Wednesday, June 13, 2007

Jobs Out East

This piece was previously published earlier this year in the energy supplement of Atlantic Business Magazine.


Newfoundland and Labrador’s talk radio shows are abuzz with the latest personal stories of out-migration. The media is reporting the recent addition of a direct flight from rural Newfoundland to northern Alberta, to better serve those workers on a 6-week-on 2-week-off work rotation to the land of opportunity.

Out-migration and migrant work practices are even on Premier Williams’ mind: on a recent trade mission to Alberta, he took the time to reassure the members of the Newfoundland and Labrador diaspora in Fort MacMurray that they would be able to come home in a decade.

There is another side to this story.

While one end of the petroleum labour force is packing its bags and heading out to work the western oilfields, up the ladder at the knowledge end of the industry there’s not necessarily a rush to the airport. In fact, some people are happy where they are.

Take the example of Production Services Network (PSN).

PSN was formerly the production services arm of Kellogg Brown and Root’s (KBR) energy and chemicals division, a subsidiary of the Haliburton Group, prior to a management buyout. These days PSN is a major independent international service contractor to oil and gas exploration and production customers around the world.

While they maintain field offices in 25 countries around the globe to gather initial information, that data is then transmitted to just three engineering centres: Sidney, Aberdeen and St. John’s.

According to Roger Clarke, PSN’s General Manager and Vice President of Canada Operations, the centre in St. John’s was originally established to provide engineering and related professional services to the Hibernia project. They have been here ever since. And because of changes in technology, there is simply no reason to move and there’s every reason to stay. Last year the St. John’s operation expanded to 280 employees.

“With the way technology is running these days, we can engineer remotely. We can produce deliverables here and electronically ship them to wherever we have to. The customer can review the work, comment on it and return it back to us. Ten years ago you couldn’t do it,” says Clark.

With the ability to send large quantities of data quickly, cheaply and securely, engineering offices can be located anywhere, even at great distance. “Whether it’s an upgrader in Fort MacMurray or a mechanical plant in the UK, we can engineer far away from the customer sites.”

The local office provides engineering services to two local projects, Terra Nova and Hibernia, as well as for a client in Bakersfield, California and a North Sea project.

But if technology allows for remote engineering from a distant location, why not just do it all from the head office in Aberdeen? “Because Aberdeen has the same problem as Calgary: the resources available are simply maxed out - office space, engineering staff.”

Besides the technical side, there is a shift in customer attitudes. Clark says that previously, customers would insist that engineering work be done close to the site. Ironically, that’s how PSN ended up in St. John’s in the first place. Today, that’s not an automatic requirement.

Roger Clark is a strong advocate for the PSN business model of a local office doing global engineering and thereby creating a local demand for professional knowledge workers.

Jerry Byrne, President of offshore engineering and fabrication company D. F. Barnes and Chair of petroleum sector trade association NOIA, is also an advocate of retaining local expertise - which in his case includes skilled trades as well as engineers - while serving national and global markets. His firm is pursuing opportunities where components can be fabricated in Newfoundland and Labrador and then exported to other parts of the world.

His philosophy is simple: “import the contracts and export the products”. This is possible because the distance from Atlantic Canada to the Alberta oilsands is 53 feet, the length of a flatbed truck. Anything that can fit on one of those, or in a standard shipping container, can be built here with local skilled labour and then be transported anywhere in the world.

Recently, the D.F. Barnes Group of Companies was awarded a multi-million dollar manufacturing contract with Oceaneering International, Inc., the world’s largest supplier of remotely operated vehicles (ROVs) for use by the oil and gas industry. D.F. Barnes will manufacture launch and recovery systems, called LARS. These are large mechanical devices used to put the ROVs over side during offshore operations and then take them back aboard when their work is done.

This contract establishes the D.F. Barnes Group as one of three worldwide suppliers of LARS, serving Oceaneering’s North America and Western Europe marketplace.

Improved transportation infrastructure combined with exploding demand and the inability of established manufacturing centres to deliver within a reasonable time frame opens the window to this kind of award. As a bonus, it also allows skilled tradesmen to stay in the province and even encourages some to come back. This is not only good for the skilled workforce, but a competitive advantage for companies seeking to attract engineering and fabrication contracts.

The cases of PSN and D.F. Barnes show how Atlantic Canada can take advantage of the global trend towards outsourcing. Instead of trying to keep high-cost personnel in a high-cost location where you have to compete with other companies for professional staff, it’s possible to establish an office at any lower-cost location anywhere and service your customer base from there.

This business model emphasises continuity and making best use of accumulated experience by creating stability for the team. It avoid the costs of uprooting to follow projects around the world. The oil and gas sector is a mobile one, where staff follow projects around the world because new projects are always being developed while other projects move out of the development phase and into the production phase.

Reestablishing the expertise of a cohesive engineering team with every move from place to place, besides the costs of rebuilding due to attrition, degrades the ability to accumulate knowledge and expertise.

St. John’s has the competitive advantage of a critical mass of related educational facilities, Memorial University engineering school and the Marine Institute in particular, an established cluster of petroleum activity and a population inclined to stay put if the opportunity presents itself.

Besides those hard business factors are the quality of life issues. St. John’s is a good place to live and raise a family in, as far as employees are concerned. If you walk into any gathering of petroleum industry professionals, you will hear a variety of accents from across Canada and around the world. Many of these people have settled into St. John’s for good - they have homes and children in school and are reluctant to uproot.

There will always be a need for people to move away from home and stay near development sites. Sometimes there is just no substitute for being close by and for gaining valuable experience under a variety of conditions that only working outside one’s home jurisdiction provides.

But PSN and D.F. Barnes show the way to an alternative business and employment model - one which can keep more knowledge and skilled workers, and therefore expertise, closer to home, while still being a player in the industry around the world.

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