$364-billion oil sands spend will hit all provinces: Conference Board

EDMONTON—Nearly one-third of the economic benefits of oil sands investment between 2012 and 2035 will occur in provinces other than Alberta, according to a Conference Board of Canada report assessing the impact of an estimated $364 billion investment.

Much of the economic benefits outside Alberta will be in Ontario and British Columbia.

“The development of Canada’s oil sands deposits constitutes one of the largest development projects in the country’s history. It is so large that it will rival massive public works projects in scale, such as the building of the Interstate Highway System in the United States,” said Michael Burt, director, industrial economic trends.

The report, Fuel for Thought:The Economic Benefit of Oil Sands Investment for Canada’s Regions, was presented today at the National Buyer Seller Forum in Edmonton.

“Last year more than $37 billion was invested in the oilsands and this year investment is forecast to increase to $40 billion, presenting huge opportunities for companies in Alberta but also across Canada and around the world,” said Stephen Kahn, Alberta Minister of Enterprise and Advanced Education. “Alberta’s oilsands are the foundation for global supply chains, poised to set the country on a successful economic path for many years to come.”

In the past decade, the cumulative investment in Canada’s oil sands has surpassed $100 billion.

The Conference Board estimates that nearly four times that amount—$364 billion in price-adjusted investment—is expected to take place over the next 25 years. This level of investment is forecast to support 3.2 million person years of employment over the term of the investment, or 8,800 person years for every $1 billion in investment.

In addition to the direct spending on new projects, improvements, maintenance and repairs to capital assets, this study considers employment in the support services that are part of oil sands investment as well as spending from employee wages.

These figures include only the effects of investment; the resulting production would generate additional employment and supply chain effects.

About 70 per cent of the supply chain employment will occur in Alberta, however nearly one-third of supply chain effects will occur in other provinces, and Ontario will see the lion’s share, identified as percentage of national total:

• Ontario (14.8 per cent): Above-average employment compared to the province’s share of overall investment will occur in services, but also in manufacturing inputs for the oil sands. Manufactured inputs account for one-fifth of the manufacturing employment effects.

• British Columbia (6.7 per cent): In the B.C. goods sector, miscellaneous plastic products, paper products, and wood products all experience above-average effects. Scientific services, legal and accounting services, computer services and transportation and travel-related industries will see some impact.

• Quebec (3.9 per cent): supply chain effects are tied to the large businesses that are headquartered in Quebec, such as CGI for computer services and CN for rail transportation.

• Prairies (3.7 per cent): The Prairie region will act as transportation hub between Eastern and Western Canada—rail and truck transportation will shine. Industries such as steel mills, metal tanks, steel pipes and tubes, printing, and medical equipment and supplies also gain from supply chain effects related to oil sands investment.

• Atlantic Canada (0.8 per cent): Industries that could see benefits include ornamental and architectural metal products; construction machinery; navigational, measuring, medical, and control instruments; and tire manufacturing.

Beyond the employment impacts, oil sands-related investment is expected to generate government revenues of $79.4 billion—that’s $45.3 billion in federal revenues and $34.1 for provinces between 2012 and 2035.

“The environmental footprint of the oilsands is getting better but it is still bigger than conventional oil. This is leading to some social pressures and concerns. If those concerns are not adequately addressed we could see a reduced pace of investment from what we expect,” warns Michael Burt, director of industrial trends, Conference Board of Canada.

“We’ve seen some resistance to pipelines like XL and Gateway. If that takeaway capacity isn’t built we’re going to have to figure out other ways to get that oil out, whether it’s rail or another option or again, investment might not be as robust as we think.”

Jayson Myers, president and CEO of Canadian Manufacturers and Exporters, is bullish on the oilsands.

“[This is] an industry that can provide $20 or $30 billion a year in new investment, another $20 or $30 billion a year in maintenance and repair equipment. An industry that can then spin off other business opportunities … to companies around the world,” says Myers, though he noted environmental concerns.

“Responsible environmental management is key. There are challenges in terms of the image of the oil sands and the message that we all have to get out not only of the importance in terms of the economic opportunity, but in terms of the responsible development that is taking place in the oilsands,” Myers says.

The Conference Board says capacity constraints in the oil sands region, fluctuations in global oil supply or demand, and the need to mitigate environmental risks could alter this forecast.

Download the study, which was was funded by the Government of Alberta and Industry Canada, from the Conference Board’s e-library.

Lisa Wichmann, reporting from the National Buyer-Seller Forum in Edmonton, contributed to this story.