Power PlayClick image to enlargeby Noelle Stapinsky

Growing global demand for energy could spark opportunities for Canadian manufacturers

 

It’s no surprise that Canada is sitting pretty in the view of global markets. Geographically, it is rich with natural resources, from oil and gas to mining and forestry to renewable energy sources. And according to Natural Resources Canada, the world is looking to us as a reliable and stable supplier of traditional energy, which means there is a wealth of opportunities for Canadian businesses on the horizon.

Samuelle Ménard, communications officer and spokesperson for Natural Resources Canada says, “in 2016,
the resource sector directly and indirectly contributed 16 per cent of Canada’s GDP and employed 1.74 million Canadians.”

And in 2017, Statistics Canada summarized the resource sector performance stating, “the real GDP of the natural resources sector increased by 4.6 per cent in 2017, its highest annual growth rate since 2014. The strong growth rate in natural resources was largely attributable to the energy subsector (+6.1 per cent), which represented about 70 per cent of the real natural resources GDP in 2017.”

Ménard points out that there were more than 470 major resource projects under construction or planned over the next 10 years in Canada, worth $684 billion in potential investment in that same year. 

“We recognize that we are in a global transition –from the energy that has powered our societies for generations–to clean, renewable sources,” says Ménard. “The pace of transition may vary from country to country, but it’s underway and irreversible. Canada’s vision is two-fold: invest massively in clean technology, renewable energy and green infrastructure, while continuing to grow our role as a secure, reliable and cleanest supplier of oil and gas in the world.”

In May, the Liberal government announced that it would purchase the Trans Mountain Pipeline (TMX) and related infrastructure for $4.5 billion from Kinder Morgan. The expansion project will twin the original 1,150 km pipeline that was constructed in 1953, from Strathcona County near Edmonton, AB, to Burnaby, BC, and increase the pipeline capacity from 300,000 barrels per day to 890,000 barrels per day.

While this move may have been shocking to some, this kind of support is exactly what the Canadian Association of Petroleum Producers (CAPP) has been calling for. 

 

Upstream prospects
CAPP recently released its 2018 Economic Report Series: Canada’s Role in the World’s Energy Mix, a report that explores the growing global economy, opportunities for Canadian oil and gas and natural resources, recommendations on policy and regulatory changes, as well as federal government leadership to help position Canada as a future global supplier.

“The world is going to continue to need and rely upon fossil fuels for the foreseeable future. And the question has become what sources will provide that,” says Ben Brunnen, vice president, operations and fiscal policy for CAPP. “The Canadian oil and gas sector is one of the most highly regulated, and environmentally and socially responsible sources of supply globally.”

One of the biggest challenges for the oil and gas sector has, in fact, been building pipelines. “We just continue to see reforms to policy and regulatory processes that extend time lines and generate uncertainty, and just overall create risk for the sector,” says Brunnen. “While we can certainly appreciate the importance of a robust analysis and assessment of the impacts, there needs to be balance.”

Brunnen continues, “under this administration, we really haven’t seen the federal government embrace and define that there is a role for the sector. In fact, they’ve been quite silent. But the recent TMX expansion announcement with the government taking on the pipeline changes all of that. They are very clearly committed to supporting investment in Canada and the upstream oil and gas sector, and getting behind it with all of the corresponding financial political risk. This is a very positive message from a confidence perspective.”

According to the CAPP report, Canada is currently ranked as number one among 11 nations as a preferred oil and gas supplier. What sets us apart is innovation in technology. Twenty years ago there was very limited production in oil sands. But technological advancements have made it economically viable in the past decade. “Steam-assisted gravity drainage (SAGD) is perhaps the most significant technology that has brought production up to millions of barrels per day,” says Brunnen. “The next phase of innovation for the oil sands is going to be finding ways to get the carbon out of the barrel, if you will. And steam displacement technology will help get us there.”

With the TMX expansion and increased investment in the sector –which already currently employs 500,000 in Canada–Brunnen predicts that market access opportunities and demand across the entire value chain will be strong. 

For manufacturers interested in expanding into oil and gas, there are some challenges. Tom Whalen, president of the Petroleum Suppliers Association of Canada (PSAC), explains that manufacturing shops involved in this sector tend to have one to three big customers. This is due to the tight specifications and intellectual property that goes along with supplying the sector. 

“One of my contacts in Edmonton has a small shop. He has one company that’s over 70 per cent of his revenue and he’s making tools for the hydraulic fracturing market,” says Whalen. 

The specifications are tight due to the risk factor of the industry and the technology is constantly evolving. But that’s not to say the demand for supply isn’t there. According to Whalen, every well drilled in Canada gets hydraulic fracturing and that requires tools that are one-time use consumables. While the demand for such products is strong in the western provinces, some are also being exported to the US and abroad. 

PSAC is connected to those international markets and Whalen points out that wellhead (hydraulic fracturing) and downhole tools are the extent of exported goods. 

Manufacturers already involved in the upstream oil and gas sector could expand into renewable energy. “If you look at wind or solar, there’s growth there,” says Whalen. “If you’re an oil field service company that does maintenance work on oil field equipment, there’s nothing stopping you from manufacturing or doing maintenance work for wind turbines or fabricating solar panels. They all use metal, mechanics and technicians. I think the opportunity that presents itself is how do you position yourself to be able to transcend all of those? At the end of the day we’re going to need all forms of energy.”

Natural growth
The CAPP report says wind and solar are expected to grow tremendously as renewable sources in the global energy mix — it’s anticipated to represent about six per cent by 2040 — with the largest growth coming from wind energy.

“Right now, Canada is sitting at the ninth largest capacity in the world, which for our population, is quite high,” says Phil McKay, director of operations and maintenance program for the Canadian Wind Energy Association (CanWEA). 

If you’ve travelled in Southwestern Ontario, you may have noticed the horizon is peppered with wind turbines. “That’s a really good news story in Canada. Actually, Ontario is one of the top ten jurisdictions in North America for wind energy,” says McKay. “Those installations are kind of a factor of multiple things: being close to the load source of electricity consumption; farm land which is a prime wind resource; and farmers that can continue using their land while making extra income off the turbines.”

Wind turbines consist of 150 components and up to 8,000 individual parts that make up the three main elements: the blades, the towers and the nacelles. The blades are made of composite for light weighting, the towers are rolled steel, and the nacelles are covered housings for all the generating components. There is an intense network of rebar needed in the turbine foundation, and a structure within the towers that attach everything together for the framework. And then there’s underground cabling, substations that collect the power and transformers ensuring a good clean signal off the grid. 

For the Ontario project, local suppliers were contracted. But the next major focus is going to be in Alberta. “[The province] has made a commitment to procure 5,000 megawatts of wind energy. So this is an enormous opportunity. Towers and blades may be manufactured close by. But then you have all the other bits that come together. And I think that’s where we see big opportunity for Canada,” says McKay. 

CanWEA released an Alberta Wind Energy Supply Chain study, in which it identified 37 industries that are relevant for manufacturing wind turbines and related components. As an example, the study pointed out pressure vessel manufacturers in Alberta that have the capabilities to take three-inch thick steel plating and roll it to the required 24-foot circumference in 33-meter sections. These sections can be welded to create the 100 plus meter tower structures.

The bids on this project have already come in. To get involved, McKay suggests checking recent news for the winners of the latest procurement. “If you can get hold of the project owner, you can make a case for what you’re able to provide.”

With population and demand for energy growing, and the support of the Canadian government investing in both oil and gas and green technologies, Canada is on the cusp of being a major global player. SMT

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