Digital technologies are destroying white collar oil and gas jobs in Calgary. A new economic development strategy will help, but not in the short-term
As the pace of global technology change picks up, changing how businesses operate and the type and number of jobs they create, Calgary is updating its economic development strategy to focus on innovation in the “New Economy.” Good thing, because employment is dropping in the “old economy” (read, energy sector) as empty office towers attest.
Calgary unemployment is still 8.2 per cent in August, down slightly from the 8.4 per cent of the same period in 2017, even as Vancouver and Toronto sit at 4.7 per cent.
Some of the jobless recovery is explained by the wider than usual discount – a whopping $55.91 on Thursday – from West Texas Intermediate that Alberta producers are getting for their product, as well as continued low natural gas prices caused by the prolific output from American shale basins. Large integrated companies like Suncor and Husky are much less exposed than juniors and midcap producers, most of whom are still losing money.
“We purposefully changed the focus of the Strategy to be centred around the fundamental drivers of prosperity as our economy evolves rapidly in this period of unprecedented technological innovation globally,” said Adam Waterous, CEO of Waterous Energy Fund and co-chair of the leadership and implementation team of Calgary Economic Development (CED), which unveiled Calgary in the New Economy Wednesday.
“We are actively building a new economy in Calgary and this strategy lays out the roadmap to help us get there,” says Mayor Naheed Nenshi, himself a business consultant for international consultancy McKinsey before entering politics in 2010.
What’s wrong with the old economy? Even the big oil sands producers are shedding jobs as supply grows.
The reason? New technologies, both in the field and at head offices, which are almost entirely in Calgary.
All those empty offices downtown would normally be filling up with new hires and rehires as the recovery took hold. Not this time. The downtown commercial real estate vacancy rate hit a record 27.8 per cent in the second quarter.
“We’re not saying that oil and gas and energy is going to fade away, what we’re saying is that new employment growth is likely to come from other industries,” said Court Ellingson, VP of research and strategy for CED, in an interview with Energi News.
“Oil and gas is generating new employment where the work is done, but not in the headquarters.”
Digital technology is transforming white collar work in the energy sector around the globe, says Dr. Ramanan Krishnimoorti, chief energy officer for the University of Houston.
“Whether I’m a driller, whether I’m a production engineer, whether I’m a well log person, whether I’m a geoscientist, it doesn’t matter. Up and down the food chain every one of our jobs is going to get augmented by data,” he said in an interview.
New technologies like artificial intelligence and machine learning, data analytics, blockchain, and quantum computing will raise productivity, reduce risk, and eliminate repetition. Humans will evolve from doing to supervising the machines that are doing, says Krishnimoorti.
And that trend has already started in the Alberta oil patch.
“Significantly increased efficiencies means that they’re doing things with technologies that humans were doing. They have taken out redundant positions. So, it’s a much leaner and meaner industry than it ever was,” Megan Zimmerman, CED’s business development manager, renewable energy and technology, said in an interview.
Take Cenovus Energy, one of the Big Three oil sands producers (along with Suncor and CNRL).
“The future is going to be digital,” Harbir Chinna, VP of technology, told Energi News. “We are looking at digital technologies like big data analytics to help us forecast wells better, do predictive maintainance that figures out when the pumps are going to be down. I think even though we’re not there yet, we are testing it out, figuring out how to make our plants more efficient.”
The company began investigating digital three years ago and quickly began adopting it for the head office in Calgary. Chinna thinks field and operations applications are only a few years away.
Marian Hanna is the former head of the Canadian Society of Exploration Geophysicists, which had 1,400 members before the price of oil collapsed in late 2014 and has just 600 now.
“I was laid off in 2015. I am currently employed but I was one of the lucky ones. I know a lot of colleagues that are not employed or they are employed in other capacities,” she said in an interview.
Going forward, the industry will probably only need one-third of the geophysicists that it employed before the crash, she says.
Canadian oil and gas data from PetroLMI, a Calgary-based research firm, shows that 52,000 jobs were lost during the downturn, but only 17,000 will return by 2021 even as production from the oil sands rises by more than 500,000 b/d.
No wonder Ellingson and Zimmerman don’t expect oil, gas, and pipeline companies to fill up all downtown offices.
The new strategy “is built around the fundamentals we need to catch the next wave of growth,” said Steve Allan, CED executive chair.
“The intention is to embrace the disruptive technological innovation in our established industries – energy, agribusiness, transportation and logistics – as well as emerging sectors; life sciences and health, creative industries, financial services and tourism.”
Economic development strategies take time to bear fruit. In meantime, Calgary (and Edmonton) suffer unemployment rates 3.5 points above comparable cities. Among the unemployed are professions – petroleum engineers, for example – who never imagined they would be wearing out shoe leather looking for a job.
Welcome to the future. It’s only going to get worse as energy companies like Cenovus embrace digital technology.