From 2015 to mid-2017 the Canadian upstream and downstream sectors shed 52,000 direct jobs, most of them in an oilfield services sector that was devastated to the tune of almost 38,000 during that period. Even though higher oil prices have revived the industry of late, the news isn’t all good: only a third of the lost jobs are expected to return.
“The good news is that Alberta oil and gas companies are figuring out how to prosper and thrive in a low-price environment. The bad news is that the strategies that are allowing them to do that involve using fewer people and creating fewer jobs,” says Gil McGowan, president of the Alberta Federation of Labour and co-chair of the Alberta Government’s Energy Diversification Advisory Committee. “They’re finding new ways to squeeze out what managers call ‘efficiencies’ but for working people, it means fewer jobs.”
A recent study of labor productivity by PetroLMI, a division of Energy Safety Canada, which tracks labor trends and data in the Canadian oil patch, found that the two-and-a-half year bust has wrought rapid change in the field and in head offices. Producers are famous for sticking with the tried and true when prices are high and getting as many barrels as possible out of the ground, then innovating when the shoe pinches as prices fall. Digital technologies, automation, outsourcing services to other countries, and the use of big data and analytics software are just some of the ways companies are squeezing out efficiencies and raising worker productivity.
Mark Salkeld, CEO of the Petroleum Services Association of Canada, said the Canadian industry is a little slower to adopt new technologies than other countries.
“Some of this technology sounds like future think, maybe too much for the oil patch to digest at this point in time. We are famously known for taking our time to adopt and adapt but we do eventually,” he said.
According to Carol Howes, vice president, communications and PetroLMI, the news could be worse.
“We found in our recent productivity study that should the whole industry adopt these technologies, that would have a much bigger impact than currently because not everyone has adopted,” she said. The study pointed to a number of constraints that have slowed adoption, such as safety concerns, the need to update government policy and regulation, and a shortage of specialized skilled labor.
Oilfield services employment peaked at 108,120 by second-quarter 2014, but by the first quarter of the next year had plummeted by almost 26,000. Service company jobs reached its lowest point in second-quarter 2017 at 65,110.
By comparison, E&P/oil sands actually added employees for all but one of the quarters between second-quarter 2014 and fourth-quarter 2015, before dropping quickly thereafter and bottoming at 88,000 in fourth-quarter 2016, then adding 6,000 workers by year-end 2017.
Pipelines employment fared even better, beginning first-quarter 2014 at 5,400 and adding as many as 12,000 jobs at one point before finishing the period at 15,000.
Service companies and producers alike kept experienced, skilled workers when the downturn really took hold in early 2015, packaging out older employees and laying off younger, less skilled ones. While that strategy seemed like the smart play at the time, it had one unexpected consequence for the services sector: workers don’t want to come back.
“We scaled back wages by up to 30% in some cases. We cut bonuses, we cut benefits, we cut pension matching, we cut all these fringes to lower our cost because our customers were saying, ‘Get your cost down, get your cost down,’ sort of thing,” said Salkeld.
Matt Grzesiak started on a Saskatchewan drilling rig in 2005 and has seen a few ups and downs during his time in the oil patch, but the latest bust caught him at a different time in life. Now in his mid-30s, married with children, he values family and financial stability over the high wages of oilfield work. “Money’s tempting, but I look at my kids and it’s hard to leave. There’s temptation obviously. I miss the income,” he said. “I wanted something stable, something consistent. Now I’m a youth employment coordinator for people with disabilities. I’m not going back to the rig again.”
Salkeld has seen this scene play out over and over again during the current upturn.
“When we try to bring them back, they say, ‘Well, you know what? I’ve got a five-year job in front of me that might make me not as much money as I was making in the oil patch but it’s steady and I’m home every night and it’s everything that I need at this point in time and you can’t guarantee me more than a winter’s work at this point so I’ll stick where I am,’” he said.
Workers have been able to stick where they are to some extent because the Alberta economy has created jobs in other industries, like construction and high tech, and
provincial job numbers have returned to 2014 levels. The provincial unemployment rate dipped to 6.9% in December, not close yet to the 5% seen during the salad days of the last boom and still a full point over the Canadian rate, but the lowest since October 2015.
The oil and gas labor market may get even tighter over the next five years older workers retire. Howes says that if historic rates apply going forward, the industry can expect to lose another 23,000 employees by 2022. No one is quite sure who will replace them.
“Part of our job really is to explain to younger workers that there’s going to be opportunity going forward, in fact, some of these jobs will be more interesting from a technological point of view and from a skills point of view,” Howes said. “But right now there’s certainly a concern that they’ve become quite discouraged by this downturn. We did a survey in the fall and certainly got that feedback.”
That may cause political problems for the industry in coming years. “On one hand, we recognize that oil companies have to compete and on an increasingly challenging economic landscape,” said labor leader McGown. “On the other hand, if there’s an ever-shrinking amount in it for Albertans in terms of royalties and jobs, it’s going to make it much more difficult for industry to justify, especially as concerns about the environment and climate change continue to be at the top of the agenda.”
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