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Labor shortage threatens Canada’s $50B gas-export plans
As many as 47,900 oil and gas jobs will need filling in Canada over the next decade, including those required to build the nation’s first network of natural-gas export terminals, according to the Petroleum Human Resources Council of Canada.
CALGARY, Alberta — Energy companies trying to raise almost $50 billion for Canada’s first network of natural-gas export terminals will face an even more basic challenge: finding the workers to build them.
Housing complexes boasting an indoor golf driving range, a two-story gymnasium and a private movie theater are among perks that companies are mulling to lure tradesmen to Canada’s remote, snow-swept West Coast and mitigate wage inflation that could blow up project budgets.
Labor shortages in the country already have pushed wages for some oil and gas workers as much as 60 percent higher than their counterparts in the U.S., according to U.S. and Canadian labor data.
“The lack of skilled workers is a major component for the reason why you’re often behind schedule and over budget,” said Geoff Hill, partner and oil and gas leader at financial advisers Deloitte Canada in Calgary. A dearth of labor for oil sands and mining sectors will be “exacerbated” by a new wave of construction to enable gas exports, he said.
Chevron will need as many as 5,500 workers to build a pipeline across Canada’s western mountains and a plant on the country’s frosty Pacific Coast for shipping gas to Asia, according to company estimates. The company may be vying for workers with as many as nine other proposed liquefied natural gas, or LNG, export terminals on the West Coast that have received or applied for permits.
Chevron, Royal Dutch Shell and Petroliam Nasional are among energy companies planning to profit from rising gas demand in Asia, where Japan imported $58 billion of liquefied natural gas, or LNG, last year.
LNG project leaders such as Chevron are working to secure additional financial partners and negotiate long-term contracts with suppliers before they make their final investment decisions to proceed. If five of those Canadian projects are built by 2021, they’ll require 21,600 workers at the peak of construction, according to estimates from Grant Thornton, an audit, tax and advisory firm.
Producers are expected to spend C$47.8 billion building five LNG export terminals in Canada by 2021, according to a forecast from National Bank Financial.
Investors want to prevent the spiraling labor costs that have contributed to a budget overrun of more than 20 percent at Chevron’s Gorgon LNG project in Australia. Canada’s fast-growing development in its oil sands, shale fields and mining sector has put a premium on skilled workers in the nation.
Oil and gas drill operators, for example, can earn C$44.80 ($42.01) an hour in Canada, compared with $29.50 for the same job in Texas, according to figures from Nabors Industries, which operates the world’s largest land-based drilling rig fleet.
As many as 47,900 oil and gas jobs will need filling in Canada over the next decade, according to the Petroleum Human Resources Council of Canada.
Chevron’s site is near one of western Canada’s snowiest communities, Kitimat, B.C., which adopted a snowflake logo to commemorate the 14 feet that drop on average each winter, Environment Canada data show.
Atco Structures & Logistics is building a 600- person starter work camp in Kitimat for Chevron, the third- biggest oil company by market value.
If Chevron and its partner, Apache, proceed with the project, Atco expects to build a larger complex to accommodate workers over the years it will take to build the export plant.
Calgary-based Atco is proposing some of the latest industry amenities to create a “home away from home” for workers spending weeks at a time on site, said Craig Alloway, Atco’s vice president of sales for North America.
A homey atmosphere and ample entertainment options are meant to help counter the isolated location of the project as Chevron recruits tradesmen from across Canada and the globe, Alloway said.
Atco has designed housing camps for Canadian mining and oil sands operations featuring a 200-seat movie theater, a two-story gymnasium with squash courts and a running track and recreation rooms with Ping-Pong and foosball tables.
For golfers, an indoor golf simulator mimics a driving range, using a computer to calculate the ball’s spin, force and accuracy as it hits a tarp. Common areas include fireplaces and high ceilings with exposed timber beams to give the feeling of a lodge.
Chevron’s project will have an advantage securing workers because it is one of the furthest ahead in planning, said Gillian Robinson Riddell, a Chevron spokeswoman in Canada. Chevron can’t speculate on additional work-camp facilities beyond the initial “basic” 600-person camp Atco is building until it makes a final decision whether to proceed with the LNG terminal, she said.
In the oil-sands region of Alberta, more than 70,000 people live in work camps, according to Black Diamond Group, a Calgary accommodations provider.
The cost to house a person in Canada has risen to about C$200 a day as competition for workers has made work camps become more like hotels than dorms, said Trevor Haynes, Black Diamond CEO.
Labor costs can make up about half the construction budget of a typical LNG plant, and will vary dramatically depending on the local job market, according to KBR, which has built such projects from Nigeria to Australia.
Perks weren’t needed to lure workers to BP’s Tangguh project in Indonesia because so many locals wanted the higher-paying jobs, said Heinz Kotzot, LNG technology manager of Houston-based KBR, which oversaw the facility’s construction.
In Australia, competition for workers spawned resort-style extras that didn’t stop wage inflation. Welders of cryogenic equipment earn as much as A$500,000 a year, Kotzot said — more than three times the average annual salary of a U.S. lawyer.
Chevron will require as many as 1,500 people to build the pipeline and 4,000 to build the plant, Jeff Lehrmann, president of the Canadian unit, said at an October conference in Calgary.