EnergyBC

Employment Opportunities

JOB CREATION

When discussing employment in the offshore oil and gas industry, most studies look at the four main phases of operations separately since each has specific demands for various types of workers. Within this context, it is also helpful to compare the experience from Newfoundland and Nova Scotia who have already seen firsthand the cyclical nature of offshore employment. The following assessment is based on a review of potential offshore oil and gas development in BC by Simon Fraser University (2004) and JWEL (2001).

1. Exploration

Exploration involves seismic surveys and exploratory drilling to identify commercially viable reserves. The exploration phase has been shown to generate the lowest amount of total employment and is considered to be relatively short term (<5 years) (see industry timeline). The shipboard component of seismic surveys is often completed within a period of weeks involving specialized crews of 20-30 people while exploratory wells can be completed in about 3-4 weeks (JWEL, 2001).

AGRA (1998) and JWEL (2001) have identified several reasons for the limited employment potential of the exploration phase. Exploratory drilling requires expensive, specialized equipment that local communities do not typically manufacture or service. Labour required to operate this equipment is highly specialized and often brought in from elsewhere by oil companies. However it should be noted that BC has considerable local expertise in ocean geophysical surveying located in Victoria and Vancouver in both the private and academic sectors. In order to reduce costs, exploration companies often pool resources (asset sharing) for the exploratory phase, thus reducing the potential for local jobs and the need for local services. In the event that local residents are employed in the exploration phase, their prospects for long-term work are limited and they would subsequently need to look internationally for employment based on these skills.

2. Development

Development involves the construction of the production and transportation facilities required to extract and transport oil and gas. The development phase offers the greatest potential for employment in terms of the number of jobs created, though again the jobs are not classified as long term. Direct and indirect community employment can be expected to increase significantly during the development stage and then decline once construction is complete. The type and duration of jobs created during the development phase is largely dependent on the type of platform and transportation systems that are chosen. In the past, offshore drilling has often utilized fixed, gravity-based structures (GBS) that are connected to shore by pipelines. The construction of GBS's and pipelines is large-scale and requires a tremendous amount of labor. The government of Newfoundland insisted that the Hibernia project use a GBS platform because of the higher employment potential (Marshall 2001). A specialized facility was built for the construction of the Hibernia GBS in Bull Arm, Newfoundland in 1990. Over 1.8 million hours of design work would also go to Newfoundland residents (Shrimpton, 2002).

Technological advances have resulted in changes to labor requirements during development. As in exploration, resources can also often be pooled between companies, resulting in fewer opportunities for local residents.The use of FPSOs (floating production, storage, and off-loading systems) combined with a greater reliance on shipping for the transport of oil instead of the construction of pipelines has also reduced the required labor for construction (JWEL 2001). This increased usage of FPSO's means that platforms and platform components can be prefabricated elsewhere (JWEL 2001). In Newfoundland, a large part of the platform for the Terra Nova project was built in South Korea because it relied on FPSO technology (Marshall 2001). The upcoming White Rose project will rely on similar methods. However, despite the fact that the Terra Nova main structure was built in South Korea, more than 2000 workers were still employed in Newfoundland at the peak stages of development. Similarly, regarding the White Rose FPSO being constructed in international yards, there are currently 1200 people employed in Marystown, NL, working on the White Rose FPSO; about 90% of these people are Newfoundlanders (Shrimpton, pers. comm).

Proponents of offshore development argue that Prince Rupert has the potential to become specialized in the construction, operation and maintenance of offshore equipment once the industry is up and running in the area (JWEL 2001). This is in contrast with the limited amount of short-term construction likely to take place along the North Coast because there are no deep-sea ports with shipbuilding or large steel fabrication facilities (Marshall 2001). With resource pooling and the importation of FPSOs, it is unlikely that the industry would favor the construction of a Bull Arm type facility in BC.

3. Production

Production offers the greatest opportunity for long-term local employment. In Atlantic Canada, as of 2001 the Hibernia field employed about 800 workers per year, approximately 90 percent of whom were Atlantic Canadians. The Cohasset field in Nova Scotia, though no longer operating, employed about 400 persons annually, 87 % from Nova Scotia and 11 % from other parts of Canada. During the year 2000, the Sable Island gas project employed on average about 840 people, over 92 % of them from Nova Scotia (JWEL, 2001).

Less labor is required for this phase, so communities normally experience a decline in total employment from the development stage. Of the four major East Coast offshore projects, Hibernia, Terra Nova and White Rose in Newfoundland and the Sable Offshore Energy Project (SOEP) in Nova Scotia, declines ranged from a 48% drop at Terra Nova to an 84% drop at Hibernia (SFU, 2004). Potential employment in the production phase can be again limited by new technologies and practices such as the use of FPSO's and asset sharing. Production drilling is sometimes accomplished by floating rigs such as those used in exploration. In addition, FPSO's can increase the viability of smaller and relatively short-lived fields (JWEL 2001).

SFU (2004) suggests that as a result of capital-intensive technology, the offshore oil and gas production phase generates few jobs per dollar invested. Jobs generated per million dollars of investment (JPM) for offshore development is lower than other energy sectors such as conventional oil and gas (7.3 JPM), renewable energy projects (12.5 JPM), and energy conservation (36.6 JPM) (Campbell et al. 1997 in Marshall 2001). SFU (2004) also noted that oil and gas also generates fewer jobs than almost any other sector in the BC economy per dollar of production. However, the capital intensive nature of the industry should not be considered a negative characteristic, but rather simply illustrates the smaller job creation potential of offshore projects.

4. Decommissioning

The decommissioning stage will have a large impact on local and regional economies as all direct and most indirect employment and revenues from oil and gas will come to an end. The decline may occur gradually over a number of years or quickly over a short period depending on resource supply and the eventual fate of major facilities such as platforms, supply bases, warehouses and other offshore infrastructure. Decommissioning offers limited employment prospects as structures are designed with decommissioning in mind, reducing the time and labor required for these activities. The use of some decommissioned structures as marine research platforms is one alternative being employed to create jobs after industry has departed.

NAFTA

The North American Free Trade Agreement is seen as a significant obstacle to achieving local employment targets for West Coast offshore development. The Canada-Newfoundland Atlantic Accord Implementation Act (which laid out the regulatory and royalties agreement between Newfoundland and Canada) was specifically exempted from NAFTA. It is considered unlikely that BC could expect a similar arrangement. With respect to future offshore projects, NAFTA restricts the ability of governments to impose performance requirements – such as requiring a company to hire locally – on any investor. If the BC government wants to ensure that offshore oil jobs will go to British Columbians or that offshore platforms will be built in BC, it may be required to compensate oil companies for such a concession.

Some credit from above text to Review of Offshore Oil and Gas Development by Simon Fraser University, 2004 and Royal Roads University: BC Offshore Oil and Gas Socio-Economic Papers, 2004