In my last blog, I looked at the reasons for the global collapse of oil prices since 2014, with Western Canada Select hitting a low price of $5.97US per barrel in December 2018. The Alberta oil industry’s response to this collapse was predictable. The industry cut back on investments and looked for economies in operations.
The collapse of oil prices meant decreased profits for oil companies. At the low point, some oil companies would lose money on each barrel of oil sold. Decreased profits meant global cutbacks on investments in new crude oil ventures. That was certainly the case in Alberta’s oil sands, where new ventures require larger investments and have longer timelines to profitability. Alberta’s oil boom was soon in the rear-view mirror.
The industry also looked for labour solutions that saved money. Layoffs were widespread. By some estimates, Alberta lost 43,000 oil industry jobs by the summer of 2016. Skill level, safety records, productivity, and experience all counted, but cost was very often the deciding factor in labour decisions.
Efficiencies to Reduce Costs
Along with labour cost reductions, the industry emphasized efficiencies. Those efficiencies included reducing carbon footprints and fuel costs by reducing fuel consumption in extracting and processing bitumen. They also included automation, robotics, and Artificial intelligence (AI). Successes meant a reduction in the number of workers required to maintain current production. Examples are familiar to many of our members.
- In some instances, remote monitoring using cameras replaced operators to monitor oil wells and check for leaks.
- In other instances, inexpensive sensors networked to cloud computing optimized production without relying on human reading of dials.
- Suncor and Canadian Natural Resources began experimenting with automated heavy haulers.
- Cenovus worked on enhanced oil recovery using unmanned steam-assisted gravity drainage (SAGD).
The efficiencies changed labour requirements. Even with new oil sands projects in the future, labour needs will be different.
The End of Alberta’s Latest Oil Boom
Through these and other efficiencies, Alberta’s major oil companies became leaner and required less labour than they did during the boom years. Efficiencies also meant they could earn profits at lower prices per barrel than previously. That may have a positive impact on future investment, but first Alberta has to find a way to get its oil to market. My next blog looks at Alberta’s problem with shut-in oil.