DougB
Active Member
The Heritage Fund struggles to exist in the Canadian political landscape. Any balances are targets for other governments or public sector unions. Better to use surpluses to pay down debt than have money in the bank.
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- Thread starter Surrealplaces
- Start date
DougB
Active Member
It makes sense that many would identify as Albertan than as Canadian due to the vast geographic distance, lack of shared history, poor economic integration and different political priorities of Alberta vs. Laurentian Canada.
The 0&G industry is fundamentally global, which is why it often conflicts with the direction of a central government that is typically provincial in outlook (ex. Canada could set its own prices for energy in the 90s, Canada can pursue climate policies different from those of the US)
artvandelay
Active Member
This is incorrect - in fact we've seen many (if not most?) of the major international players exit Alberta over the last 5 or so years leaving the industry more locally managed than likely anytime in its history.
The 'decline' of oil and gas narrative is a fantasy ignorant of the fact that oil and gas consumption has grown in recent years and will continue to do so for the foreseeable future.
MichaelS
Senior Member
Those two sentences seem contradictory at face value.
1. Major international organizations have left the Canadian O & G sector.
2. O & G sector is going to be in demand for the foreseeable future.
If #2 is correct, why is #1 happening?
For the record, I think #2 is accurate, and I have my theories about why #1 is happening, but I am at best just a casual observer of the industry and by no means an expert.
1. Major international organizations have left the Canadian O & G sector.
2. O & G sector is going to be in demand for the foreseeable future.
If #2 is correct, why is #1 happening?
For the record, I think #2 is accurate, and I have my theories about why #1 is happening, but I am at best just a casual observer of the industry and by no means an expert.
trtcttc
Active Member
While O&G is going to be in demand, the growth in consumption has definitely slowed. To maintain profitability growth, multinationals are exiting high cost assets (like the oil sands) into their core businesses to drive efficiency. They're also not the primary operator of most assets in the oil sands, as they typically own a minority stake with a local Canadian firm. Due to the environmental concerns and high costs, it makes more sense for them to focus on their stronger markets.
The regulatory environment is also pretty uncertain in Canada, as our pipelines face lengthy delays and lots of regulatory uncertainty. The O&G sector will be around but it's not going to grow in the same way it had in the past. Companies invest in growth, since that's what investors expect and they just don't see growth in the future of the oil sands, which I'd largely agree.
CBBarnett
Senior Member
There's also the labour part in the O&G sector - the sector hasn't seen anywhere near the growth in employment and has largely stagnated in the past decade, in boom and bust years. Lots of factors going on, but the oil and gas story of the past decade wasn't employment growth (automation, cost-cutting to maintain competitiveness with cheaper production costs elsewhere in a global market).
But to the point on identity and if Calgary is still an "oil and gas city" - the relatively stagnation and/or decline of oil and gas employment is a big part in any changes to that identity. Lots of Calgarians know the impact oil and gas has to amorphous things like "the economy" and impacts to provincial revenues, but fewer and fewer know people directly employed in the industry in any capacity. The growth in jobs for all other areas of the economy dilutes the energy industries real and perceived connection to the day-to-day of Calgary and it's citizens, and therefore ultimate disconnects from the city's identity.
Part of this is a function of size too - bigger cities diversify by their scale alone, there's just loads more people doing different things all the time and they are all Calgarian contributing to the identity of a place. This is not the same for smaller energy dominated boom-towns.
trtcttc
Active Member
I think the size argument is bang on. Most Calgarians that work in O&G are really white collar office workers that work in the O&G sector, which share similar skills with other white collar workers. Toronto's employment is heavily skewed towards banks/financials, but there's not that identification with those industries in the general population. Because as industries change, people would simply try to transition their skills. This in comparison with South Western Ontario there's significant identification with the particular industry that drives the town, like Woodstock with autoworkers, and Sarnia with chemicals.
Calgary also benefits from a large influx of people from other provinces. The recent run up in housing prices in Toronto/Vancouver means those places are simply unaffordable for 99% of working people, especially if they want to raise a family. It'll take time for it to play out as there's people that bought property years ago or are in rent controlled units. I know many people in Toronto that are in a holding pattern, especially in their late 20s/early 30s. They have a relatively high paying job (i.e. lawyers, engineers) but cannot afford something that allows them to transition to the next stage of life. As more people visit Calgary and see the amenities it offers for the price, I think we're only at the start of the influx of people moving here.
artvandelay
Active Member
A combination of elevated regulatory risk and (somewhat irrational) negative investor sentiment. If you want an example of this - check the divergence in valuations between Canadian E&Ps and US based operators over the last five or so years. As Keynes said, markets can remain irrational longer than you can remain solvent!
ByeByeBaby
Active Member
As a scale thing, in 2021 there's around 37K workers in NAICS 22 - Mining, quarrying and oil and gas extraction and they're almost all working in oil and gas (about 1250 in other forms of mining; ~300 in coal, ~450 in metal ores, ~550 in non-metallic mining e.g. rock quarries and gravel pits, numbers won't add due to rounding).
The obvious oil and gas workers from other fields are ~1300 in wholesale (Petroleum and petroleum products merchant wholesalers), and ~4000 in transportation (2500 in oil pipelines and 1500 in gas pipelines).
Construction, there's perhaps a few workers; there's a subgroup of Utility system construction workers who build various utilities, which includes pipelines (but also electrical, water, cable, etc.), there's 4200 workers total, but I'd guess ~2000 max workers in oil pipelines -- we do build those other utilities. Oil specialty construction (eg well casing or foundation) companies - those who basically only do mining-specific construction - are in with the mining workers already.
Professional/technical, there's a lot of generic services here; legal, accounting, advertising, computers systems, generic 'management consulting' (like McKinsey). We do have a lot of workers (more than other cities) in the Architectural, engineering and related services category - there's ~24,800 total workers in this category; plenty of these are doing other types of work that isn't oil & gas. But this category would include geophysical and other exploration work (including seismic) and an EPC company like Bantrel that does oil & gas facility design/construction. Again, looking at other cities in Canada, I'd guess ~8000 of the workers here; this category includes 1000-1250 each of chemical engineers, petroleum engineers and geoscientists, so the floor is probably ~3000, plus some associated technicians and a share of the mechanical, civil and electrical engineers as well as some support staff.
All that together is ~51K more or less fairly directly employed in the oil and gas sector; more than in first blush, but less than 40% more; putting the oilpatch at roughly 6.3% of total employment.
What I'm not including here are second-order and beyond; there are lawyers who specialize in oil and gas contracts, auditors who specialize in oil company bookeeping, the workers who clean an oil company's office, or cater their holiday party or whatever, or workers in layers further away.
Bingo. Even though oil and gas isn't going anywhere for while, and the peak is likely a few years away, the local benefits from the industry are in decline. With no more large scale projects on the horizon, the industry will mostly run its course making money from oil and gas but isn't going to be investing much. The decline is something we've already been seeing over the past 8 years. Oil companies lay off 1000 here and a 1000 there, smaller companies merge and layoff a few hundred here and there. It's been happening for some time and will continue to happen.
When I speak of it being in decline, it's more about what @CBBarnett said in his post The actual decline of the use of oil and gas itself is still some time away - when the decline will start could be debated for days. Personally, I think it's still a decade away. As far as it's role in Calgary goes, it's more or less in decline though. It's a slow decline, which is a real benefit to Calgary, as the stability is mostly there, and the industry has a demand for skilled workers, which keeps them in Calgary and keep that labour pool well oiled (no pun intended) for the new industries coming along.
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Alex_YYC
Senior Member
Those international players, Shell, Connoco, BP, etc always managed their Canadian operations locally, but people outside of province and country made the big decisions.
It isn’t much different today with the Canadian producers. Still locally managed, but controlled by shareholders from out of province or out of country.
I’ll repost this graphic from Darwink. The big 4 Canadian producers are more than 50% foreign owned, not mention out of province ownership. Run by shareholders who couldn’t care less about Calgary or Alberta, only maxing their profit. Not that there’s anything wrong with that, but that’s what the industry is.
darwink
Senior Member
It does this, it just hasn't been as good as it otherwise would be since it has had some risky losses and isn't big enough to play in far less liquid asset classes! The only political interference is not investing in companies which were on Norway's investment red list in 2011-12 --ones producing banned weapons and tobacco iirc.
trtcttc
Active Member
Wondering if anyone can share some insights on why the Heritage Fund trails the returns of AIMCo (the investment manager) by so much? The first chart is the Heritage Fund performance, and the second has AIMCo, which itself is lagging other pension plans.
darwink
Senior Member
What are the transfers from the fund that are labeled as 'Investment Income Transfers'? Does that money go into general government spending?