry express an interest.

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