Supply chain forum a good place to start for Ontario firms looking to break into oilsands
A group of Ontario manufacturers is forging a new path for firms in the province to land supply deals in Alberta's oil and gas industry.
TORONTO—They aren’t pioneers, but a group of Ontario manufacturers is forging a new path for firms in the province to land supply deals in Alberta’s oil and gas industry.
And the first step in that trail-blazing process is building relationships, a step the group will take when it heads to Calgary next month for the National Supply Chain Forum (NSCF) as part of an envoy led by the Ontario Ministry of Economic Development, Trade and Employment.
“Our role is to provide them with the information in terms of market support, intelligence of where they can look and suggest where they can look in the marketplace, and (to) provide them with feedback for various entry strategies (and) where they would be able to fit,” said Steve Matheson, project lead of energy connections and oil sands supply chain development with the ministry, who helped organize the trip for about 26 Ontario companies.
The NSCF, a combination of the Alberta Institute of the Purchasing Management Association of Canada’s (AIPMAC) annual Supply Chain Management Conference and the National Buyer/Seller Forum, will act as a platform for Ontario firms looking to break into—or expand their roles in—the oil and gas market by meeting with buyers and decision makers.
“It’s all about spreading your hand (around),” said Andre Lajoie, president of ANJ Industrial Fabricating Ltd., a Sarnia, Ont.-area manufacturer. “You’ve got to start shaking hands and start (earning) some trust.”
While ANJ already does a fair deal of business with major industry players such as Shell, Exxon and Suncor, Lajoie said those relationships have yet to translate to jobs in the oilsands.
“We’ve done very little in Alberta and we’re trying to get more (work there),” he said. “The Alberta mentality, of course, is, ‘If you’re not from Alberta we don’t really want you here’.”
That pseudo-protectionist approach has been one of the biggest hurdles for ANJ and others in trying to land supply deals in the Wild Rose province.
This, of course, is not a new problem.
It’s also one that’s starting to change, according to Michael Walsh, director of sales with Henry Technologies Ltd., a maker of heat exchangers based in Brantford, Ont.
“Some of the companies have been a little bit more open in looking for capacity from Canadian shops,” he said. “It seems like they are trying to buy closer to home, which is a good thing.”
But while one hurdle is slowly clearing, Walsh and Lajoie said more obstacles exist, including a lack of enticement for oil and gas firms to buy Canadian.
With few incentives in place for oil and gas firms working in Alberta to buy Canadian, companies from Ontario and elsewhere are facing an uphill battle when it comes to landing supply deals, with players from South Korea and the United States often landing at the top of suppliers lists.
“There’s no real incentive for the oil companies to buy Canadian products as opposed to going to the U.S. or offshore,” Walsh said. “I suppose if there was some kind of incentive put in place for them it would be helpful.”
Inter-provincial logistics further complicates matters.
According to Lajoie, shipping is a major impediment to Ontario companies trying to work out deals in Alberta.
Case in point, he said, is the shipping cost associated with sending piping and process modules west.
The cost of moving oversized modules from southwestern Ontario to Alberta can be in the neighbourhood of $250,000.
“(We) can’t ship those super modules by road because (of) one bridge in northern Ontario that’s too low,” Lajoie said.
But with super modules representing a growing trend in the oilsands, Lajoie said part of his mission to Alberta will be to discuss the prospect of returning to more standard module sizes to make shipping easier.
“Some of the new players in there are (designing) them to be smaller,” he said, and in doing so they are making it easier for ANJ and others to bid competitively.
As the trip approaches, Ontario manufacturers and fabricators who have been supplying their home province’s energy and chemicals industries in the past have a slight upper hand—one that they need to highlight when they land in Calgary.
“They don’t need to learn how to build the equipment or provide the services that are needed,” said Dave Moody with the Sarnia Lambton Economic Partnership. “They already know that stuff.”
The NSCF runs Nov. 12 to 14 at Calgary’s BMO Centre.