Amid global energy crisis, labour shortage constrains growth of Canadian oilpatch

Labour shortages in Canada's oil and gas industry could curb its ability to quickly step in to fill a gap in supply left in the wake of U.S. sanctions against Russia, industry insiders say.

The sector has been struggling with a lack of workers since last year, when rebounding oil prices first spurred an uptick in drilling activity in the Canadian oilpatch.

By last fall, the number of direct and indirect jobs in the oil and gas services sector was up 130 per cent year-over-year — an increase of more than 20,000 jobs — while the unemployment rate in the sector had fallen from 17.7 per cent in September 2020 to 3.7 per cent, according to industry statistics.

But that was before Russia invaded Ukraine last month, sending oil prices soaring and leading U.S. President Joe Biden to ban Russian oil imports.

The world is now hungry for energy, and the U.S. specifically is facing a shortfall of approximately 700,000 barrels of oil per day.

While Canada's industry has some ability to increase exports in the short term — estimates vary between 200,000 and 400,000 additional barrels per day — it can't turn on a dime, said Mark Scholz, president and chief executive of the Canadian Association of Energy Contractors (CAOEC).

"Even if there was a signal from our customers that they were going to put more money into the ground to take advantage of high prices, there's no guarantee that we would even be able to supply the market with available rigs, based on the labour situation," Scholz said.

Years of sustained low prices have led to significant "under-investment" in Canadian oil and gas, Scholz added, and now the industry is under-equipped to respond to soaring global demand.

"We've seen a lot of money leave the industry, and when you see that much money leave an industry, there's going to be consequences," he said. "It's impacted our ability to attract people into the industry, to grow as an industry."

Government messaging of 'dying industry' a tipping point

Gurpreet Lail, president of the Petroleum Services Association of Canada, said if the oil and gas industry is going to meet future global demand for energy, it will have to increase its efforts to attract underrepresented segments of the population, like Indigenous people and recent immigrants.

But she said governments will have to help too, by changing the messaging about oil and gas.

"The downturn absolutely affected our ability to attract people to the sector," Lail said. "But what actually took us over the tipping point was the rhetoric coming from our own federal government that said this industry is a dying industry. We need to start changing the narrative a little bit so that young graduates understand oil and gas is here to stay."

Oilfield services company STEP Energy Services — which is headquartered in Calgary and has operations in Western Canada as well as the U.S. — is doing everything it can to attract and recruit workers, including offering on-the-job career development and training programs, said president and chief operating officer Steve Glanville.

He added while the current energy price environment is good news for STEP and its business, the availability of labour is an ongoing concern.

"We're competing with different industries now, like the tech industry. Just to give you an example, Amazon is hiring truck drivers at $25, $26 an hour, so those are the industries we're actually competing with from a labour standpoint," Glanville said.

"It's definitely going to be a restraint on the growth of our business, for sure. This isn't going away any time soon."