“If you look at the oil sands, there’s a whole bunch of stuff that hasn’t even really started yet. That’s the scary thing,” said Justin Bouchard, an analyst with Raymond James in Calgary. He has prepared a special report on the topic to be published next week.
Labour shortages and cost inflation “will be the story, the only one that’s going to matter” in the next one to five years, he said. “Pipelines, whether we send our oil to China or the U.S., Keystone – all that stuff is a backdrop. I think the most important thing is going to be cost inflation,” he said.
Alberta is surging. Figures compiled by CIBC World Markets show that the province has the lowest unemployment in the country, at 4.9 per cent, after posting real GDP growth of about 4 per cent in 2011 – double the Canadian average. Industrial wages are way up. A journeyman pipefitter makes nearly 12 per cent more per hour today than in 2008, at the height of the last boom.
Costs are rising. One Calgary banker pointed to costs for phases three and four of Suncor’s Firebag development that, taken together, average $50,000 per flowing barrel, the standard industry metric on expenses. That’s a high number, especially since the record for non-mining oil sands projects stands at $52,000.
“I'll bet there is going to be further creep in those costs and they set a new record,” the banker said. “Cost escalation is a huge risk these days.”
With that problem in mind, companies are scrambling for fresh approaches, constructing more of their projects far from the field – both through huge yards building Lego-like modules around Edmonton, and through component builders as far afield as South Korea.
“You’ll see more of automation and a lot more emphasis also on the whole supply chain dynamics, to make sure that the people supply chain is as efficient as possible,” said Chris Lee, energy and resources leader for Deloitte Canada.
But “aviation will continue to be very, very important. There are only so many skilled workers available.” Some oil sands companies have even mooted plans to begin picking up workers in the U.S.
Aviation companies are scrambling to keep up. Calgary-based North Cariboo Air, one of the busiest oil sands charter operators, has doubled in size every 24 months for the past six years. In the past week alone, North Cariboo is getting a Dash 8-300 painted in Trois-Rivières, installing seats in two Beechcraft King Airs, and waiting on delivery of a Beechcraft 1900. It has a BAe 146 jet sitting in Calgary, preparing to enter service. In the span of little more than a month, those five planes will give North Cariboo the capacity to move around 300 new people a day – or 9,000 a month.
“Right now, it’s a bit of a growth spurt,” said Hart Mailandt, the director of business development for North Cariboo Air.
THE SUNCOR AIRLINE
No one tracks the size of Canada's corporate flight departments, the aviation offices that move workers into mines and forest operations and hydro operations. But most are modest. Hydro-Québec, for example, shuttles workers to remote sites on three Dash 8 aircraft that, in 2010, moved 68,000 workers over the course of the year, or under 6,000 a month.
Then there's Suncor – or SunJet, the name it gives its fleet. On one particularly busy month, the company flew 32,000 people. SunJet runs five aircraft, including three Bombardier-made regional jets, two with 90 seats, and another with 50. Two additional business jets ferry around executives. All told, its planes fly 400 hours a month, run by an aviation department staffed with 55 people. It supplements those with outside help – on any given day, the company can have four or five charters moving around a broad assortment of people.
“Everybody flies. That includes employees and contractors,” Mr. Grainger said.
SunJet planes run to Calgary, Edmonton, Saskatoon and Vancouver. They even take Fort McMurray-based employees to Suncor's own Firebag airport, located near its oil sands operations of the same name north of the city. The airstrip is exclusively for Suncor's own flights, and it's sophisticated enough to land the class of Boeing 737 jet that WestJet flies.
Numerous companies have similar arrangements. Syncrude Canada Ltd., MEG Energy Corp., Canadian Natural Resources Ltd., Statoil ASA and Devon all have private strips. Royal Dutch Shell PLC runs a major aerodrome, also used by Imperial Oil Ltd., located on a lucrative enough oil sands deposit that at some point, the existing runway will be torn up and built somewhere else so Shell can mine beneath it. Each of these is a major commitment: Paving an airstrip alone can cost $25-million; building an entirely new airport can cost $40-million, or more.Report Typo/Error