Robots Add to Job, Price Slump in Canada Oil
Calgary — Truck driver Craig Huzulak is unemployed after losing his job four times since December — the new normal in a Canadian oil patch still reeling from a downturn.
Huzulak, 49, was working at a mine last year near Fort McMurray, Alberta, when crude prices plunged and work dried up. He lost two more positions in the following months and then had a job offer yanked at the end of June before he could even start.
In addition to the market rout, the father of two now worries about the self-driving trucks Suncor Energy is rolling out in its oil-sands mining operations that will replace workers like him to save companies money.
“It’s really, really hard for heavy-equipment operators,” said Huzulak, who has driven trucks and worked on drilling rigs in Western Canada for 15 years. “There’s a lot more fear now that this might last longer.”
The burgeoning use of robots is one more reason there probably won’t be a quick jobs rebound in Canada’s energy industry as it grapples with cheap crude, tougher environmental controls, higher taxes and elevated costs.
The shelved projects and job reductions are helping to shore up the balance sheets of companies. They’re also a reflection of the upheaval weighing on producers’ stocks as they strive to keep projects competitive.
Jobs have disappeared as the U.S. crude benchmark tumbled 54 percent from last year’s high to around $50 a barrel. Unemployment doubled to 8.2 percent in June from a year earlier in Alberta’s northern oil-sands region. That may be just the beginning.
Canada will lose 185,000 positions due to the energy slump, according to projections from Petroleum Labour Market Information, a division of work-safety association Enform, in Calgary.
The industry had been a jobs machine, with more than 720,000 people directly and indirectly employed last year, according to the group. Employment in the country’s oil and gas, mining, forestry, fishing and quarrying industries increased 32 percent in the last 15 years, compared with 22 percent for jobs nationally, according to the federal statistics agency.
The broader economy is being hit by the industry’s pain, too. The Bank of Canada last week reduced its benchmark interest rate for a second time this year as the damage from lower oil prices shrank the economy in the first half.
“The industry right now is simply thinking that we are in a new world,” said Greg Stringham, vice president of markets and oil sands at the Canadian Association of Petroleum Producers. The group last month cut its outlook for the nation’s crude output in 2030 by 17 percent.
Suncor, which eliminated 1,200 positions this year, plans to save C$200,000 ($154,000) annually for each of the 800 truck drivers it replaces with autonomous vehicles by 2020, Alister Cowan, chief financial officer, said at an investor conference in June. Husky Energy Inc. is saving money with a walking drilling rig, Chief Operating Officer Rob Peabody said at the conference. The rig doesn’t need workers to tow it from one spot to another.
The replacement of workers with machines is on top of slower growth, as companies scrap or delay projects.
“We think because this environment is unpredictable, that we can’t afford to be building five different projects simultaneously,” said Harbir Chhina, executive vice president of oil sands at Cenovus Energy Inc., which has cut about 800 positions this year. Instead, “we build two of them.”
North American energy companies, and their stocks, are in for another tough year-and-a-half of low oil prices, as global supplies are poised to increase faster than demand with a wave of production set to come from Iran, said Sam La Bell, an analyst at Veritas Investment Research in Toronto. U.S. producers also have an edge over the Canadians in attracting investment because their oil is generally lower cost, he said.
“Companies are going to be reluctant to hire people back quickly,” La Bell said. “The trend line for North America for any of these swing producers is pretty much that anyone outside of OPEC can’t make money below $60 in any steady way.”
The Standard & Poor’s/TSX Energy Index is down about 19 percent since the beginning of May, compared with a 14 percent decline for U.S. peers on the S&P 500 Energy Index.
Production forecasts may still be too high for Canada, as the world shifts away from carbon-heavy fuels with vehicles increasingly running on electricity, said Michal Moore, an economist and the director of energy and environmental policy at the University of Calgary. He predicts only half the Canadian jobs lost in the rout will come back in a recovery, because of slower output growth, consolidation among companies and machines replacing workers.
“The industry in a lot of different ways has fundamentally shifted, and there are a lot of dinosaurs left out there who don’t see it and can’t imagine it isn’t going to all work out,” Moore said.