Oil sands: a global sustainable energy leader?

A Deloitte report declares Canada is poised to do for global hydrocarbon-based energy development what Germany has done for the renewable energy research and development and manufacturing sectors.

September 22, 2011   by PLANT STAFF

TORONTO: With critics worldwide who see Alberta’s oil sands development as an environmental catastrophe in the making, and more immediately the vocal and well-publicized opposition to the Keystone pipeline project, it’s hard to imagine Canada being described as a potential leader in sustainable energy resource development, yet that is what a recent Deloitte report suggests.

Indeed, the global consulting and Canadian professional services firm declares the opportunity is at hand for Canada to do for global hydrocarbon-based energy development what Germany has done for the renewable energy research and development (R&D) and manufacturing sectors.

“The fundamentals for Canada to forge a global leadership role in sustainable energy resource development are there,” says Chris Lee, leader of Deloitte Canada’s national energy and resources practice. “No other jurisdiction in the world with this magnitude of resource potential has anywhere near Canada’s combination of political stability, advanced education, technical prowess, and ongoing improvements in developing the oil sands with an increasingly minimal environmental impact.”

But Lee said achieving energy superpower status would require industry heads “to step up to the plate before our moment passes.”

Gaining Ground in the Sands 2012 says getting access to new markets is key to achieve and maintain global leadership. Unless that access becomes available over the next five to 10 years, much of the growth potential will be lost.

“It’s difficult to self-proclaim to be an energy superpower when we can serve only two markets—our own Canadian market and the US,” explains Lee. “Australia, for example, has benefited hugely from filling the bill on the materials side. Canada needs to take its rightful place on the energy side where international markets are concerned.”

Some of the top challenges identified by the Deloitte report include:

• Demographic transformation – hiring and rewarding Generation Y. Looming waves of Baby Boomer retirements combined with little planning to retain talent and institutional memory suggests skill shortages will persist and worsen. Separation and replacement costs for talent can vary from 25% to 200% of the positions’ annual compensation. Companies need to create cultures that attract and nurture members of Generation Y.

• Labour logistics. Money continues to be left on the table through current practices involving workforce housing and transportation. By using the basic supply chain pillars (process, technology and people), improving information management and developing intimate supplier relationships, organizations can build a significantly more efficient people supply chain while realizing additional non-economic benefits. Industry-government investment must include significant education opportunities and expanded community support.

• The spirit of automation. More attention needs to be paid to advanced technologies (such as advanced remote-sensing equipment or remotely-controlled vehicles) developed elsewhere in the world and/or in other sectors that carry potential benefits to oil sands operations, especially when many of these technologies can help mitigate labour crunches.

• The NOC wildcard. National oil companies (NOCs) will continue to play an evolving, and sometimes unpredictable role in development of the oil sands in 2012. Deloitte anticipates one or two major non-Chinese deals struck in the next year. Aside from demand for more people, this involvement could lead to increased sourcing and development of design and operational talent from NOC home bases.

• Identify and focus on core competencies — and outsource the rest. In core areas like safety training and the environment where all companies must meet minimum standards, Deloitte suggests collaborating to define, design and deliver a singular and shared contractor orientation that would meet everyone’s needs and certify contractors at all relevant sites. Decentralizing some support and/or infrastructural tasks will free up existing labour for higher value activities.

• Internal rigour around operational excellence. Companies need to engage in a “deep” review of their organizational structures, including hiring, communications and quality control-processes. Placing greater resources and intelligence on industry benchmarking and extra-industry best practices results in better organizational awareness and the ability to better anticipate avoid or respond to larger unforeseen developments.

• Improved accountability. The pace and scale of development over the last decade has also made cost overruns almost the norm, with labourers and service and materials suppliers enjoying a seller’s market. Producers need to rethink approaches and policies that pertain to big-ticket items such as engineering, procurement, labour and construction.

• Adopting models from other sectors. Borrowing from the automobile and hi-tech sectors, many oil sands producers are implementing contemporary manufacturing approaches such as lean and Six Sigma for significant savings and efficiencies. Among these are reducing cycle times by 30% to 50%, reducing overall operational costs by 15% to 20%, and eliminating non-productive activity by more than 50%.

• Enhanced collaboration. Strides toward greater collaboration within and between companies is being matched by industry associations in a variety of strategic areas, including technology development, environmental protection, and social engagement with multiple stakeholders.

• Locating the public perception reset button. Swaying public perception is often a game of inches and success comes from hard work, tailored communication and synergies between all players.

Click here for a copy of the report.

Compiled by PLANT from the report and materials provided by Deloitte.

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