- September 4, 2014
Seizing opportunities in the energy and resource markets
Machine shops that serve Canada's energy sector have a bright future. Oil sands production is expected to peak in 2030, and then plateau to 2045 and even beyond. There is major activity in renewables, particularly in Ontario. And of course the east coast is experiencing its own mini-boom.
"The major industrial provinces stand to gain the most, as they will be supplying some of the specialized equipment and parts that will be required on an ongoing basis," says Dinara Millington, Senior Research Director at the Canadian Energy Research Institute (CERI) in Calgary. "However, some equipment and materials will be provided by foreign sources."
That last comment suggests that there is opportunity for Canadian suppliers to up their game. Energy is often seen as a simple, commodity-based export, but oil sands costs are rising faster than oil prices and general inflation, and there is significant opportunity for job shops to innovate and find a supplier niche by controlling costs in a growing market.
"Technology will play a significant role in driving the costs of oil sands projects down," says Millington. "This is especially true when it comes to extraction technologies that can produce oil sands-derived crude with less energy feedstock, such as natural gas and electricity."
Millington notes that oil and gas extraction in Western Canada first and foremost benefits the provinces of Alberta, British Columbia and Saskatchewan, where the development occurs. However, Ontario and Quebec, the centre of Canadian manufacturing and home to large populations, are second in line to received substantial benefits.
"We are projecting that by 2020 total Western Canadian crude oil production, including oil sands, will be five million barrels of oil per day," says Millington. "This is made up of three and a half million barrels of oil per day of bitumen production and the rest from conventional and unconventional crude oil sources."
There is of course another side of the energy story that affects Canadian manufacturing: the renewable sector. With the recent election of a Liberal government in Ontario, it is a near certainty that the province will continue its industrial support for the feed-in tariff program for wind and solar.
"The Ontario government has been fairly clear on their intentions for next few years," says Tim Smitheman, communications manager for Government and Public Relations at Samsung Renewable Energy. "All of our contracts are with the government, and there is more stability with a majority government."
As part of the Green Energy Investment Agreement, or GEIA, Samsung is committed to 1,068 megawatts of wind generation, and 300 of solar. The GEIA has domestic content requirements, which spells opportunity for suppliers in Ontario. At present, much of the work has fallen to Siemens Canada, which recently announced a large wind project in Goderich, and to CS Wind in Windsor. The solar side is mostly covered by Canadian Solar, which has a manufacturing facility in London.
However, the federal government, in its support of pipelines, clearly sees oil and as gas as the driver of Canada's industrial strategy. There appears to be no national vision for the role of manufacturing with renewables.
"There doesn't seem to be any movement on the national level, and there is no sense that there will be a national renewable energy strategy any time soon," says Smitheman.
So, for the foreseeable future, Ontario will go it alone with renewables as Western Canada and the Maritimes ride the oil and gas boom.
"As of end of 2013, Canada was a fifth largest producer of gas," says Millington. "As well, in 2013 China was producing 4.2 million barrels of oil per day and Canada 3.7, so it is foreseeable that Canada could soon overtake China in oil production volume." SMT