Cdn. Natural's eyes firmly on Horizon
COMMENT:
Canadian Natural Resources (CNR) joins a steady stream of oil and gas companies announcing record profits in 2005. Thanks mainly to soaring prices for oil and gas, CNR took in a record one billion dollars after-tax profit. It's an astounding amount of money.
But it's nothing to Exxon Mobil, engorged with US$59 billion before tax profit (not revenues, folks, profit) and $36 billion after taxes. You can read more about these record profits here: http://www.sqwalk.com/blog2006/000652.html
CNR's asset portfolio includes the $11 billion Horizon oil sands project which will come on stream in 2008. Even now there are more than 1,700 people are working on the site. That is expected to grow to 6,500 in 2007.
Think about that for a moment. In slightly over a year, CNR needs to find or train nearly 5,000 workers.
Yet Horizon is just one oil sands project. One estimate is that there are 33,000 jobs already created by oil sands development. "It is predicted that the oil sands will create a total of 240,000 new jobs across Canada by 2008." (www.oilsands.cc)
Think about THAT for a moment. Within two years, Canada needs to find or train 240,000 new workers, just for oil sands work.
On top of this, there are proposals for at least four major pipelines costing together over $12 billion to move crude from the oil sands to markets. The $8 billion Mackenzie Gas Pipeline may start construction. The $20 billion Alaska-Highway may actually get through twenty years of politics and corporate manipulation and rising gas prices, and it too may begin construction. If all these pipelines were to proceed, that may add another 100,000 jobs to the 240,000 directly related to the oil sands.
Perhaps on a smaller scale, but really big by British Columbian standards, the Olympic Republic of Vancouver-Whistler is hosting the 2010 Olympics but may actually have to employ British Columbians if it can't import 20,000 foreigners (http://thetyee.ca/News/2006/02/24/BCGlobalTemps/)
Where could Canada possibly get 360,000 new workers trained and available?
CNR has already recruited workers across Canada, but is considering bringing in a contractor from China to build part of Horizon and use Chinese labourers.
Foreign workers are allowed in Canada under the federal government's Foreign Worker Program and as many as 20,000 foreigners are expected to be working in Alberta this year, nearly double the figure from 2005, driven higher by demand for labour in the booming oil sands.
Even if all these trained workers could be found, anywhere in the world, where would they sleep at night? The number of available hotel beds in Fort McMurray on any given night is zero. Building new capacity is just one of the boom industries in town (competing with Horizon and other oil sands projects for skilled labour.) Room rates of $250 per night are common.
Then consider that most of these jobs are for construction. Once these projects move into operation, what happens with these armies of unneeded workers? Do they join the others in the heaps of social discards in the streets of our big cities? Do we ship 'em back where they came from?
This is an opportunity for government to slow things down, pace development, to manage this oil sands Klondike. But where boomtimes occur, governments are loathe to interfere, other than to encourage the frenzy with injections of financial incentives, infrastructure development and "join the rush" marketing initiatives.
Imagine the possibilities. Just one: imagine if access to the oil sands were conditional on zero greenhouse gas emissions from mining and refining.
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Cdn. Natural's eyes firmly on Horizon
By DAVE EBNER
Globe and Mail
Friday, February 24, 2006
CALGARY -- Canadian Natural Resources Ltd. had its best results yet in the fourth quarter and the company says the performance underscores its ability to successfully build its giant $10.8-billion Horizon oil sands project.
"We continue to perform with record results," John Langille, Canadian Natural vice-chairman, said on a conference call yesterday. "These results further strengthen the company's balance sheet as we move forward on the Horizon oil sands project."
Profit, cash flow and production hit records but financial analysts said the results were as expected and instead focused on progress being made at Horizon, located north of Fort McMurray. Its successful completion -- on time and budget -- is considered the principal factor that will push Canadian Natural and its stock ahead.
"The worry is the same as it always is. Horizon is a big project. They seem to have it well thought out -- and so on and so forth -- but they still have a ways to go," said Alastair Dunn, a senior money manager at Connor Clark & Lunn Investment Management Ltd., a large Canadian Natural shareholder.
Labour is a main issue. Canadian Natural has about a fifth of the work done on Horizon, whose first stage is expected to produce oil in late 2008. More than 1,700 people are on the site now with several thousand more coming this summer and the tally will reach a peak of about 6,500 in the spring and summer of 2007.
"We're hearing from a number of sources that access to labour is more and more challenging," said Tom Ebbern, an analyst at Tristone Capital Inc.
Last week, OPTI Canada Inc. said its Long Lake oil sands project, being built with partner Nexen Inc., was behind schedule, explaining that "access to labour and a very active construction environment are putting pressure on cost and schedule."
Canadian Oil Sands Trust, the largest owner of Syncrude, announced another cost increase in January for a nearly finished expansion of the oil sands biggest operation, blaming "persistently lower than expected construction performance factor."
Canadian Natural has recruited workers in 18 cities across Canada and said on the conference call that "new contractors and new blood" on the Horizon site is helping. The company has contractors that are doing oil sands work for the first time, including firms from B.C., Ontario and New Brunswick.
"We see quite a bit more potential in the Maritimes," Steve Laut, Canadian Natural president, said in an interview.
Horizon is an open site for labour, governed by a deal with the Christian Labour Association of Canada. Traditional unions represented by the Alberta Building Trades Council say that deal has inadequate provisions for overtime and are upset with Canadian Natural. Last week, the building trades council and the Alberta Federation of Labour said the company wanted to bring in a contractor from China to build part of Horizon and use Chinese labourers.
Mr. Laut said no decision has been made and noted that foreign labour would receive the same pay as domestic workers.
"You have an advantage if you bring in Canadian labour to the site," Mr. Laut said. "If you bring in foreign labour, it means you have added transportation cost. So you're at a disadvantage to bid on a project if you're bringing in foreign labour."
Stock of Canadian Natural fell 8 cents to $63.10 on the Toronto Stock Exchange.
Canadian Natural Resources Ltd.
Q4 -------- 2005 --------- 2004
Profit ----- $1.1-billion -- $577-million
EPS ------- $2.06 -------- $1.07
Revenue - $3-billion ---- $2-billion
Yearly
Profit ----- $1.1-billion -- $1.4-billion
EPS ------- $1.96 -------- $2.62
Revenue - $10.1-billion - $7.6-billion