DISTURBING TREND OF CANADA/ALBERTA EMPLOYMENT SCENARIO – DESIGN AND ENGINEERING/WHITE COLLAR JOBS DISAPPEARING SWIFTLY

First let’s look at the numbers reported by Canadian economy regarding month of May 2014: Canada's unemployment rate rose to seven per cent from 6.9 per cent over the previous month; the economy actually shed 29,100 full-time jobs in May. As a consolation, there was a gain of 54,900 part-time jobs, most of them likely temporary seasonal work.

Among sectors that lost jobs, the natural resources industry declined by about 23,000, and there were about 21,000 fewer workers in finance, insurance, real estate and leasing. Manufacturing was also down by 12,200 and construction was largely flat. Alberta saw the strongest gains, with 16,400 new jobs, and Newfoundland and Labrador lost 4,100 positions, but the other provinces saw little change in their employment rates.

The number of working Canadians aged 15 to 24 increased by 49,000 (this is attributed to many university and college students finishing their spring term in April and seeking out work for the summer) bringing their employment to a level similar to that of May 2013. However, this was partly offset by fewer employed men aged 25 to 54.

Still, there are 1.3 million unemployed Canadians, evidence of an economy that has run out of steam after churning out strong job gains in the first few years following the 2008-09 recession. One bank’s chief economist says the latest report "pounds home the point that underlying Canadian job growth remains anemic." He further adds, "Even those modest gains are almost entirely concentrated in piping hot Alberta, with the rest of the country managing just 0.1 per cent growth in the past year."

Now, let’s sift the grain from the chaff and also look at some aspects no one is talking about in Canada for whatever reasons – failing to notice in the first place due to ignorance and/or mediocrity, or, not having the guts to stand up and speak about it.

First, about the so-called ‘piping hot’ jobs in Alberta. These are mostly in the construction (sustaining capital and some new capital investment projects), drilling, and maintenance. As we know, these jobs tend to support associated service sector, therefore, there is some addition of jobs in this sector too.

But the most disturbing aspect of jobs in Alberta (and to a reasonable extent in Canada) is that there is continual decline in white collared jobs in design and engineering (in the EPC companies) in particular and other sectors in general. Reasons?

a)      Drop in new capital projects in oil sands by large, medium and small companies due to increasing pessimism in the investing companies (recent example: TOTAL deciding to put $10 billion project on hold for indefinite period);

b)     Owner companies in Alberta insisting on farming out large chunks of engineering work to offshore places, e.g., China, India, Philippines etc. in order to depress total engineering costs.

The combined effect of the above reasons and especially ‘b’ is that more and more engineering work (from FEED and Detailed Engineering) is getting shipped out of Canada. The direct impact of this in Alberta (and EPC companies located in other provinces of Canada) is increasing job redundancies and hence more and more layoffs.

The way things are going, eventually, the EPC companies in Canada would be doing just the concept evaluation, the design basis memorandum (DBM) and a bit of FEED. Consequently, the engineering work force will continue to shrink and large number of experienced engineers and technologists would either go to other countries (wherever they find jobs) or take on jobs much below their competence level. This would potentially have a domino effect – overall decrease in service sectors’ size and contribution to economy (remember, service sector contributes about 70% to Canadian economy).

One may argue that the proposed LNG projects would pick up the EPC houses’ slack increasingly discernible in Alberta. Unfortunately, that’s not going to happen. Why? Because the bulk of engineering will be done by the companies in Japan (example, JGC, Chiyoda), Korea and US (example, KBR, Foster Wheeler). Only some residual engineering work will be done in Canada.

The other industries, namely, mining are also seeing sluggishness and new capex projects are few and far between. There is hardly any basic design and development engineering taking place in manufacturing industry also. This is coupled with another very disturbing situation: sharp decline in intellectual property generation in Canada which is causing atrophy of design and engineering work in those areas.

So, the net effect of above would be that gradually, for all intents and purposes, Canada will get reduced to a body supplying country for construction industry, drilling, and service sectors, essentially, blue collared jobs. The white collared jobs will decline.

To have blue collared jobs is not bad but disappearance of white collar jobs would mean negative impact on service sector (from new higher mortgages, to new homes building, to new vehicles purchase and so on). Of course, this impact would not be felt immediately, it would take a while before StatsCan and the government in Ottawa would notice the significant negative impact on the economy.

Canada was at one time at the cutting edge of knowledge based activities, but that situation is rapidly metastasizing to such a degree that Canada’s leadership in technology and engineering will turn in to a myth. The situation is getting exacerbated by reluctance of Canadian companies to invest in innovation, R&D and productivity enhancement activities. 

The above indeed is very sad for Canada. If the Federal and the Provincial governments do not show guts and take timely corrective actions, things would continue move from bad to worse and Canada would morph from being a first world knowledge powerhouse to a second or third world body supply warehouse.  

WHY CANADIAN ECONOMY IS IN DANGER OF SLOWLY SLIDING IN TO A SECOND WORLD ECONOMY

Statistics Canada’s figures released on 30 May indicated that Canada’s economic growth slowed to an annual pace of 1.2 per cent in the first three months of 2014. It was the weakest growth since the fourth quarter of 2012. As per Statistics Canada, the gross domestic product of Canada in the first quarter of 2014 marked a deceleration from the 2.7 per cent of the final three months of 2013.

Much of the above is being attributed to severe winter which apparently impacted the overall domestic demand, or spending by consumers, government and business. Harsh winter conditions in US are also being cited as one of the contributing factors apart from drop in housing construction.

            

The weaker first quarter, however, hasn’t changed the 2014 outlook for some observers. A lot of hope is being pinned on US economy to bounce back and businesses in Canada loosening their purse strings to invest. However, some analysts fear that domestic demand are likely to remain under pressure as debt-laden households constrain growth in consumption, housing constructions slows, and government spending remains capped by tight fiscal policy.

But the abovementioned fear does not recognize the elephant in the room – the tardy pace of the exports and the ominous circumstances threatening to crush the expansion potential of major components of Canada’s export resource, i.e., oil sands (and yet to be tapped gas for export as LNG).

People who are familiar with the basics of Canada’s GDP know the significant contribution oil makes to Canadian GDP and the huge service sector it supports (remember, service sector is one of the two main components of Canada’s GDP). The Canadian Association of Petroleum Producer’s 2013 Crude Oil Forecast, Markets and Transportation report forecasts Canadian crude oil production will more than double to 6.7 million barrels per day by 2030 from 3.2 million barrels per day in 2012. This includes oil sands production of 5.2 million barrels per day by 2030, up from 1.8 million barrels per day in 2012.

But the situations that are surrounding oil sands today seem almost poised to strangulate the lofty expansion plans set forth by the industry. One of the main stifling reasons being lack of infrastructure to export the bitumen out of Alberta – the various proposed pipeline projects meant to solve this situation are getting increasingly bogged down in litigations, controversy and delays. One of the casualties of this disheartening situation was Total’s Joslyn North project which was recently put on hold for an indefinite period.

Over on the LNG export side of things too, the portents don’t inspire optimism: the tax regime of the Province (BC) is yet to be finalized, LNG supply economics is getting squeezed due to the recent gas supply deal between Russia and China and the issues with First Nations not settled yet.

The horrifying scenario of oil sands industry getting stifled and LNG projects not getting off the grounds (or just one or two LNG projects getting set up at best) is that Canada’s revenues will get severely impacted in which situation hundreds of thousands of jobs will not get created which will in turn mean opportunity lost in the boost the service sector would have got.

As more people get jobs and earn more, they spend more and, as this work force grows, they need more of everything - from Tim Hortons to pickup trucks. This leads to more jobs and higher wages in other sectors and other regions of the economy, so everyone benefits.

The knock-on effect of stifling of the oil sands (and the proposed LNG industry) will be so severe on the overall Canadian economy that many features of the first world economy that Canada is would get severely disrupted: health care, education, infrastructure, seniors’ care, all these sectors would be badly affected. What would that mean? It would mean Canada would slide from being a first world country to second world nation for all intents and purposes. Is this what Canadians would like for their children’s future?

Can something be done about it? Yes, sure but Canada does not have the luxury of time. The Canadian Federal and the Provincial governments would have to resolve the issues that have the potential of strangulating the oil sands and the LNG industry. The governments need to deal with the First Nations (FN) on top priority basis. The FNs are economically better off than before and smarter too – they now know better how to leverage off their so-called treaties with the Crown and wangle bigger slices of the pie.

The FNs are getting publicity savvy too – the latest example being to get Desmond Tutu to lecture Canada on climate change. What should be raising the alarm bells for the Federal and Provincial governments is that people like Tutu are not lecturing the other heavy oil producing countries nor even lecturing his own country (South Africa) on coal based power plants but comes almost half way around the world to lecture Canada.

This means that there is probably a sinister move to throttle Canada’s oil industry (which for all practical purposes is predicated on oil sands) and thereby deal a crippling blow to Canada’s economy and its economic clout. This is indeed cause for worry and the Canadian government with all the resources at its disposal, namely, CSIS and CSEC, should investigate and take necessary protective measures.

The global economic situation stands at a very critical juncture where economic outlook is still very uncertain and recovery mechanisms highly fragile. At such a juncture, Canadian economy is also walking a tight rope. A slight push or shove can potentially send Canadian economy on downward slippery slope, some forces seem to be wanting to do that. It is up to Canada (its government and the peoples) how it handles this and succeeds in continuing to be a vibrant first world nation. Canada would need all the speed, alacrity, nimble-footedness, resilience, determination and innovativeness to come out on top. 

WANT SOME PUBLICITY ON THE CHEAP? COME AND BASH THE CANADIAN OIL SANDS!!

If you happen to live in North America and get a sudden fetish for public attention and publicity and you do not have much money or resources to spend, what do you do? You just pack your bags, land up in Canada, meet some anti-oil sands groups and/or people and tell them that you are willing to start another anti-oil sands movement in some shape or form. Just get started with your form of protest against oil sands with some sensational verbiage (but may be factually incorrect, who cares?) and you are off to media attention and publicity!

Curiously, some celebrities whose careers are heading in to sunset and who wanted to get some publicity ‘high’, chose the oil sands bashing route to get back in public limelight. Example? Robert Redford some time ago, and now Neil Young (Young who?).

Frankly, I had never heard of this guy Young – a rock star? Really? Anyway, this fellow, for some strange reason (and may be some personal agenda which needs to be investigated and established) parachuted himself in the midst of Canadian landscape as a messiah for and on behalf of Fort Chipewyan folks and as an anti-oil sands crusader in general.

It seems his umbilical connection with Canada by virtue of having being born in that country seems to be helping him to get some traction in Canada on his oil sands related utterances and some attendance in his so-called concerts in various Canadian cities. Young is taking the opportunity of his so-called fund raising concerts to launch in to anti-oil sands tirades with all sorts of assertions that are clearly indicative of how ill-informed/mis-informed and pathetically biased he is.

Unfortunately for the Canadians (see later narrative as to why I say so) the television channels of Canada seem to be slanting the reporting about this fellow’s views with a negative bias toward oil sands. And more unfortunately, some sections of Canadian public also seem to be getting an itch to jump on the anti-oil sands bandwagon.

Why is the purported negative bias toward oil sands unfortunate for Canadians at large? Because the narrative of most of anti-oil sands rant of these people indicates that they have:

-      NEVER visited Ft McMurray;

-      Absolutely NO idea of actual foot prints of oil sands projects (i.e. land disturbance) vis-à-vis total area of Ft. Mc expanse;

-      Absolutely NO idea of historical presence of bitumen like substance for millenniums in Athabasca region and its dynamics with the environment (water and others)

-      NO factual idea (or any idea!) of official situation on various agreements, consultation with First Nations folks;

-      NO firsthand how oil sands projects are ACTUALLY taking care of environmental impacts, reclamation;

-      NO factual information about commercial venture opportunities for the First Nations folks in oil sands development process (and the economic benefits accruing to them).

The above is not taken from any leaflet of any oil company or from CAPP. The above is based on first hand understanding of the ground realities. Moreover, the perception that oil sands development would bring calamitous consequences for planet Earth is as nonsensical, blighted and mis-informed as saying that Sun goes around Earth.

The gullible Canadians are getting carried away by the scare mongering rhetoric of the so-called environmentalists. The lay person is not challenging the global warming models - that the so-called environmentalists allude to when talking of calamitous consequences of oil sands’ contribution to global warming - which have so many parameters that are fuzzy, half-baked, incomplete, un-validated.

Based on the above 'models' there is this scare mongering going on that GHG going to wreak hell soon and oil sands is a major villain in this regard. This is utter crap, balderdash, clap trap. Why? Because the GHG’s contribution to global warming in totality is no more than 5% and oil sands contribution in all this is 0.1% or even less (depends on what is the basis of calculation).

Global warming is taking place – yes, it is correct. What factors REALLY contribute to it, is not clearly understood by so-called scientists – there are so many theories, schools of thoughts, models, explanations of inter-relationship of parameters and so on. And, amongst all this, one thing is fairly clear – the overall impact of GHG is no more than 5% (and impact of oil sands ? Even less). Sounds unbelievable? Well, this is correct - the fear mongering environmentalists may not like to hear this though.

So, folks, ascertain the facts, challenge the so-called scientific material thrown at you (creating scare and negative biases), challenge the sensational verbiage (which may be zillions of miles away from facts and reality) used by people like Young and more importantly look for the hidden agenda and ulterior motive folks like Young are having. Do not get carried away by the purported grandiose sounding ‘messianic’ image sought to be conveyed by such individuals.

Remember this: Oil sands is NOT a game changing contributor toward bringing about catastrophic consequences to this planet. On the contrary, it contributes significantly towards maintenance of ‘first world’ basis/status of Canada – the whole gamut ranging from health care to education to seniors’ care to social development at large.