Tapping into oilsands contracts
by Lisa Wichmann, with files from Nate Hendley
Ontario manufacturers breaking barriers to lucrative Alberta market
Windsor, Ont.—Ask Ontario manufacturers how they managed to win business in the oilsands and some common themes emerge—legwork, patience, and more than a few flights to Alberta.
“Don’t expect [work] to come to you,” says David Glover, owner of Harbour Technologies Ltd., a machine shop in Windsor, Ont. “You’ve got to work for it—go there physically, get face-time.”
For Glover, whose company manufactures products such as tools, gauges and fixtures, in-person networking was key to tapping into components and machining contracts.
It’s also important to know who to approach, and who to avoid. “Be wary of companies that are offering deals that are too good to be true. There are lots of companies now set up to act as middlemen between oilsands [companies] and Ontario [manufacturers]. They’re out for their best interests and they shop for the lowest price they can.”
Though Glover hasn’t pegged the amount of revenue coming in from oilsands-related projects, stakeholders say the market for Ontario manufacturers is compelling.
New oilsands projects will require about $63 billion worth of goods, materials and services from Ontario companies by 2035, according to a May 2011 report from the Canadian Energy Research Institute (CERI).
Oilsands companies and their suppliers will need products such as tires, trucks, gauges, pumps and valves—feeding into a $2.1 trillion benefit to the Canadian economy over the next 25 years, according to the Canadian Association of Petroleum Producers (CAPP).
Though some Ontario manufacturers bemoan the strength of the so-called ‘petro dollar’, others are clearly benefiting from the oilsands and oilpatch supply chain.
Wessex Precision Machining Ltd., for instance, a custom machine shop in Ayr, Ont. started supplying gearboxes, down-hole tooling and parts for oil rigs in 2007. Co-owner Peter Alden estimates the company did more than $230,000 worth of business directly with oilsands companies in 2011. So far this year, sales are more than $400,000.
“I worked in the Alberta oilpatch myself and I know people out there,” Alden said. “I think that’s the key, to have someone there [that you know]. It’s very difficult to get work with those guys directly.”
Quality and value-add are also big differentiators in this highly-competitive market, he added.
“They want good quality parts, on time, and they want to put them straight to work. They don’t want you to send in a half-finished product.”
Shipping from Ontario to Alberta takes about four to five days, but Alden says transport costs haven’t been much of a problem. On that note, some manufacturers wonder if setting up shop in Alberta would open more doors.
Richard Westlake, who founded his own pipe fabrication company in Burlington, Ont. in 2006 says his company is considering it. But labour in Alberta is short.
“There’s tremendous pressure on that whole economy right now and whether or not it’s the right move to join in, or do our business from [Ontario] is a decision we’re kind of running through at the moment.”
In just a few years Westlake Industries has had something of a meteoric rise, working with clients such as Dofasco, Siemens, Duke Energy and GE Power Systems. It also made Profit Magazine’s Hot 50 Emerging Growth Companies listing in 2009 and 2010.
Westlake has made solid inroads into the oilsands as well. It won a major project for Bechtel Canada Inc., to supply prefabricated piping for Shell Canada Ltd.’s UE-1 off-module oilsands project.
The company is waiting to hear back on a couple of recent bids and is actively pursuing more business out west.
“It’s lots of legwork, lots of phone calls, lots of visits to go and meet the people that are involved with each of the projects,” says Westlake, adding the company has been networking in Alberta for the past five or six years.
He pointed out some oilsands companies want to be directly involved in procurement, but others delegate it to the contractor level.
“Each owner has a different strategy on how they want to execute their project. So it’s important to know where in the chain you need to get to.”
By the time big contracts are reported in the media, supply decisions have often been made already, he added. Still, he scours newspapers and the Internet to learn about newly approved projects. “You have to make sure you’re positioned early enough.”
It’s also important to show how your company can be competitive, and accommodate capacity and scheduling, he said—a strategy not unique to oilsands contracts, but any bid. “There are always barriers like the cost of transportation and the logistics…the size of the modules and your ability to transport them to Alberta. Those are all real issues you have to address in your sales effort.”
His advice for other manufacturers? “The most important thing is to not get daunted by the size and complexity of the projects. It’s really no different than any other sales efforts in that you have to understand the projects, the people and what their needs are.”
Westlake, like other Ontario manufacturers, will continue to build profile and relationships in the oilsands and oilpatch—knowing in the end, patience and determination can really pay off.