Is Alberta losing a ‘global war for talent’?
A global commodity boom raises the temperature in province's red-hot labor market
As Lorraine Mitchelmore rushed from a speaking engagement out into a hot June afternoon, the president and country chair of Shell Canada Ltd. paused to consider Alberta’s never-ending shortfall of skilled workers.
“There’s a decade of projects that we’ve got in front of us,” she said, standing in the lobby of Calgary’s Delta Hotel on June 11. They include a massive liquefied natural gas (LNG) venture proposed for Canada’s West Coast, as well as an 80,000 to 90,000 barrel per day expansion at Shell’s Athabasca Oil Sands Project.
“We don’t want to end up thinking we’re going to get the resources the minute we need them,” she said. “That’s not going to happen, so we need to plan ahead.”
The latest figures compiled by the Petroleum Human Resources Council of Canada suggest the country’s oil and gas sector could be short 3,400 workers in the next four years.
Less acknowledged, however, is the impact a labor-sapping global commodity boom is having on Alberta’s already thin supply of skilled workers. Losing just one per cent of the sector’s workforce to other industries or competing jurisdictions will create an additional 980 job vacancies between 2012 and 2015, the council reports.
In an interview, Mitchelmore casts the challenge as “a great opportunity for aboriginals and Canadians across provinces,” but she chafes at the suggestion that Canada, Alberta and the oil sands are on the losing side of what the McKinsey Global Institute calls a “global war for talent.”
“Yes, Canada can compete globally, of course,” she says.
And Alberta? More than 29,000 people arrived in the province through the first quarter of 2012, the largest population increase in the country, according to Statistics Canada.
Nearly half of the gain, or 13,400 people, came at the expense of other provinces. Another 7,500 new immigrants entered the province, the highest level recorded over a three-month stretch since 1971.
Skill shortages are nevertheless endemic. The province is projecting a shortfall of 114,000 workers by 2021, for instance. Oil sands production is poised to crest three million barrels per day by then, according to industry projections. What’s not clear is whether Canada and Alberta can attract the skilled hands needed to wring that much bitumen from the earth.
However the recent slowdown in China and broader concerns over European debt pan out, the recent boom in global commodities has effectively raised the temperature a few notches in Alberta’s already red-hot labor market.
“It’s undeniable. There’s a global war for talent,” declares Rupert Merrick, director of international operations at Working In Ltd., a global recruiting firm based in Sydney, Australia. “We’ve got this massive growth story going on and just not enough local workers. It’s a demographic reality.”
Australia is fast emerging as a serious rival to Canada. Two days after Mitchelmore addressed the Canadian Council for Aboriginal Business, warning that the country has become “complacent” in the face of shriveling demand and rising oil and natural gas production in the United States, a global career expo swept into downtown Calgary.
Behind a kiosk littered with glossy pamphlets advertising for drilling and completions specialists and surface engineers, Jane Somerville shakes her head dismissively. “Poaching? I don’t know about that. We’ve got a great lifestyle,” she says.
Somerville is a senior technical recruiter with Santos Ltd., one of Australia’s largest producers of domestic natural gas. The company, which at press time had a market cap of $9.8 billion, is the lead sponsor of a $16-billion LNG project planned for Curtis Island, a spit of land offshore Queensland on Australia’s northeast coast.
The proposed Gladstone LNG project is slated to pump out 3.9 million tonnes of the supercooled gas per year from its first “train” beginning in 2015. Its second phase, using coal seam gas drawn from Australia’s Bowen and Surat basins, will nudge production north of seven million tonnes per year – most of it destined for Malaysia and South Korea, whose state-run oil companies have signed on as equity partners.
The project will yield 5,000 jobs in construction, Santos estimates, plus another 1,000 during production. The Adelaide-based company is counting on Canadian talent to fill at least some of those positions. (At least two of its engineering and construction contractors, Fluor Corp. and Saipem SpA, were on hand at the Calgary career expo in June).
“We’re focusing on technical professionals,” Somerville says, standing amid a throng of resumé-clutching applicants at Calgary’s Telus Convention Centre. The company is targeting Canadian geoscientists and geophysicists, reservoir engineers and completions specialists, in part for their experience, she says, but also to help offset personnel losses to competing jurisdictions.
“We are losing people offshore as well to very competitive environments, such as the Middle East and U.S.,” Somerville says. “And so we’re almost in an identical situation as Alberta – same people, very captive market.”
The similarities do not end there. Like Alberta, Australia is scrambling to find workers to support its industrial ambitions. The country plans to boost LNG production fourfold, from 20 million tonnes annually today to 85 million tonnes by 2017. Eight projects, worth an estimated $175 billion, are either planned or under construction, according to the national Bureau of Resources and Energy Economics.
The pace and scale of growth is unprecedented. A report submitted to the Australian government in July 2010 by a National Resources Sector Employment Taskforce notes that no country except Qatar has successfully built more than two gas “trains” concurrently, for instance.
One reason is labor. Australia’s LNG rush happens to coincide with a mining and mineral bonanza. Exports of iron ore alone will climb 12 per cent this year from last, to 493 million tonnes, according to resource bureau estimates. By 2017, exports are forecast to reach 779 million tonnes, driven by expansions of existing facilities and the construction of new ones.
“What you’ve got is the emergence of the Asia story, of India and China, and what they’re doing is creating an even greater demand than ever before for resources and energy,” says Merrick at Working In, which has successfully recruited in Calgary, Edmonton and Vancouver on behalf of BHP Billiton, Arrow Energy and Rio Tinto, among others.
“A lot of people are pressing go on a lot of projects and there’s just not enough workers to go around.”
Governments are increasingly jostling to gain an upper hand in the talent war. On May 25, Jason Kenney, Canada’s federal minister of citizenship, immigration and multiculturalism, told a business crowd at Toronto’s Royal York Hotel that there are 250,000 unfilled jobs across Canada today.
“We expect that number to triple by the end of this decade, because of large and acute labor shortages,” he said, according to speaking notes.
Bureaucrats in Ottawa are moving ahead with a raft of reforms to address the projected shortfall.
The government says it is streamlining the Federal Skilled Worker Program, for instance, moving away from a focus on attracting professionals and managers in favor of filling jobs in construction, transportation and manufacturing, which together make up just three per cent of all skilled workers entering Canada, according to federal statistics.
The Conservative government has also capped the number of skilled workers it admits each year, at 10,000, in order to clear a backlog of applicants (this year’s allotment was filled by early May).
Would-be economic immigrants are now classified according to a list of so-called “priority occupations” that includes heavy-duty equipment mechanics, industrial electricians, and oil and gas drilling supervisors.
As a country, “I don’t think we’re standing still,” says Carmen Velasquez, an associate director with consultancy IHS-CERA who has studied oil sands labor issues. The trouble, she suggests, is that demand for both resources and skilled workers is galloping at a faster clip.
Take British Columbia. The province’s oil and gas sector will need 17,000 workers as drilling and construction activity required to support several LNG export schemes ramps up, according to a May report compiled by a government-appointed immigration taskforce.
So-called “sectoral poaching” is already common in some regions, taskforce chairman and B.C. immigration minister John Yap heard. Labor shortages are so acute in the Lower Mainland that some businesses reported they had considered leaving the province altogether in favor of jurisdictions with more people and friendlier immigration regimes.
While geology keeps oil companies firmly tethered in place, procurement contracts are free to go where labor is more plentiful and, therefore, cheaper.
In June, Newfoundland and Labrador Premier Kathy Dunderdale, whose province faces its own labor challenges amid an unprecedented boom in energy and resources, publicly chided ExxonMobil Corp. over the company’s decision to skip building a third module for its Hebron development in local fabrication yards. Exxon says building the unit in Newfoundland would delay the project.
Imperial Oil Ltd., majority-owned by Exxon, also faced sharp criticism from labor unions for outsourcing construction of modules for its massive Kearl oil sands mine to South Korea – a decision conceived, in part, as a way to avoid the high costs for materials and labor that crippled growth projects during the last boom.
Velasquez says the international battle for skilled labor has only grown more intense since 2006. Indeed, Canada may have already been outflanked by Gina Rinehart, Australia’s richest woman and the chairman of Hancock Prospecting Pty Ltd.
Hancock has partnered on a massive iron ore mine in northwestern Australia that will be the first to use Enterprise Migration Agreements, recently introduced by the government in Canberra as “a temporary migration initiative” tailored exclusively to help staff resource projects with capital budgets in excess of $2 billion and a peak workforce greater than 1,500.
Rinehart reportedly has pre-approval under the agreement to hire up to 1,700 foreign workers using special visas.
“That just makes the situation for us worse, if anything,” Velasquez says. LNG developers, shipbuilding yards, pipeline builders, oil sands expansions – and now Australian megaprojects –are all vying for the same labor, she says.
“We can’t complete the projects that we have on the list if we can’t get enough people,” she says. “That is one of the biggest challenges to getting to three million barrels per day of oil sands production by 2020, for sure.”
The risk is not lost on Shell. Mitchelmore, the company’s Canadian president, advocates for a mix of immigration and training of underutilized pockets of labor to top up the country’s diminishing pool of workers.
“For me, having worked internationally, I see such an incredible game-changer happening right here in Canada,” she told aboriginal business leaders at the luncheon in June. “In every single resource, we are within the top five or six, globally.” She meant oil, natural gas, coal, hydro and wind – not people.
Infographic: Global Worker Snapshot