Industrial

The boom in global commodity prices is now into its fourth year. It seems that new long-term, multi-billion dollar capital projects are being announced daily. And unlike the 1970s, there is a sense that what we are experiencing now is not just a supply phenomenon due to the depletion of convention oil reserves, unrest in the Middle East and a relative paucity of investment through the 1980s and 1990s in the exploration and development of new mineral deposits. Rapid growth emanating from China and India in particular is driving demand for a range of basic commodities as these economies evolve to more intensive consumption patterns.

Figure 1: Facts on Calgary

Nowhere is this feeling of growth and optimism more apparent today than in Calgary, Alberta, the heart of the Western Canadian oil patch. Calgary is emerging onto the world stage primarily due to the attention being paid to a unique heavy oil asset – the Athabasca Oil Sands – that languished for years as uneconomic when the price of oil was at its low point. Things started to change though when oil hit $20 a barrel; and they really started to change when oil began its dramatic march to the $60 level a couple of years ago.

The Athabasca Oil Sands is the biggest known reserve of oil in the world. Located principally in the Athabasca region of Northern Alberta, a four-hour drive north of Edmonton, the reserve takes the form of bitumen that is found in oil-saturated sand deposits left over from ancient rivers. It is estimated that there are roughly 1.7-2.5 trillion barrels of oil trapped in a complex mixture of sand, water and clay. Proven probable reserves are calculated at 175 billion barrels, second only to Saudi Arabia (see graph below).

Capital investment has poured into the region over the past few years as the commercial viability of developing this reserve has been realized. The running total of $1 billion + projects that have been announced for the region currently stands at 20. Canadian Natural Resources’ Horizon Project alone has a price tag of more than $10 billion. All told, an estimated $75-100 billion of capital is committed to the Oil Sands over the next decade.

Figure 2: Canadian Oil Sands Production

More capital keeps coming as the provincial government of Alberta continues to foster a pro-business environment that attracts interest from all corners of the world. Indeed, while the U.S. government looks very favourably on the development of a secure oil supply in a friendly neighbour, it also finds itself in competition with European and Asian investors who also have a strong interest in the Oil Sands. Walk into the lobby of any downtown Calgary hotel these days and you’re likely to hear conversations in Chinese, Spanish or Russian, as various international delegations descend on the city to understand the Oil Sands story.

But with this investment activity comes a number of challenges as Calgary tries to keep up with the rapid growth. One of the major problems is supply: from the supply of office space and residential housing to the supply of talent. Skilled tradesman, general labourers, entry level engineers – they are all in very short supply. What is most challenging and mission critical, however, for many of our clients is the supply of talented managers and leaders, especially in project management roles. Whereas even five years ago, we could solve a search for a senior project leader on a multi-billion dollar capital project without looking outside the region, now those searches are truly global in scope. Candidates in the U.S., Australia, South America, South Africa and other markets known for large-scale capital project expertise are now actively pursued for roles in Calgary and the Oil Sands (see graph below).

Figure 3: Oil sand created 120,000 jobs across Canada by 2003... doubling to 240,000 by 2008

This is why Egon Zehnder International is now in Calgary. Better than any other executive search firm, we can link Calgary to the world. Our “one firm” global partnership model enables us to bridge the needs of our clients for leadership options that do not rely solely on local market solutions.