Mining and Oil and Gas Extraction Industry

September 2008

The Mining and Oil and Gas Extraction industry employed about 146,900 Albertans in 2007. The industry is expected to grow by a yearly average of 0.7 per cent, employing about 152,000 in 2012. The 2007 unemployment rate was 2.5 per cent (the average for all industries was 3.5 per cent).

The Mining and Oil and Gas Extraction industry includes companies involved in activities such as:

· exploring for crude petroleum and natural gas

· drilling, completing and equipping wells

· operating separators, emulsion breakers, desilting equipment and field gathering lines for crude petroleum

· mining for coal, metal ore, and non metallic mineral mining and quarrying

· other activities in the preparation of oil and gas up to the point of shipment from the producing property.

Industry Outlook

Information adapted from the Mining and Oil and Gas Extraction Industry profile (September 2008)

According to Canada's Oil Extraction Industry: Industrial Outlook, Winter 2008, crude oil prices are expected to remain well above historical averages. Current record prices have been spurred by the devaluation of the United States (U.S.) dollar, speculative and strong global demand growth, and geopolitical tensions in key producing countries. The Outlook projects that non-conventional oil from the oil sands will become the dominant form of production in Canada in 2009. Production is expected to increase by 19.5 per cent this year. However, the share of conventional oil in Alberta’s total oil production is projected to decline due to the maturity of the reserves and natural depletion.

Along with increased production in the oil patch comes increasing costs and the situation continues to worsen as companies scramble to acquire the necessary material and labour to complete their projects and extract the bitumen. In 2007, material costs alone, which accounted for roughly 70 per cent of total costs, increased by 16.7 per cent. In 2008, total costs are projected to increase by 17.4 per cent.

Coal mining in the province should continue to strengthen over the medium term due to the additional energy required by Alberta’s fast growing economy. Its long term future is uncertain as continued pressure to reduce carbon emissions rises. Research into clean coal technology is being undertaken by members of the Canadian Clean Power Coalition to reduce greenhouse gas emissions and find ways of using coal to power Alberta’s growing heavy industry through gasification processes. Some companies have already announced intentions to develop and research clean coal technology that would improve the operating performance of coal and reduce the environmental footprint of the resource.

Information adapted from Alberta Career and Industry Outlook (August 2008)

A catalyst for activity and opportunity throughout most of the rest of the economy, this industry itself is expected to post strong growth in the years ahead, particularly if oil prices stay at, above or near historic levels.

Production life of conventional oil wells has been extended due to marginal wells being more economic in the high oil price environment. In addition, resources like crude oil, derived from oilsands bitumen, are replacing declining production from the conventional resource. It is estimated, for example, that conventional oil will account for only one in every four barrels of oil produced by 2020, compared to just over one in two barrels today. Oilsands production, which now exceeds a million barrels a day, is expected to increase three or perhaps even four times by 2020 and will account for about 80 per cent of total Canadian crude oil production. Billions of dollars will need to be invested in all areas of the industry to achieve and sustain these levels of production. There are challenges—the short supply and high cost of skilled labour, managing inflated capital and other costs and dealing with increasing calls for industry to take on greater social and environmental responsibility.

Unconventional resources such as coal bed methane are expected to offset declining production of natural gas from depleting conventional reserves. Strong growth is forecast for Alberta’s coal bed methane industry.

Coal mining in the province should continue to strengthen over the medium term to help fuel Alberta’s booming economy. However, the industry will need to continue to work on reducing its environmental footprint. Aware of the public’s concerns and convinced of coal’s potential, the Canadian Clean Power Coalition is conducting research on coal gasification, which would enable industry to use coal as a fuel source while minimizing its environmental impact.

Information adapted from Building and Educating Tomorrow’s Workforce: A Workforce Strategy for Alberta’s Energy Sector (September 2006)

Alberta’s energy sector is a diverse and complex sector comprised of numerous subsectors. This complexity, along with the energy sector’s interdependence with other sectors of the economy, makes it somewhat difficult to define. For the purposes of the workforce strategy, the sector has been defined broadly to include businesses involved in:

· exploration and production of both conventional and non-conventional crude petroleum and natural gas, including oil sands and coal bed methane

· mining for coal

· electric power generation transmission and distribution

· oil and gas pipelines.

Alberta’s energy sector, as defined above, encompasses a number of diverse sub-sectors:

· Oil & Gas. While production of conventional oil and gas has been declining, drilling activity has increased significantly in recent years as the industry continues to respond to a high price environment resulting from strong demand. Increased drilling activity across the oil and gas industry is leading to increased competition for the same pool of workers among firms involved in conventional and non-conventional oil, and natural gas extraction.

· Oil Sands. It is estimated the oil sands will account for three quarters of Alberta’s total oil production by 2008. Further expansion is planned with billions of dollars being invested in developing this resource. The use of mining and drilling (in-situ) techniques in the extraction process means that the oil sands industry is in direct competition with other energy sub-sectors for the same pool of workers.

· Coal. Although not nearly as large in terms of investment or employment as oil and gas, coal has been, and continues to be, an important part of Alberta’s energy sector. There are 11 major coal mines that operate in Alberta.

· Electricity. Alberta relies primarily on thermal sources such as coal (50 per cent) and natural gas (38 per cent) for its generating capacity. The rest is comprised of hydro, wind, biomass and fuel oil. Increased wind power generation is planned in southern Alberta in the coming years. While Alberta’s generation capacity has increased significantly in recent years, there has not been a major transmission upgrade in 20 years. A comprehensive long-range 10 year transmission plan has recently been prepared which identifies upgrades required to keep pace with the province’s growth.

· Pipelines. As production from Alberta’s oil sands grows, pipelines will be integral in exporting bitumen to new markets in the United States and Asia. New natural gas pipeline routes are also being proposed from Alaska and the Northwest Territories. These projects will place increasing demands on the labour market, competing with other construction projects in western and northern Canada for both skilled and unskilled labour. The Mackenzie Gas Project, for example, is expected to require 5,000 workers over a four year construction period.

As well, a number of occupations in the oil and gas, and electricity industries are experiencing the challenges of an aging workforce. Forty per cent of the labour force in oil and gas supervisory, engineering, technology and operations-related positions are 45 years and older.

The energy sector also employs proportionally more men than women. Men represent almost 75 per cent of the total workforce in mining, oil and gas extraction while they only account for 55 per cent of all employed Albertans. However, the numbers of women in mining, oil and gas extraction are steadily increasing.

Occupations in the sector are wide-ranging with varying education and skill requirements. While there are some positions that do not require high skill levels, many occupations including engineers and geoscientists require a four year bachelor degree or higher. Several technologist positions including geophysical, petroleum engineering and industrial engineering technologists require a two year technology diploma. Many occupations are in designated trades requiring the completion of apprenticeship training.

Average hourly earnings for workers in individual energy sub-sectors are substantially higher than the provincial average.

Many observers agree that the global energy market has moved into an environment of higher prices. As a result, forecasts are predicting strong growth for Alberta’s energy sector.

The level of drilling activity in the oil and gas industry is expected to remain relatively high over the medium term. This prediction is in response to strong current and anticipated demand for oil and gas resources and reflects the industry’s attempts to replace existing conventional production. Drilling and service companies have experienced worker shortages for several years due in part to the loss of their traditional labour pool and lack of public knowledge of drilling and service occupations. In the future, strong demand for labour coupled with anticipated rates of retirement are expected to lead to continuing labour shortages in occupations such as engineering, technology and operations-related positions.

In the oil sands sector, production is expected to nearly double from 2004 levels by 2010, and then nearly triple to approximately 2.7 million barrels by 2015. This will lead to a significant increase in employment for heavy equipment operators, process operators, heavy duty mechanics and power engineers.

As more technological improvements are researched, developed and applied to increase both conventional and non-conventional resource recovery, highly skilled workers such as engineers, geoscientists, technicians and environmental specialists will be in high demand.

Work in this industry

Alberta occupational profiles that describe various types of work in this industry are listed in OCCinfo's Search by Industry: Mining and Oil and Gas Extraction