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Labour crunch looms in oil sands Add to ...

As billions of dollars begin to pour back into northeastern Alberta, those charged with building the next wave of oil sands development are bracing for a labour crunch.

Some construction companies are preparing to bring in workers from outside the province, even looking to the U.S. Midwest for skilled trades. Others are exporting engineering work to Texas and India in hopes of avoiding a pinch spurred by the dramatic upturn in Fort McMurray's fortunes.

Strong crude prices are fortifying the oil patch's drive back toward Alberta's great bitumen reserves. In the past week alone, three companies have forged ahead on oil sands development. Husky Energy Inc. gave the green light for its $2.5-billion Sunrise project; Athabasca Oil Sands Corp. accelerated plans for its Hangingstone project; and Canadian Natural Resources Ltd. set plans to expand its Horizon mine next year.

Many other projects are either already in construction - such as Imperial Oil Ltd.'s $8-billion Kearl mine - or under consideration. Companies have brought back to life a greater volume of projects in the past year than they cancelled or delayed in the dark days of 2008 and 2009.

The soaring demand for workers to engineer and assemble the massive new projects highlights the stark difference in prospects facing hard-hit manufacturing zones such as Ontario against resource-rich areas such as the West.

Labour leaders believe that within two years, Western Canada will need more workers than it did even at the heights of 2008, in part because the oil sands won't be the only sector growing. Industrial development is now cropping up across the country. In B.C., projects are being built and planned for aluminum and natural gas. In Saskatchewan, it's potash and uranium. On the East Coast, it's oil and nickel.

"It's a full-blown crisis, and I mean that; 2012 will make 2008 look like a picnic party," said Josh Coles, national construction co-ordinator for the Communications, Energy and Paperworkers Union of Canada.

Western resource companies will find it far harder to fish in one of its traditional labour pools, Atlantic Canada, as improving prospects there and in Quebec make it increasingly likely that workers will stay home.

In Newfoundland and Labrador, Vale Inco's Long Harbour nickel-processing plant needs an average of 1,630 people per year while it is being built over the next few years. The massive Hebron offshore oil platform, which is expected to begin construction in 2012, will need 3,500 workers at its peak. Although the project has yet to be sanctioned, the provincial government expects up to 2,700 workers will be needed to build the Churchill Falls hydro dam.

"We might have had 10 per cent of our workers over the last decade from Newfoundland, which is a pretty high number," said Ian Johnston, senior vice-president of heavy industrial with PCL Constructors Inc., one of the leading firms in the oil sands.

"And in 2006, 2007, 2008 we brought all kinds of Quebec workers in because a bunch of the Quebec markets were slow. But it's not as slow there any more. So it's a big question mark," he said.

To compensate, some companies are already looking to the United States, where the economy remains more depressed, as a potential new Newfoundland.

"You've had very high levels of unemployment in the states of Michigan, Ohio and Minnesota. There are trades that could be made available to support the workload here in Canada if we couldn't supply it," said Tony Fanelli, vice-president and manager of labour relations with Bantrel Constructors Co.

Though Mr. Fanelli doesn't expect to need outside workers until late 2012, some companies have begun preparing for an eventual return to hiring under Canada's temporary foreign worker programs. And engineering firms, whose work precedes the builders, are already surging.

Not all sectors see a serious crunch, however. The construction industry, for example, expects a solid demand for workers to arise between now and 2013, but at a manageable level that remains substantially below the 2008 peak. Nearly completed projects - such as a recent Royal Dutch Shell Plc expansion, which at its peak had employed 10,000 - free up needed workers.

And it's difficult for some companies to even contemplate shortages, since much of the oil patch work isn't expected to materialize until late 2011 and 2012. "In the immediate future, I don't know of any shortage of tradespeople in Alberta," said Brian Halina, president of Chemco Electrical.

There is also confidence that the woes of past years can be avoided. Many of the new oil sands projects smaller, and therefore easier to manage and shut down if necessary, and the brush with scorching inflation in 2008 has made the oil patch more willing to try new strategies - including sending work offshore.

That has already started at some engineering firms. "We're work-sharing with India with some of our clients. We're work-sharing with Houston with some of our clients. That's taking place as we speak," said Chip Mitchell, the western region group vice-president for Jacobs Engineering Group Inc.

"The engineering side of the business has become very busy in the last four or five months," said Mr. Mitchell, whose company has already returned to 75 per cent of the work force it had in 2008.

Still, the labour issues are serious enough that some industry leaders are raising a caution flag, suggesting worker availability is one of the chief obstacles to expansion of the oil sands, which is expected to nearly triple its 1.5 million barrel per day output in the next 20 to 25 years.

"The challenge the industry is going to have is a human capital issue, in terms of having enough human resources," Murray Edwards, vice-chairman of Canadian Natural, said in a recent interview. The consequences of not properly managing that challenge, he added, could be serious.

"You have to be really disciplined in execution. If you're not disciplined, you'll drive your returns below the cost of capital."

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