Canada rushes for its black gold
Released on 27/03/2008
[B]lack gloop is behind a massive boom that is pushing Canada’s construction spend to record heights and sucking skilled workers from all over the country and the world.
Before 2003 Fort McMurray was a quiet town just about as far north in the Canadian province of Alberta as you’d wish to go. Now it’s the epicenter of a building boom that is pushing the whole country’s construction spend to record heights, and a trailer there costs more than a house in downtown Toronto.
The high price of oil has sparked a rush to develop the Athabasca oilsands, and Statistics Canada estimates that CAN$100 billion will be spent on oilsands-triggered construction in the next few years. (CAN$1 = US$0.98)
The gloop is bitumen – black tar mixed up with sand, clay, water and oil. There are approximately 2.5 trillion barrels of the stuff in the oilsand fields, making it the largest hydrocarbon deposit in the world.
It used to be unprofitable to extract because the refining process is expensive, but after crude topped US$60 per barrel in 2005, production exploded. According to the Alberta Energy and Utilities Board, it went from around 750,000 barrels per day in 2005 to more than 1 million in 2006 and the estimate for 2020 is more than 3 million.
The result is one of the biggest and most concentrated booms ever seen in Canada – let alone in Fort McMurray. Capital expenditures in the oilsands announced for the period 2006 to 2015 exceed $100 billion, twice the amount projected only in 2004.
This remote, northern town has exploded beyond its boundaries, both geographically and in terms of infrastructure. The population, at around 65,000 in 2006, is growing at 9.2% per year, unprecedented anywhere in Canada – and that does not include the 25,000 workers housed in work camps, hotels, or camping illegally in temporary tent settlements. The population is expected nearly to double between 2006 and 2012.
Such is the demand for skilled workers to drive heavy machinery, build plants and operate them, and build all conceivable amenities to service this near-instant new city, that the region is sucking skills not only from all over Canada but from all over the world.
In March, architects were finalizing plans for a CAN$100-million project to triple the size of the Fort McMurray Airport. The town needs 5000 new housing units per year just to match conservative growth figures, and it is only building 2000 now. Then there is the extra schools, health clinics, colleges, churches, retail and leisure facilities, water treatment plants, etc. that any booming city needs.
Meanwhile the boom is being felt beyond Fort McMurray. Statistics Canada reports that, nationally, non-residential construction climbed to a seventh straight record in 2007 as a result of substantial gains in office-building construction in Alberta and its neighbouring province to the west, British Columbia. Spending on commercial, industrial and institutional projects rose 10.8% from 2006. Alberta and British Columbia alone accounted for more than 80% of the total national picture. In the fourth quarter alone, non-residential spending hit $1.3 billion in the Calgary area, up 6.6% from the previous quarter.
“It’s frantic,” says Chaz Osburn, editor of Alberta Construction Magazine. “You will be hard pressed to find a construction firm in this province that isn’t busy. Executives at some of the bigger companies in Alberta compare it to running a race. For them, it’s like sprinting, not jogging.”
Demand is high for all types of buildings: housing, infrastructure, healthcare, education, though two areas, affordable housing and infrastructure, stand out.
“It’s not uncommon to see a mobile home for sale for CAN$400,000. That’s more than the average single-family home in Toronto!” Mr Osburn said. “Skilled labourers on oilsands projects, construction workers in particular, can easily make $100,000 a year because there’s such a shortage of workers. But with the price of a house—and I mean nothing fancy—around $600,000 or $700,000, it’s ridiculous.”
As another example of the pressure on infrastructure, he said the Alberta government is considering commissioning 18 schools in Calgary and Edmonton through a public-private partnership to cope with the population growth. The schools would have similar designs and be built in such a way that modular classrooms could be added or subtracted depending on what’s happening with the school population.
Elsewhere, office towers, hotels, retail developments, and more are springing up, he said.
“Clark Builders, based in Edmonton, is growing so quickly it is having to expand its corporate headquarters again,” said Mr. Osburn. “The president of the company told me they’re growing revenues between 10% and 20% a year and expect to be doing about $1 billion annually in five years. Tell me you wouldn’t like to have that kind of growth rate!”
There is a downside. Oilsands development severely broadens Canada’s already large carbon footprint. The country is listed as the world’s eighth largest emitter of greenhouse gases, a surprising rank given its relatively small population.
The Canadian journalist and activist Naomi Klein has written: “The process of refining bitumen emits three to four times the greenhouse gases produced by extracting oil from traditional wells, making the tar sands the largest single contributor to Canada's growth in greenhouse gas emissions. The $100bn in projected investments from the tar sands have also turned Canada into a global climate renegade.”
And it threatens to decimate the local habitat. Boreal forests covering an area the size of Florida risk being leveled for oilsands production, according to the Pembina Institute, an authority on the oilsands’ environmental impact.
But with the prospect of such phenomenal growth, neither the provincial nor federal governments are likely to impose serious restrictions any time soon.
