Sept/Oct 2008

2020 Vision

A look at the future of the Canadian oil sands

By D. Zlotnikov

Syncrude’s expansion facilities

At 2.7 million barrels per day, Canada accounts for about three per cent of the world’s total oil production. Even as conventional oil supplies continue to decline, one region in particular is continuing to grow in significance — the Alberta oil sands.

Representing over 95 per cent of all oil and gas producers in the country, the Canadian Association of Petroleum Producers (CAPP) endeavours to inform its members and assist them in making market-related decisions. To this end, the association produces an annual report from information derived from surveys of its members, as well as those involved in potential and existing markets and pipeline projects. The most recent report has projections extending until 2020 and the news is both good and bad.

“Our moderate growth scenario, which we use as a sort of baseline case, has Canada’s oil production grow dramatically through 2020,” said Greg Stringham, vice president of markets and fiscal policy at the CAPP.  “The oil sands alone will go from 1.2 million barrels per day in 2007 up to 3.5 million.”

Growing pains

However, because of the sheer volume of growth in such a concentrated area, Stringham said there will be great challenges in meeting labour demands during the construction phase of the projects. “Operationally, the oil sands require a fairly small number of people,” he explained. However, the Construction Owners’ Association of Alberta estimates that the greatest peak in demand will occur in the second half of 2010, requiring a staggering 44,000 people. Stringham listed a number of initiatives geared to meeting this need that are underway in the oil sands industry.

“We have a large number of apprenticeships underway in trades,” he said. “Alberta is home to 11 per cent of Canada’s population, but offers 25 per cent of the country’s apprenticeships.” Because it takes three to four years to have an apprentice graduate to journeyman, Stringham acknowledged this as more of a long-term effort.

To address the immediate shortfall, Alberta has been outsourcing portions of the assembly and construction work to Ontario and Quebec, where the decline in the automotive industry has created a pool of trained workers. Rather than having these people move into the already overcrowded oil sands communities, smaller parts are sent over for assembly and then shipped back to be installed.

In addition to recruiting workers from other provinces, another initiative has focused on immigration. “We’ve had some success bringing people in on temporary work permits from the Philippines and Mexico,” said Stringham.

Just as there are growing pains on the construction side, there are some challenges anticipated on the demand side, as Canada looks for buyers for all the extra production.

“Of the 2.7 million barrels, Canada exports just over half, primarily to the U.S. Midwest,” said Stringham. As the production grows, CAPP has been looking to the Gulf of Mexico to pick up the extra production. “There are already refineries in Texas that are seeing a decline in oil coming from places like Venezuela and Mexico, which produces very heavy oil,” Stringham explained. “As that supply continues to decline, we can just move in and pick up the slack.”

Stringham suggested that the lighter oil coming out of the upgraders can be sold directly to the Philadelphia and New York markets in the United States or domestically to Eastern Canada. Overseas shipping is also being considered, but pipelines remain the most cost-effective method of moving oil, and so while tankers are an option, they are likely to remain an alternative rather than the first choice.

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