Who benefits from oil sands investment.
A Conference Board of Canada report tallies how oil sands money impacts provincial and national economies.
If the engine that’s powering Canada’s economy is shifting from Ontario, it’s only fitting that it should wind up in Alberta where the fuel is so plentiful. Turns out energy from the oil sands will spread out one-third of the economic benefits from an estimated $364 billion in investment to provinces outside Alberta, according to a Conference Board of Canada report.
The Ottawa think tank unveiled the comprehensive 84-page report, Fuel for Thought: The Economic Benefit of Oil Sands Investment for Canada’s Regions, at the National Buyers and Sellers Forum in Edmonton in October before an audience of stakeholders and potential suppliers interested in getting in on the action.
“The development of Canada’s oil sands deposits constitutes one of the largest development projects in the country’s history,” said Michael Burt, director of industrial economic trends for the Conference Board.
Burt cited strong demand from China, other Asian countries and the Middle East for energy that is increasingly difficult to reach. “With tight global supply expect prices to remain high going forward.”
There are also risks. High prices and greenhouse gas emission regulations may curb demand, while technological advances will make “marginal” sources of supply feasible. If environmental concerns are not addressed, investment could be affected. Pipeline capacity must also be developed. “If it’s not built, we’ll need to figure out other ways to get the oil out,” he said.
Not surprisingly, most of the benefit (70%) will go to Alberta through conventional oil and gas, and oil sands development and production. About 80% of the inputs come from manufacturing, he said.
Ontario’s 14.8% share of the bounty will be felt most by steel forging and stamping companies, which will account for up to 70% of the inputs. Services account for 30%. Oil sands business will deliver about 20% of the manufacturing employment effects.
BC with its 6.7% share will see few benefits from manufacturing. Most will accrue to its goods sector, such as plastic, paper, and wood products; scientific, legal, accounting and computer services; and transportation/travel-related industries.
Quebec’s share (3.9%) is tied to large businesses, such as CGI (computer services) and CN (rail).
The Prairies have a 3.7% share that comes from its role as a transportation hub between Eastern and Western Canada. Steel mills, metal tanks, steel pipes and tubes, printing, and medical equipment and supplies also benefit.
Benefits across the board
Much of Atlantic Canada’s 0.8% benefit goes to ornamental and architectural metal products; construction machinery; navigational, measuring, medical, and control instruments; and tire manufacturing.
The report says direct supply chain effects should generate up to $172 billion in wages and salaries. When the money is spent, an additional 880,000 person-years of employment will be supported. Combining the employment effects, the oil sands will support 3.2 million person-years of employment. That translates into 8,000 for every $1 billion in investment.
Alberta benefits most from the employment benefits (74.2%), followed by Ontario (11.7%), BC (6.9%), Quebec (3.4%), the Prairies (3.1%), and Atlantic Canada (0.7%).
The report notes many people who work in the oil sands region don’t reside there. The Conference Board estimates there were 5,200 out-of-province workers in Wood Buffalo-Cold Lake in 2011, earning $280 million in wages. Most of them come from Newfoundland and Labrador, BC and Saskatchewan.