Edmonton: The New Capital is a special series taking the pulse of the city. From Terwillegar to Castle Downs, CBC journalists are talking to people about how Edmonton is changing and what it means for the future.
Alberta’s oil industry has rebounded and prices have risen since the crash of 2014, but the industry’s long-term future seems uncertain with changes in regulations, transportation and technology.
2018 is expected to be a less volatile year, with fewer layoffs and a renewed focus on efficient operations.
But that doesn’t mean things are going to be easy.
Producers in Alberta are struggling to find markets for oil, to attract capital investment and to contend with the NDP government’s tax on carbon dioxide emissions.
“We’re seeing a disproportionate amount of North American investment going into the United States,” says Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers. “What we’re expecting for 2018 is a similarly challenging year.”
How will Edmonton’s oil industry respond to these challenges in 2018 and beyond?
We put that question to three energy experts in a panel discussion on Edmonton AM. Their takeaway? Oil has long played a starring role in Alberta’s economy and even if the global demand for it slows, there are reasons to be optimistic about the industry’s future.
Automation and innovation
The recent recession and carbon regulations have driven companies to do more with less, and to work harder to reduce their impact on the environment.
That’s led to job losses.
And there are more job cuts coming.
Suncor Energy has been testing driverless trucks at its mines in northern Alberta and is expecting to eliminate about 400 jobs when the trucks are introduced into production over the next six years.
There are other advances in technology as well that will result in fewer people needed to operate oil rigs.
But Mark Salkeld, president and CEO of the Petroleum Services Association of Canada, says advances in technology aren’t only taking away old job — new ones are being created as well. The difference is that the new opportunities require trained technologists who know how to work with data.
“When I started 37 years ago, all you needed was a hard hat and a heartbeat,” Salkeld says.
“But the people we need now have a Grade 12 education and a couple years at SAIT or NAIT.”
What else can we do with bitumen?
As more countries work to replace fossil fuels with energy from renewable sources, some experts say oil companies in Alberta need to take more steps to diversify their products.
More than 90 per cent of all bitumen from the Alberta oilsands goes to create transportation fuels like gasoline, says Axel Meisen, a chemical engineer and advisor to Alberta Innovates,
The remainder — a very small percentage — is being used to make non-combustion products, like asphalt, lubricants, fertilizers and petrochemicals,
“What we have to do is figure out how to make that larger,” says Richard Dixon, who teaches energy, ethics and economics at the University of Alberta and Athabasca University.
Suncor’s Edmonton East refinery can produce specialized types of oil and hydrocarbon products, like waxes, lubricants, plastics and even lipstick.
But Dixon — who served as the Alberta Energy Regulator’s first chief of strategic foresight from 2014 to 2016 — believes the industry isn’t moving fast enough in this direction.
“We have to drive more and more that way,” he says. “We have to be much more innovative.”
Meisen is also looking ahead to a future in which the global demand for oil declines — something experts predict could happen after 2030.
He works on the Bitumen Beyond Combustion (BBC) project, which is looking at how oil from Alberta could be used to create new products.
“One of the most promising products is asphalt because demand for this is expected to increase, especially in Asia and Africa,” Meisen says.
Distribution is a problem, however, since asphalt needs to be shipped in molten form at a very high temperature. It’s very expensive to move it long distance.
But Meisen wonders if Alberta companies could develop new ways to ship it in a solid form. That could be a game-changer.
Another potential use for Alberta bitumen could be the creation of carbon fibres. Though the local market for these is small, producers could sell carbon fibres to foreign manufactures who use them in high-end sports equipment, airplanes or construction materials.
“Companies are thinking about this very seriously,” Meisen says.
Electric cars: Are they a threat?
The adoption of electric cars has been slow in Canada, where they account for less than one per cent of car sales.
But their market share is growing. In Canada, Quebec is leading the way, accounting for nearly half of the electric vehicles in Canada, according to a 2016 report title EV Sales in Canada.
Overseas, the British oil company BP predicts the number of electric cars on the road will rise from 1.2 million in 2015 to more than 100 million by 2035.
It’s expected that improvements in the technology will make the batteries better in cold weather, faster to charge and cheaper to buy.
“There’s going to be a huge incentive for people to shift to electric,” says David Gray, founder of Gray Energy Economics, an Edmonton consulting company specializing in the economics of electricity.
Tim McMillan of CAPP says no one should view electric cars as a threat.
Though they will continue to play a role in the energy system, he expects demand for gasoline to increase substantially in developing parts of Asia, where new roads are being built and incomes are rising.
‘Prospects for the oil industry are still very good’
Many drilling companies in the Edmonton area are focused on the oil and gas sector, but there are growing opportunities for Alberta-based drilling technology to be applied to other sectors.
One of them is geothermal energy production. The town of Hinton, just east of Jasper National Park, has proposed a pilot project to use energy from the bottom of an abandoned gas well to heat municipal buildings.
This is a small scale project, says Brian Wagg, the director of business development and planning at C-FER Technologies, an applied research lab based in Edmonton.
But the larger opportunity for Alberta comes from developing the technology, then selling it to countries that have more conventional geothermal reserves.
“People are coming here to learn what’s available,” says Wagg.
Learning about what’s available — in terms of new products, new jobs, new technologies, new growth — could be a slogan for the current state of Alberta’s energy industry.
But realizing these opportunities, says Meisen, will require companies, governments and universities to work together to make it happen.
Even if the demand for gasoline stabilizes or even falls, he adds, “I think in the longer term, prospects for the oil industry are still very good.”