By James Mahony
With the prospect of a brisk drilling season brightening the outlook this winter, some western Canadian drillers and well-servicing contractors are thinking hard about where -- and how -- they'll find crews this year.
Last winter, despite healthy demand, some drilling rigs stood idle for lack of crews, a prospect that might be on the minds of some drilling and oilfield service executives this time of year.
At last week's annual meeting of the Petroleum Services Association of Canada, shortly after its 2012 drilling forecast was released, an audience member asked Mark Salkeld, association president and chief executive, to name three concerns most likely to keep PSAC members up at night. "Labour, labour, and labour," he told members gathered for the annual meeting.
"It is a concern," he added. "We have a PSAC [human resources] committee meeting once a month that usually starts with a roundtable and industry update. In the last three or four [meetings], those represented at the meeting ... were looking for over 2,000 [workers]. ...Labour is number one."
Earlier, Salkeld and two PSAC board members traced the labour shortage back to the industry-wide slowdown that began in 2009, when both workers and equipment were leaving Alberta for greener pastures in the U.S. and abroad. AsMike Edmonds, PSAC's incoming chairman, recalled, some equipment -- and some crews -- have not returned to the basin, a reality that has not escaped Western Canada's drilling contractors.
Asked if this winter could once again see rig iron go idle for lack of crews, the head of Precision Drilling Corporation recently said his company, at any rate, is ready to go.
"I think the labour tightness in Alberta remains," saidKevin Neveu, president and chief executive. "Certainly, the economy is following our industry [and] all industries will be looking hard for skilled workers. At Precision, we've been doing this for a long time [and] are focused on improvement. We think we're in pretty good shape for the winter," he said.
Labour concerns are also on the minds of producers trying to line up contractors this winter, and executives are well-attuned to the tightening workforce outlook. At a recent investor's day, executives fromPenn West Petroleum Ltd. named labour as a key issue for the company, given its outlook for the near term.
"Western Canada is heading potentially for another labour pinch over the next couple of years," Murray Nunns, Penn West president and chief executive, told shareholders. "It affects the rigs [and] the people you get to run the business. That's an important area we all have to work on."
While Nunns felt the industry is "potentially" entering a labour pinch, others said the pinch is already here, best illustrated by the increasing efforts contractors are making to find crews. While recruiting locally was once enough, going farther afield is the rule today.
At Nabors Canada, staff recruiters draw drilling crews from all quarters. "We're seeing applicants from the West to the East Coast," Joe Bruce, company president and chief executive, told the Bulletin. "Predominantly, [job applicants] are still in the Calgary-Edmonton region, but we're [also] seeing applicants from Saskatchewan to Nova Scotia."
Nabors is considering holding career fairs in Ontario or Quebec to find more workers. Bruce acknowledged Western Canada is a "tight labour market," estimating Nabors' drilling rig utilization in this year's fourth quarter would range between 54 and 58 per cent, a figure that might not beat -- or even equal -- the rates reached by some competitors.
"I know [our competitors] are on a high utilization, but my philosophy ... is not to just send rigs out with bodies on them. We're very conscious of finding a balance between experienced and inexperienced workers [and] not jeopardizing or putting people in harm's way by having too many inexperienced people on a rig."
Others agreed the labour picture is tightening. Earlier this week,Mark Scholz, president of the CanadianAssociation of Oilwell Drilling Contractors (CAODC), said a shortage of skilled workers is the main factor preventing higher drilling rig utilization in Western Canada (DOB, Nov 8, 2011). The CAODC predicts the well count will rise about one per cent next year, to about 12,672 wells from some 12,555 this year.
While announcing the CAODC's well forecast, Scholz noted that Western Canada's drilling rig fleet, currently estimated at about 805 rigs, is expected to swell to some 840 rigs by year-end 2012.
Brian Krausert, chairman of CAODC's forecasting committee, was asked at the association's forecast event if the current environment is the right one for adding new rig iron, something many contractors are doing.
"Whenever there's an up-cycle, we [contractors] continually build more iron. Basically, we kill the goose that laid the golden egg," he said, half-facetiously. "It's pretty hard to stop entrepreneurs from adding equipment. On the other side [of the coin], there's a gradual progression of [aging] equipment being retired. You're adding [equipment] over here, but sometimes the [retired rigs] don't go as quickly as the guys ... want."
The Bulletin recently canvassed some drilling contractors about labour issues. The chief executive of a contractor that boasts a 95 per cent utilization rate was asked how he manages to find enough workers to crew his 42 drilling rigs (most contractors run three crews per rig, with two 12-hour shifts a day, while a third crew is off).
"It's difficult," said Dale Tremblay, head of Western Energy Services Ltd. "[Our HR staff] work hard at it every day. This time of year, they will be on the phone from morning 'til night, five days a week, chasing down [workers]. Just keeping rigs fully-crewed is a lot of work."
Owner of Horizon Drilling Ltd. and other drillers, Western also brings in rig-workers from the Maritimes, among other places, and tries to meet their unique needs. For example, because many Maritimers feel a one-week break is not enough to return home, Western runs a longer shift that gives them a better break between shifts.
"They work longer and then are off longer," said Tremblay. "When they go home, they get a good rest. In these labour markets, you're just more accommodating than when you have a lot of employees...."
In terms of labour tightness, other contractors tell a similar story. "As we get busier, it's [a challenge] attracting labour to the oilfield services industry," said Duncan Au, president and chief executive of CWC Well Services Corp., which runs 64 well-service rigs in Western Canada. In particular, finding the more junior workers, such as roughnecks, trainees and floorhands, has been a challenge, he said.
When it comes to finding crews, the place well-servicing firms find themselves in is not very different from drilling contractors, although Au cited differences between the workers targeted by the two contractor groups.
"A drilling rig moves a lot more than a service rig, he said. "[Drilling crews] are used to subsistence and living in camps and hotels. But on the service rig side, they like to go home. It's a much different worker," he said, adding that service rig crews will often work for less than drilling rig crews in order to come home each night.
To address the labour crunch, CWC is also looking to non-traditional pools of workers, including First Nations, immigrants, including those not yet in Canada, as well as new Canadians who already are here. Attracting people from each group has its own challenges, he said, outlining a recent CWC initiative.
"We've asked SAIT Polytechnic if they're willing to provide a training program on First Nations' land, to try and convince [band] leaders they should invest in training," Au adds. "We would pay SAIT to bring people there [and] we'll provide trainers to help them work around the rig. Safety is important for us. We don't want injuries."
Au described the SAIT initiative as "very preliminary," noting the school is currently conducting its own analysis, deciding if such a program makes sense for it.
Other well-servicing contractors agreed the outlook for finding workers this winter could be tough. That group includes CCS Corporation, owner of Concord Well Servicing. There, the view is that the worker shortage is likely to persist Canada-wide, but prove especially tough in Alberta and British Columbia.
With that in mind, the company is recruiting far and wide. "We look right across Canada. Part of the issue is the mobility of [workers], but if they're willing [to move], we're more than willing," saidMike Williams, CCS vice-president of human resources. CCS is one of several contractors exploring the prospect of hiring crews in other countries, and bringing them to Canada.
"We're looking at foreign workers in Mexico, Eastern Europe, Ukraine and Russia," he said. "We're having to work through the [federal immigration] system to get these guys in," he added. Part of the CCS plan is to ensure in advance that potential workers meet a minimum skills level, including English, before they reach Canada. On that score, CCS is working with a corporate partner in Mexico, and language training is part of the equation.
Other contractors who've worked through federal immigration channels voiced frustration about the time it takes to bring foreign workers in. One executive said the process took so long, that by the time it was done, the need for the workers had passed. Williams spoke cautiously when asked about any red tape he's experienced thus far.
"It just takes time," he said. "But I think anything the [federal] government could do to streamline the process would assist industry."
As for improving the process, Ottawa has shown some responsiveness, moving to introduce regulations to simplify it, he said. "They're in conversation with industry leaders to understand the issues, but they also ... want industry to be figuring [out] ways to attract people to the industry," he added. The latter, he said, might be the tougher nut to crack, given the service sector's cyclical nature and the fact that contractors can't guarantee crews year-round work.
"That's still an issue today," he said. "That's one of the barriers to getting people into the trade to begin with. Once they're in, they get used to the lifestyle. But one of the barriers to getting the number [of workers] available up is that prospect, and it's very different from a steady job that's year-round."
Among contractors who spoke to the Bulletin, not all agreed that the industry's current labour shortage is caused by a shortage of workers. Some felt it was also related to a surplus of rig iron.
"It's a combination of both," said Nabors' Bruce, who is also chairman of the CAODC's board of directors. There are workers to man the rigs, he said, reiterating that good safety practices limit the number of inexperienced hands that can be deployed on any given rig.