Alberta’s oil sands are vital to Canada’s present and future energy needs and economic prosperity. Consider their role in just two aspects of the economy — employment and investment. Every permanent position created in the oil sands results in the creation of nine more direct, indirect or induced jobs. As a result, some 240,000 Canadian jobs are directly or indirectly linked to this industry. On the investment front, $59 billion were poured into the sector between 1997 and 2006. The industry also has the potential to generate at least $123 billion in royalty and tax revenues between 2001 and 2020, representing a major boost to the public coffers.
Down, but not out
Despite their scale, the oil sands have not been immune to the storms buffeting the global economy. Most producing operations are surviving, but many construction and development projects have been placed on hold, as their owners wait for investor and consumer confidence to rebound.
No longer as bullish as it was a year ago, the industry is definitely not all gloomy, either. Nancy Lever, managing director of ARC Financial Corp., a Calgary-based energy-focused private equity firm, is clearly optimistic. “There’s been a bit of a slowdown, but the long-term outlook is very positive,” Lever says. “Recently, the industry was challenged by huge capital cost overruns due to an overheated economy, but labour and material prices are starting to come down again. That’s a very good sign.”
Affected by the slowdown, industry suppliers too are looking forward to better times. “We think the recession will be short-lived,” says Greg Lucyshyn, contracts manager with drilling service provider, Boart Longyear Canada. “There’s going to be a pick-up in activity pretty soon.”
Paraphrasing Mark Twain, Chris Yellowega, North American Construction Group’s (NACG) vice-president of operations says, “Rumours of the death of the oil sands have been greatly exaggerated. The outlook is still very positive. Most players are taking advantage of the slow-down to increase operational efficiencies, preparing to take advantage of new opportunities when things pick up again.”
David McColl, research director at the Canadian Energy Research Institute in Calgary, sees the slowdown as “a golden opportunity.” He explains, saying: “The credit crisis and collapse in energy prices can be a chance for the industry to step back and focus on the next moves in the development of the oil sands.” McColl thinks the time is ripe to secure high-quality labour that has been released by other companies, to obtain supplies and inputs at reasonable costs and to prepare for the return of higher oil prices and economic activity. He cites Imperial’s decision to proceed with its Kearl Oil Sands project as an example of such strategic thinking.