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Oil & Gas

Oil companies look to drones as pressure to ship mounts

As other methods of shipment face challenges, oil-by-drone emerges as a new possibility >

Eric Newell

Eric Newell – Chairman and CEO, Syncrude Canada Ltd.

Under Eric Newell’s leadership, Syncrude has become a key player in the western Canadian economy, an increasingly significant source of energy supply for the entire nation, and a model of a reliably operated, environmentally efficient, socially responsible corporation. >

David P. O’Brien

David P. O’Brien – Chairman, President and CEO, Canadian Pacific Limited

There seems to be nary a bend or incline in the tracks David O’Brien has been riding these days as chairman, president and CEO of Canadian Pacific Ltd.

A Sea of Sand; A Flood of Money

The fastest growing portions of the housing market are condominiums and townhouses. Of a new 520-unit downtown housing development, for instance, only 60 are rental units and 190 are condos.

In his best-selling book, The 7 Habits of Highly Effective People, author Stephen Covey advises readers to “Begin with the end in mind.” Easier said than done. Take the community of Fort McMurray. Nestled in the middle of the largest oilsands deposit in the world, containing bigger oil reserves even than Saudi Arabia, this northeastern Alberta community is scrambling for order amid the tumultuous economic wake of an announced $51 billion in oilsands investments in RM Wood Buffalo. “The effects are phenomenal,” says Fort McMurray mayor Doug Faulkner. “We are facing some the most severe challenges ever, ever, in the history of the community.”

Since the first investment announcements, the city has grown from about 35,000 in 1996 to more than 42,000 this year. Forecasts indicate the population will reach just under 60,000 in the next decade. Added to that is an additional 10,000 (for this year) so-called “shadow population.” With about $11 billion already invested and $40 billion yet to flow, the fun has just begun. Since 1995, oilsands production catapulted from very little to 35% of Canadian crude oil production, of which Syncrude Canada is the largest producer. By 2007-2008, forecasts indicate oilsands development will reach about 60% of total Canadian production. “We didn”t expect the investment to double and almost triple since the [original announcement],” says Faulkner. “Nobody could have expected this impact.”

As local government and community stakeholders wade through the myriad of growth-related issues that multibillion-dollar investments can cause, the strain of two years of crisis management shows. Since 1999, the city has raced to keep up with a quickening need for new roads, new sewers, new drains, and budget increases for paramedics, fire fighting, police services, energy costs, capital borrowing costs and wage increases. Never mind the demands from the communities for new recreation facilities, walking trails and other quality of life enhancements. “There are all kinds of demands coming at us from left and right, and north and south, and east and west,” says Faulkner. “It’s quite a challenge.”

Yet the payoff will be big. “It’s a tremendous opportunity before us,” asserts Faulkner. But first comes the pressures of such good fortune.

“You deal with all the impacts of growth before you get… that return coming in,” says Russell Dauk, Wood Buffalo’s superintendent of planning and development. Planners have learned from the boom times of yesteryear. They always end. “At the same time you’re planning for growth, you (need) to plan for the end of growth,” Dauk notes.

At this point, the end seems far away. In 2001, the regional municipality expects to have about 1,000 new lots serviced and ready for development in Fort McMurray. Not bad, considering city housing starts bottomed out in the single digits in 1993. With market activity like that, “you’re not exactly ramped up to deal with massive growth,” understates Dauk. But deal with it, they did. Which isn’t to say the journey was painless.

Four years ago, Bill Almdal saw the housing crunch coming. Regional co-ordinator of the Regional Infrastructure Working Group (RIWG), an active industry/government strategy group, he produced a population survey estimating 300 new housing starts were needed each year.

Unfortunately, no one listened. “When I first published these numbers late in 1997… most people didn’t believe it,” recalls Almdal. At the time, the regional municipality and local builders adopted a wait-and-see attitude. No wonder. The city had had only 277 new housing starts the entire decade previous.

“The feeling in ’97, ’98 was that if they could build 150 homes a year in Fort McMurray that was it,” says Almdal. “We were saying, ‘You need a lot more than that.'” In early 1999, Almdal shared the results of a second population survey. This time, Almdal said 720 new housing units were needed annually for the next nine years, just to keep up with the influx of people. That time, Almdal says with a mild chuckle, “They reacted.” In 1999, almost 800 new homes were built.

Another early stumbling block in the housing sector was the banks. So, Almdal and others invited area bankers together for an information-sharing session. “Builders were saying they’d go to banks and, based on past history, the bank would loan them enough money to build five homes,” Almdal recalls. When those five were completed and sold, the banks told builders they could get money for five more. “That wasn”t going to cut it, not at all,” says Almdal. The meeting helped. After that, money seemed to flow more easily. According to Canadian Housing and Mortgage Corporation data, the city had 893 new housing starts in 2000, with 925 more units expected this year.

While the community’s initial reticence may have been short-sighted, it was also understandable. Fort McMurray had been burnt before with investment promises that never saw the light of day. The ugly sensation of having the bottom drop out of the oil market was stamped indelibly on the community’s collective consciousness. In the ’80s, when the price of oil plummeted to less than $10 a barrel, the effect on the region was dramatic. Businesses dried up and people moved away. Many of the apartment block owners went bankrupt when the city’s vacancy rate ballooned to a whooping 60%. “All the specs indicate this (recent investment boom) will last seven to 10 years,” concedes Faulkner. But who can be sure? Oil prices go up, and they can come down. “We have adopted a policy as council that we’re going to walk softly and slowly,” says Faulkner.

Describing the velocity of council’s decisions to approve and service land for development as slow is a matter for debate. The pressure-cooker of a housing market has been a tenacious wrestling partner for city planners tasked with fast-tracking planning processes to meet the deluge of new development needs. One time-saving measure allowed builders to erect houses while the city was still servicing the land.

In Fort McMurray, houses are expensive. An average 1200-square-foot, three-bedroom house sells for about $204,000, while brand new homes begin around $225,000. Mobile homes range from $99,000 to $160,000 and are very popular. “That’s because (buyers) can get them for below the $150,000 mark,” explains Dauk.

The rental housing market is more daunting. A one-bedroom suite rents between $650 and $1040. From 1999 to 2000, average rental rates in all categories increased by about $200 per month, while 2001 has seen rates increase as much or more again. Some residents endured a stratospheric doubling and even a tripling of their rent in the last three years as landlords increased rent every six months. Intensifying the rental squeeze were federal goods and service taxation changes that favoured the construction of home-ownership units over rental accommodations.

To alleviate the tight rental market and make home ownership more achievable, the city relaxed rules to allow lot sizes less than 30 feet wide. While developers have begun building more affordable housing, including 850-square-foot-plus homes on reduced lot sizes, demand still outstrips supply. “If (home buyers) don’t fit, in terms of coming in at $100,000, the private sector isn”t able to supply anything,” notes Dauk.

A Day in the Life of the Oilpatch

Here’s a surefire way to encourage young people to pursue a career in the oil and gas industry: Tell them during a typical two-week shift, you drive between 5,000 and 7,000 kilometres.

Rick George

Rick George – President and CEO, Suncor Energy Inc.

Rick George’s heart has pumped oil for a long time and it’s always given him the energy to get wherever he’s wanted to go.

Richard F. Haskayne

Richard F. Haskayne – Chairman, TransCanada PipeLines Ltd.

There was a time in Alberta”s oil and gas history when people didn”t think an accountant should be running an oil company. They probably didn”t know Dick Haskayne, O.C., FCA.

Pierre Alvarez

Pierre Alvarez – President, Canadian Association of Petroleum Producers

When asked how his high school classmates would remember him, Pierre Alvarez said “outgoing and high energy.” Good thing, because as president of the Canadian Association of Petroleum Producers, Alvarez has to be outgoing to deliver industry’s message at a time when energy has never been higher on the North American agenda.

Patrick D. Daniel

Patrick D. Daniel – President and CEO, Enbridge Inc.

Patrick Daniel can tell you some long stories about petroleum pipelines : about 15,000 kilometres long, and growing. Daniel took over January 1 as president and CEO of Enbridge Inc., Canada’s oil and gas delivery giant, and if early returns are any indication, the company won’t be slowing down.

Jim Dinning

Jim Dinning – Chair, Calgary Regional Health Authority, Executive Vice-President Sustainable Development and External Relations, TransAlta Inc.

Jim Dinning is two elections removed from his 11 years as an MLA and cabinet minister, but he’s still playing his part in satisfying public demands.

James S. Kinnear

James S. Kinnear – President, Pengrowth Management Ltd.

Thirteen years ago in the heart of Canada’s oil and gas capital, James Kinnear found a way to open the industry’s doors to the smaller investor.

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