Why the British are invading the oil patch

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At a time when thousands of Alberta's oil and construction workers have lost their jobs, the British Trade Office in Calgary has added to its numbers as it handles a surge in interest from corporations back home, many of them interested in bringing to Canada expertise gained from work in the North Sea.

As that prolific offshore basin passes its peak production, companies who built themselves on the North Sea's wealth have begun to look for a new basin to work in. Many are turning to the oil sands, with their enormous growth potential and rising international profile.

The trade office in Calgary alone expects to help introduce 150 British companies to Alberta this year. It has seen a 30-per-cent increase in demand for its market research services, which have been requested by companies that specialize in environmental technologies and recruitment. Engineering and manufacturing companies have also shown interest.

"We're busier than we've ever been," said trade office director Paul Paynter. "U.K. companies who have got a strong global pedigree, they're not afraid to go out and look for new markets, particularly if markets in the North Sea might be closed up because of the long-run reduction in production there."

One company took the dramatic move of completely uprooting from Britain. Oilflow Solutions Inc., which grew out of research at Britain's University of Bradford, transplanted its entire operation and staff to Calgary last year. The company sells a specialized product that changes the consistency of heavy oil - like what's found in and around Fort McMurray - from that of shoe polish to that of water.

The product had few applications in the North Sea, where oil is much lighter. So Oilflow moved to Canada, where it has more than doubled its staff size and now considers itself Canadian.

But having research roots in Britain is an advantage, said chief executive officer Mike Crabtree. The harsh offshore environment there forced companies to develop a more aggressive culture of technological development.

"I think one of the reasons why there are large numbers of U.K. companies coming here is that the North Sea traditionally, even from its startup in the early seventies, has been completely driven by the need for technology and technology solutions. The North Sea would have effectively run out of reserves by the mid-eighties had not technology constantly been stepping ahead of what was possible previously," he said.

That produced a kind of national skill set that fits well with the extraordinary technological needs of the oil sands, which face huge hurdles to producing crude in a way that limits environmental damage without hurting returns, Mr. Crabtree said. It doesn't hurt that until recently, the Canadian oil patch attitude toward technological development has been conservative.

The question, of course, is why anyone would want to come to Canada in the midst of a recession so harsh it has knocked tens of billions of dollars from oil sands spending plans.

"On the surface of it, it would appear to be a very poor time to be interested," said Darren Mann, the sales manager for ISIS-Ex Ltd., a British-based maker of high-tech specialized display monitors for exploration drilling that, following a recent corporate management change, has trained its focus on Alberta and the U.S. Gulf Coast.

The reason is simple: Both capital investment and exploration in the North Sea are falling. And ISIS-Ex sells to exploration companies.

That makes Canada, with its 173 billion barrels of oil sands reserves - compared with a government estimate of 30 billion remaining in Britain - look like a promising alternative. Besides, Mr. Mann believes the current lull in oil prices is temporary.

"From our point of view, we're looking at strategic growth and we realized that the current oil price dip is unlikely to be maintained. The price will go up," he said.

That's not to say coming to Canada has been easy for those who have tried. Last year, the Scottish engineering and services firm Production Services Network (UK) Ltd. (PSN), which employs 8,500 people, bought Calgary-based Tartan Engineering Ltd., which employed 150.

At the time, Bob Keiller, CEO of PSN, called western Canada "a fantastic international source for growth" and "critical" to its global strategy.

The company nurtured plans to quadruple its Calgary business. Instead, like most firms in Calgary, it saw the work dry up, and was forced to lay people off. Mr. Keiller admits the experience has been disappointing.

"The business we have in Calgary at the moment probably breaks even. We'd hoped it would be further on in terms of development than it is," he said in an interview.

"But we're still confident. … The short-term looks difficult, the medium-term looks okay, but the long-term looks really good."