From the monthly archives: March 2010

It’s not enough anymore to hang out a shingle saying, ‘I’m a service contractor’.  As the oil and gas industry changes, the expectations placed on service contactors have as well, and to compete, contractors have had to change how they approach the business of getting work.


In these post-boom days, value added services, the right approach and an impeccable reputation are all part of the package producers and primary contractors expect.

“We’ve come through a period of time with the explosion of work that was happening in ‘05 and ‘06 where lots of people were in situations beyond their competency because of a severe shortage of labour,” said Surerus general manager Steve Thorlakson.

“That is not the situation today. As a result, during those boom times, a lot of people kind of thought they were bulletproof because they were getting work and making good money in spite of themselves, not because of themselves.”

In today’s oilfield, a different attitude and approach is necessary. There is wide recognition that in order to get work, there must be a relationship, and that those relationships start with a good reputation.

Building that reputation takes enough patience to enhance skill, gather knowledge, increase exposure and show consistency of performance over time – and it’s not enough to talk about having those things, contractors need to show it.

Each company has a list of specific requirements, usually accessible on their websites, but beyond that, there are common expectations starting with a good safety record, appropriate certification and a resume or company profile.  Credible, checkable, verifiable references are critical.

When small business operators come through the door of service sector giant Flint Energy, they are expected to be able to demonstrate they know where the level of expectation of performance is set, said Tim Heins, Flint Energy business development – community relations spokesperson.

Part of what will be assessed is what a contractor knows about the industry and what they know about the industry from a business basis, he explained.

“It is about those intangibles in the individual’s skill… whether it’s a distant procurement process or a local relationship, it’s the ability to demonstrate the knowledge.”

Start-ups are especially challenging, said Heins. And yet, everyone needs to start somewhere. For a contractor that doesn’t have that experience, there are ways to build both experience and reputation.

“Don’t be in too huge of a rush to try to become the lead hand until you are an absolutely competent number two,” advises Thorlakson. For a ticketed welder with limited experience, he suggests spending time as a welder’s helper where the person can get onsite, be visible, and prove him or herself to the contractor. The same principle applies to other services.

It may not be the path to quick money but it is a path to a solid career that can better withstand the vagaries of the industry.

“This is not an industry to be breaking your limits, it’s an industry to be building your limits,” said Heins. “If you’re not willing to take those steps and build toward, chances are that you’re going to get tsunamied in the process.”

Building capacity, especially for those who want to work directly with the owner companies is a must said BP Canada economic development advisor Walter Andreeff.

Well maintained equipment is critical not only to ensure optimum safety, but to the financial well-being of service companies.

One of the mistakes he has seen is that companies misjudge or misrepresent their capacity and that could result in problems not only on the client’s project, but also to the contractor’s business and reputation.

The necessary investment is often more than new contractors understand and both Andreeff and Heins commented on the importance of contractors having the financial ability to have and maintain good equipment.

“There’s a lot of people that don’t recognize the amount of capital required to get in…you’re going to have to make an investment, you’re going to have to be current, you’re going to have to stay current,” said Heins. “Today you have to perform immediately – there can’t be issues.”

The marketplace has undergone changes, not just in terms of the economy but also in the maturity of the players operating in the North. That transition isn’t always acknowledged, said Heins.

In the US and throughout the world, companies have been at the business of oil and gas for decades longer than in this region and it is only recently, that local companies have grown enough in their own right to be considered, as Flint is, a “mature and fully integrated player”. That shift, said Heins, comes with higher expectations.

“A lot of the small business operators, I think, really aren’t up to speed, they’re not making sure they understand where the industry has actually gone,” he added.

For him, the approach is all important and that assumes the contractor has done their homework, knows who they are talking to and understands that an attitude of entitlement isn’t going to get them far.

”A small contractor in a region will come and they will talk to a Flint Energy as though we’re an owner company…that’s one of the intangibles that’s most important – that they know who they’re talking to about what or, if they don’t, when they come to the door they acknowledge that and say ‘this is what I’m trying to do – is there a fit?’.  It’s a question not a demand.”

Find out who is the right person or company to talk to, recommends Andreeff. He acknowledges that finding out just who that is can be difficult but suggested that attending as many forums as possible is a good way to find out.

He took that a step further and suggested that by finding out, from the Oil and Gas Commission website for example, who is working and how much they are working, service companies can identify who might be willing to consider them.

Even when there is no immediate need, he went on, it is still helpful to him to have a ready list of options so that he can help ensure BP’s goal of going local whenever possible. Summit Pipeline Services director of business relations Russ McCloud agreed.

“The most important thing for subcontractors, I think, is networking. It’s developing relationships, it’s communicating, it’s meeting face to face and keeping up those contacts just to ensure that people are aware of you. Subcontractors must get out there and let people know about them,” he said. “Most people are willing to help – you just have to ask.”

Companies Northwest Business spoke to did in fact have a process to assist companies who just needed to fill in some gaps in order to qualify for consideration.

Once on a site, another set of expectations comes into play, and how a company conducts themselves can make or break those critical relationships.

“ Number one – deliver what you promise, number two – make sure the relationships are strong between the two companies, and number three – take a realistic assessment when you’re done, how it went working for that company,” said Andreeff.

“Relationships are important,” he added.  “It’s not only being able to talk but being able to listen and absorb what the producer representative is trying to tell you…if you don’t follow the instructions, it may be to the detriment of your reputation and the reputation of your company.”

The other key element is safety. Certification is only a start. A good track record and a robust health and safety program have become standard, and smaller enterprises don’t always understand how important that really is, not only from a liability standpoint but, from a human one.

“Safety is a very high critical issue for us,” said Thorlakson. Surerus has recently surpassed 1.75 million man-hours without a lost time incident – an achievement Thorlakson is proud of and isn’t about to risk by hiring subcontractors that don’t take it as seriously as he does. Flint has the same consideration.

“A lot of small operators don’t understand where the industry has gone on safety and that we couldn’t even get on the bid list for things if we were not in the category that we have now attained, and if they don’t get it, they’re not even going to get a chance to work with us,” said Heins.

One of the more contentious issues facing the industry in this region is the issue of local hiring. Historically, the old boys’ network was definitely a factor in hiring. It is still true that companies will hire people they have developed relationships with however, there is an effort on the part of industry and government alike to change what used to be the status quo.

“These days, companies like Flint have begun an analysis of what the regional capacity is and have said, ‘okay, are there guys here?’. There used to be resistance to that,” said Heins, and there are some who think that resistance is still there.

BC service companies in particular, often feel like they’re “swimming upstream”, said Thorlakson. Most owner companies and larger service companies have policies in place for hiring locally when they can, however, those policies don’t always make it to the desks of those doing the hiring, he added. Even he admits however, that things are improving.

“As much as the producers get value from taking the gas or oil out of this region, we are glad to see when the service sector in British Columbia are actually employed on these projects. It’s a mutual advantage relationship between ourselves and the local service sector,” said Andreeff.

BP’s Noel Project has invested $62 million into BC service and supply in the last three years and although Andreeff admits there could be some improvement, that project boasts 60 per cent local content.

So while owner companies strive to use local resources, and local companies compete for work, recognizing that it takes a full toolkit of experience to not only get to a job site but to stay there, a new kind of industry standard is emerging – one that revolves on a good reputation and the willingness to improve constantly.

A final caution comes from Heins: “Contractors that recognize the transient nature of service projects and who, when they make the approach, are going ‘so I have a service – sometimes you might need it’,”  are the most realistic. There is no silver bullet, no one company or job that will carry the day.

Photos: BP Canada Photo
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By Joei Warm

Touted as a cradle for innovation, the Northwest has no shortage of businesses working hard to capitalize on that reputation. Whether it’s a new, process, prototype or product, statistics suggest there is good reason for that pride.

We like to tell the story that Alberta has more patents per capita than any province in Canada,” said Bruce Rutley, director of the Grande Prairie Regional College – Centre for Research & Innovation. “About 40 per cent of the patent requests come out of the Peace Country – and we have five per cent of the population.”

Even though the area may be rich in ideas and entrepreneurship, innovation takes more than a good idea – it usually takes dollars and often, those dollars have not been readily available to small and medium sized enterprises (SMEs).

“It’s definitely been a problem and it’s been a problem for a long time,” said Rutley. “While Alberta may have the highest per capita patents in the country, we are near the bottom when it comes to the available venture capital within Alberta. Individuals who are looking for money, are looking for money within a province where the level of venture capital is relatively low.”

On the world stage, Alberta is doing better. Larger scale research projects, perhaps more able to attract partners and the dollars that go with them, have propelled Alberta into a leadership position as far as the provincial government is concerned.

“We want to be known around the world as a preferred destination for turning ideas into products and services that benefit people everywhere and benefit our industries at home,” said Deputy Premier and Minister for Advanced Education and Technology.

“This positive climate has attracted more and more companies to Alberta to innovate, invest or collaborate and turn unique ideas into products or services for global markets.  This includes some of the world’s largest companies and consortia such as General Electric, Helmholtz Association, Opti-Nexen, and Pratt and Whitney Rocketdyne.”

The Alberta oil sands, underlying more than 54,000 square miles of the province, are benefitting from research such as steam assisted gravity drainage, the development of membranes that use nanofiltration and are projected to require less pressure and result in lower energy costs, four carbon capture and storage projects, and a Tecterra project being conducted in conjunction with industry to bring together geospatial, mapping and advanced decision support systems to help industry more accurately and sustainably determine where and where not to drill, mine or develop infrastructure.

“When our companies become successful, it creates jobs, launches spin-off companies and establishes new industries,” said Horner.

Horner attended the Energy Forum at the Harvard Club of New York late January where he held Alberta’s commitment to industry applied research up as a carrot to bolster US trade relations. These large-scale projects have the potential to impact this region eventually. In the meantime, the province is addressing smaller scale concerns as well.

One of the challenges closer to home, explained Rutley, is that many in this region are at the front end of things – in the development stage where investment potential is high but investments can be more risky.

Assumptions that oil companies are large enough to fund their own research, and potential angel investors being more likely to buy a business of their own rather than invest in another’s ideas are what Rutley posits as the main causes for the relative lack of investment.

Efforts are being made both provincially and federally to target funding toward research aligned with priorities, but also to make that research more accessible to smaller businesses.

The Alberta Voucher Fund, although being taken over by Alberta Innovates – Technology Futures, the province’s new innovation model, will continue to be made available to successful applicants with fewer than 50 staff.

So far, the results are good, said Rutley. He outlined the success of two round one recipients: the first, who with $50,000, was able to take an idea from the drawing board to a prototype, and the another, who with $10,000, has been able to find engineering solutions advancing their product to marketplace ready.

Sometimes it doesn’t take a lot of money, Rutley points out.  But is it enough?

With round one Peace Country investments of $220,000 and round two investments increasing to $320,000, it still seems insignificant in the larger picture, but that’s not quite the case, said Rutley.

“How big is big? How much money could we put into these great ideas, and which one of these great ideas is going to make it into the marketplace? There could be four times as much money put into innovation vouchers in this region alone but the level of investment that the provincial government has come forward with is a significant contribution to the development of new ideas and to having us strengthen our innovation as a way to strengthen our next generation economy.”

And that is the bottom line. Industry is looking for ways to work smarter, be more prepared to compete in what are sometimes volatile markets, and to improve economic standards.

The province’s new innovation model recognized just that. Alberta Innovates was designed to “better align resources, have the system be more responsive to the needs of the business and research community, and more competitive in the global economy”.

Along with that, its hope for improved coordination between business, technical and networking services, and an increased focus on commercialization and product development should help bolster the early-stage needs of the Peace.

Projects ranging from the development of a hybrid solar wind generation system to a wireline-deployed downhole video camera are among those benefitting from the early March announcement of round two funding. It’s too early to know whether those projects can make good on a great idea, but at least the doors of opportunity have been opened.

Many round one applicants, although they had good ideas, didn’t have all the details in place and so were not successful at that time, said a fund spokesperson. For companies unused to the halls of academia, accessing the resources that do exist can be tricky.

The bigger picture – accessing NSERC

There are an estimated 20,000 Canadian businesses engaged in research and development and the vast majority of them are SMEs, reports Natural Science and Engineering Research Council (NSERC) vice president of research partnership programs Janet Walden.

As one of three primary federal research funding agencies, NSERC recognized that there was a disparity between where the majority of research was being done, and where the majority of funding was being granted.

Their solution was the late 2009 launch of their Strategy for Partnerships and Innovation.

“We feel we can realize more value from our investment in post secondary R&D capabilities by, in particular, strengthening our linkages to SME companies,” said Walden.

“We have a really excellent base of programs  – once you’re in the know – that actually support and sustain industry-academic partnerships, but what we really needed to do was increase the funnel at the top end and get more of those kinds of partnerships started.”

They went to industry, not those who had existing partnerships, but to those whose feedback they were not already getting, and asked some clear questions. How are you approaching innovation? What are your needs? Where do you think the gaps are in terms of partnerships or opportunities for working with academic institutions?

They asked academics the same questions, and the response they got, particularly from the SME community, was that there were a number of specific gaps – primarily the need to find the expertise to do the research, and to have a shorter turnaround for research projects. In too many cases, said Walden, people also needed to know how to raise the capital to actually get involved in some of these projects to begin with.

After assessing their internal operations, NSERC recognized that while they had a strong research base and were already dealing well with 65 of the top 100 research investing and performing R&D based companies, overall they were only dealing with about seven per cent of the 20,000 companies doing R&D.

“On the SME side, where there’s significant possibilities for growth, and that’s where a lot of the new jobs are, we’re saying we have a significant opportunity to increase our reach and that’s really what our strategy is about,” said Walden.

“One of the big challenges, if you are an academic going out to meet a company for the first time, is you don’t want to be doing so asking for money. What you really want to be doing is going on the basis of saying ‘I have an expertise and let’s see if my expertise and your needs match’,” explained Walden.

Their response was to establish the Interaction Grants Program, offering up to $5,000 for projects up to three months, to support expenses associated with travel and meetings in order to allow researchers to establish contact with one or several companies. IG grants enable researchers and their industrial partners to identify potential research projects.

They also set up Engage Grants, which allow up to $25,000 for projects up to six months. This program is intended to foster the development of new research partnerships between academic researchers and companies that have never collaborated together before, by supporting short-term research and development projects aimed at addressing a company-specific problem.

“We’ve reoriented them from a more ‘promotion of science’ approach to a more ‘academic-industry partnership’ approach,” said Walden.

The emphasis on building the relationships has also resulted in ‘dating’ events where potential partners can meet up. Regional offices have been tasked with facilitating research matches. For the Peace, the closest office is in Vancouver.

NSERC has made some other changes as well. Accommodations for project administration costs, the implementation of a newsletter aimed at industry, and policy changes to intellectual property rights have made NSERC funded projects more streamlined and partner-friendly. They’re also striving to allow for earlier market studies.

“The fastest growing element of our partnership programs is small business now and some of it has been that, over the years, we’ve exercised increased leverage on the funding there. Now we’re trying to take that growth and more than double it,” said Walden.

Grants are provided to both universities and colleges, not to industry directly, but as “one of the largest sources of grants for public-private R&D partnerships in Canada”, being able to leverage NSERC funding means Canadian companies could end up paying as little as 17 cents on the dollar for research projects; not a bad deal even for smaller businesses, said Walden.

One of the real benefits for SMEs is the increased funding to colleges, which Walden points out may be more accessible to smaller more regional businesses.

“We’re looking for ways of working at the regional level with regional organizations who have people on the ground who can help us make our opportunities known, “ said Walden.

The first step would be to contact the regional centre at nserc-pacific@nserc-crsng.gc.ca where someone can help walk interested companies through that process of how to develop the ideas, how to develop the relationships and, then from there, how to develop an application.

“We have a very flexible toolkit that meets most business needs. So we have a wide variety of programs and the important thing would be to talk about what your needs and aspirations are with the regional office or with NSERC on the partnership side, we’re very open to those kinds of discussions, or with the universities; they’re very knowledgeable about our programs as well,” said Walden.

“We’ve had very good reception to the ideas in our strategy. It hasn’t been very long and we have a number of Engage Grants – something on the order of 60 of those already. Things are starting to take off but it’s going to take a bit of time.”

BC Invests in a Clean Future

As the only jurisdiction in the world that can say over 90 per cent of their electricity is clean, renewable power, and because the opportunities for future generations will come from clean energy such as wind, geothermal, solar, ocean, run-of-river and tidal, BC is capitalizing on their world-class reputation and focusing research dollars on the development of clean technologies.

“We are recognized around the world as having some of the finest clean technology development here in British Columbia,” said Minister of Energy, Mines and Petroleum Resources Blair Lekstrom.

“We are very focused on that as we move forward, to have those industries grow here in British Columbia, commercialize their product here, and help the rest of the world meet the reduction of their greenhouse gases as well.”

Funding is being provided for projects such as harnessing the potential of microbes naturally present in mine bioremediations in order to help improve strategies for cleaning up contaminated mine sites, and the identification of the genetic traits of Spruce trees, and is augmented by programs such as the ICE (Innovative Clean Energy Fund), which allows people to apply with new, innovative ideas or technologies relating to clean energy, and a $56.2 million investment in the Leading Endowment Fund, which provides endowments for permanent research into innovation chairs related to a number of areas.

“Overall, we invest a significant amount of money in looking at issues of climate change and improving energy and mining, improving forestry, which at the end of the day is really about you and improving the environment in which we live,” said Lekstom

The province of British Columbia has also invested in other resource-based research.  Some of the investments recently announced include:

•Clean Energy Fund: $100 million

•Pacific Institute for Climate Solutions: $94.5 million

•BC Bioenergy Network: $25 million

•Geoscience BC: $36.7 million

•Spectra Energy Carbon Capture and Storage: $3.4  million

•Norman B. Keevil Institute of Mining Engineering: $7.5 million

•Forest Investment Fund: $8 million

•Neptune Canada

•Genome BC

By no means an exhaustive list, it highlights BC’s intention to play to its strengths and its plans to build on what has put that province in what Lekstom calls “the most enviable position of anywhere on the planet”.

Photos & Charts by: Natural Science and Engineering Research Council
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New investment and increased employment opportunities are coming to the Northeast as a result of the upswing in coal prices. Western Coal announced their fiscal 2011 operating plans and the highlight for this region is the investment of $260 million.

“About 90 per cent of our spending in the next fiscal year, which goes from April 2010 to April 2011, is earmarked for Northeast BC,” said Western Coal Canadian chief operation officer Craig Dirk. Chetwynd stands to gain the most from the planned expansion as Western’s plans focus on the reopening of Willow Creek mine and the expansion of Brule mine, both in proximity to that community.

Currently, Western employs 470 people in their Northeast operations, however, that number is projected to rise to 1,000 within the next two or three years, Dirk told NWB.

“We’ve had a number of job fairs up in Tumbler Ridge, up in Chetwynd and several of the first nation communities, and we are currently in the process of following through on those interviews and making employment opportunities available,” said Dirk.

“There may be some special skill sets that we need to find elsewhere but over the course of time we want to build that capability up within our communities so that as we continue to expand and grow we hire people that have a vested interest in the area and are likely to go and stay in the area or come from the area.”

Even though he’s optimistic based on the job fair responses, which he said were “fantastic”, Dirk admitted that attracting and retaining skilled workers was something Western was concerned about.

Trades, said Dirk, was one area where there may be more competition for workers since activity in the region’s oil and gas industry is poised to speed up. Even there, however, Western plans to work toward a greater local capacity.

In the last few years, poor mark

et conditions and transportation problems have kept a cap on their activity in the Northeast. In explaining why the company was willing to invest so heavily in the area, Dirk mentioned the region has port accessibility and a good rail system, both of which he said were “under utilized”.

“We intend to invest in the region, the mines that we have up there, the communities and their people…”

~ Craig Dirk

When pressed further, he went on to say that Ridley Terminals, the Prince Rupert port used by Western to access their primary markets in Asia, could still pose problems.

“We have some concerns just about that Ridley Terminal remains government owned and doesn’t go into private hands and (we) continue to work with both communities (where we operate), Ridley Terminals and with our government to try and protect that because it is absolutely critical to our long-term success to have access to the port,” he said.

“Beyond that, we haven’t anticipated any problems with either the rail or Ridley terminals.”

Western, nearly bankrupt in 2007, has had it’s share of problems but despite them, has crawled out of the pit to grow enough where they can to not only offer substantial investment in the Northeast, but also to be counted among Canada’s largest 200 companies.

Early March, Western announced they had achieved a milestone with their inclusion in the S&P/TSX Composite Index effective at the market open on March 22. The Composite is the headline index for Canada, and the principal benchmark measure for the Canadian equity markets.

This greater prominence in the investment community will allow the company to leverage additional capital and reduce costs – something that should filter down to this region.

“I think the success in our growth is that we’re able to react quickly…Western has really gone from Western Canadian Coal, which was fully dependent on one area, one set of markets, to where it’s now a much more stable company with operations in the United States and the UK,” said Dirk.

The bulk of their operations do remain in this region and the indications from Western are that this is something that will continue.

“I would just like to reemphasize one more time that Western Coal believes that Northeast BC is a good place to go and invest. That over the next few years, there will be a strong demand for our products from the steel makers and our primary markets in Asia and that’s again reflected in the strong price of coal we’re seeing this year,” said Dirk.

“We intend to invest in the region, the mines that we have up there, the communities and their people to continue to strengthen our presence and our ability to go and supply these markets.”

Photo by: Western Coal photo
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