Proactive solutions required now.
British Columbia and Alberta place greater reliance on the oil and natural gas sectors to drive their economies.
However, if they don’t become proactive in resolving the industry’s emerging labour issues, a tremendous economic opportunity will be lost to both provinces.
I refer to the critical need for our provincial governments, oil and gas industry leaders, and academia to develop a human-resource strategic plan to meet the forecast shortfall of skilled workers in this industry.
Alberta prides itself on its balanced budget and recognition by the rest of Canada as a “have” province.
British Columbia desires to emulate this enviable position and to become once again a “have” province. Crafting and implementing a strategic human resource plan for this significant industry will contribute to these goals.
Drilling activity in British Columbia was up 40 percent in 2003 and is anticipated to yield $2 billion in royalty revenues to provincial coffers. This revenue stream takes the “pole position” away from B.C.’s ailing forestry sector.
Currently, oil and gas activity is mainly taking place in the northeastern quarter of the province. The industry awaits a federal ruling that would permit offshore drilling in the Queen Charlotte Basin, Winona Basin, Tofino Basin and the Georgia Basin.
If approvals are granted to commence offshore operations in 2005, additional royalty revenues will begin from the region’s $50 billion worth of oil and $60 billion worth of natural gas. The pipeline infrastructure running from the mainland to Vancouver Island is in the planning stage to support the initiative.
Premier Gordon Campbell recently stated that these offshore projects are a key to British Columbia’s long-term economic health. Current leaseholders include Petro Canada, Chevron and Texaco Corp., Shell Canada and Exxon Mobility Corp.
The Western Canada Sedimentary Basin and the oilsands present similar revenue and potential for Alberta. In 2002, $33 billion was contributed by this sector to the provincial GDP. Seventy-five percent ($18.5 billion) of the total Canadian industry investment was made in Alberta in 2002.
This exciting exponential growth in oil and natural gas projects presents opportunities that stakeholders must exploit. This job creation cannot, and must not, be allowed to go offshore.
Bob Fedderly identified the problem in part, president of the Northern British Columbia Oilfield Contractors Association. “Businesses close to the drill bit are doing fairly nicely; however, the service sector hasn’t been able to capture quite as much of the limelight,” he said in a recent media report.
Fedderly pointed out that too many exploration companies are bringing in contractors from other jurisdictions to do the work. Indeed, it has been reported to me that a major Calgary-based company in the energy industry has actively solicited employees from Russia. This is at a time when our unemployment rates are in the order of eight percent.
Therein lies the problem.
A report published by the Petroleum Human Resources Council of Canada notes that direct employment in the “upstream industry” is currently 120,040 workers. The indirect employment impact is an additional 500,000 jobs.
According to the report, Alberta will require a further 8,000 positions in the oilsands region, based on the anticipated growth over the next ten years.
These critical shortfalls in skilled workers will be further exacerbated by attrition due to the age of the current industry workers.
The governments are quick to “fence off” their revenues. For example, in British Columbia, the government has appointed a committee with Deputy Minister Jack Ebbels at the helm – and a budget of $5.8 million – to recommend the appropriate royalty and taxation levels for the industry in the province. The “taxes” are collected, but will they be spent investing in the industry?
With limited resources, not-for-profit organizations such as the Petroleum Human Resources Council of Canada and the western office for the National Partnership of Advance Skills are doing their best to attract the attention of stakeholders to the pending significant skills shortage in the industry. But are we listening?
A task force is urgently needed. It should consist of oil and gas industry leaders, government, academia and others. It could accurately inventory our current workers and their skills, identify gaps, and craft and implement meaningful and applied training programs that do not currently exist. We must not be myopic on this issue and allow ourselves to enter an eleventh-hour global bidding war when we have the opportunity to retrain our currently unemployed workers today.
Why should industry, academia and government collaborate?
Globally, there has been significant consolidation in the oil and natural gas sectors. This means that it is possible to have industry play a meaningful role in developing control over its labour costs. If the industry were fragmented, then the coordination problem would be much more complex.
The ever-tightening budgets of academic institutions will ensure interest in collaborating to develop training supportive of the industry’s human resource strategy.
Finally, the government will create local jobs, thereby increasing tax revenue. It is a question of sustainability. If we can bridge the “silos” of the three major stakeholders, the result will yield a win-win outcome for all three.
It would be an opportunity lost if we could not keep the supply and demand curve in balance. If we fail to collaborate, we will pay the price with significant upward pressure on labour costs on these herculean projects. These unnecessary, troubling and disruptive inflationary costs will flow through the economy and be borne by British Columbia and Alberta wage earners.
In addition, failure by the three stakeholders to think strategically about this issue will diminish our overall performance as a global oil and natural gas competitor on the world stage.
As my grandmother used to say, a stitch in time saves nine.
Note: This article was originally published in 2005.
