Edmonton’s energy manufacturers are breathing a sigh of relief in 2022 with rebounding oil prices and pandemic-related inertia ending. Global demand and attractive prices for their products drives opportunity but it also creates challenges for businesses struggling to make up for years of slowed activity.
There’s much to celebrate. “In March, it was highly encouraging to see manufacturing sales in petroleum and coal products double from last year’s level,” says Dennis Darby, President and CEO with Canadian Manufacturers and Exporters. “Part of it is due to higher prices, but volumes are up as well and the Russia-Ukraine situation is also driving activity here. With all of this, it’s not surprising at all to see strong growth in this sector right now.”
However, all that potential may be impeded as the manufacturing industry continues to experience supply chain problems and skilled labour shortages. “Canada and the U.S. tend to have very efficient supply chains but when it comes to resilience, they lack the ability to deal with hiccups,” says Darby. “Additionally, 80 per cent of our members cannot find people with the skills they need. That, more than anything, is holding back even more growth in production.”
It’s a critical challenge that has industry members calling on all levels of government to address. They want progress in immigration, bringing more people to Canada to fill the void. They also see need for more training, including retraining.
Overcoming these hurdles is paramount to recovering from a long economic recession, but also to seizing opportunity knocking on Alberta’s door – especially when 90 per cent of manufactured products are exported. “It’s so important that our infrastructure works; we make sure things can get across borders; we have the road, the rail and the port capacity to get things in and out of Canada,” says Darby.
Edmonton manufacturers echo Darby’s perspective.
For Nisku’s UnityRig Equipment, increased drilling activity brings great expectations as rising oil prices see oilfield equipment leave long yard stays to return to the field. They’re also facing the same challenges as fellow manufacturers, namely labour and supply issues.
“Throughout the downturn of oil pricing, contractors worked a minimum amount of their equipment,” says UnityRig’s equipment manager, Jason Mitchell. “When everything started heating up and more rigs started back to work again, all that parked equipment had to be certified. We’ve had a massive influx of work over this past year and a half, trying to catch up on all these things that weren’t done over the last five to six years.”
It’s a good problem to have, but it brings challenges. “We’re working as many hours as we can, but we have our limitations,” says Mitchell.
Founded in 1986 by Mitchell’s father Bob, UnityRig has held fairly steady with approximately 20 full-time employees. Today, three generations of Mitchells repair, service, manufacture and certify well service equipment, including blowout prevention and overhead equipment.
Throughout the downturn, they were reduced to a team of 12 in a highly technical business.
“Trying to add on to the staff has been a real challenge for sure,” says Mitchell. “It’s not just for us, labour is the biggest issue in our industry right now. This is specialized work. Yes, there are technical trades programs people can take that overlap our work, but it takes a fair amount of in-house training for us to get people.”
With that investment into staff, UnityRig did everything they could to retain people when the industry nearly halted, including taking on different equipment to service beyond oilfield iron. It’s a fix for one problem that comes with a different challenge – supply, especially availability, reliability, timing and pricing.
“For raw materials like steel, our lead times have become so much greater than they used to be,” says Mitchell. “The price of steel changes weekly. We have to plan everything out weeks in advance because of supply issues. This is definitely a fluid situation, it changes day-to-day.”
Mitchell says strong relationships and a commitment to transparency with their long-term customers has kept things mostly business as usual. “We’re grateful to have a really good relationship with all of our customers and they’re facing the same thing all across the board. They understand what we’re dealing with because they’re going through it themselves,” he says.
The company’s homebase in the Edmonton area is a central spot for UnityRig’s customers ranging from northern B.C., across northern and southern Alberta and a large market into southern Saskatchewan. It’s also well saturated with the product vendors the team works with.
“For us to have the raw materials and other products we need to do our work, Edmonton is by far the best hub for that and it’s the most central for the area of customers we work with,” says Mitchell.
As for the future, Mitchell sees continued opportunity and growth in an industry that is constantly changing, always creating new problems that customers bring to UnityRig to solve.
“That’s continued to drive the long-term success of this business,” says Mitchell. “I’m incredibly optimistic about the future of western Canada’s oilfield industry. I think we’re going to start to see a change in some of the people running these companies as some of the older generation starts to phase themselves out of it if they have an opportunity to sell. We’ll see a new younger generation coming in.”
To the northwest, Gambit Machining (Gambit) confirms the need to address supply and labour challenges. Incorporated in 1961, Gambit’s founding family set up shop in the early 1900s as blacksmiths where the Citadel Theatre sits today. Their history has seen them through most every imaginable challenge and recovery. But this one is unique.
In early 2020, the precision component manufacturing company was busy with a full order book. The declaration of the pandemic halted most ongoing orders as well as new purchase orders. “We had a customer who laid off 10,000 people in one day,” says co-owner Tracy Albert. “Of course, that trickles down and affects whole supply chains all over the world.”
The company didn’t see recovery until early 2022. “We can happily say revenues have finally returned to pre-COVID numbers,” says Albert. “There’s renewed optimism in the business. This is connected to the world opening up again and the price of oil climbing.”
Most of the products Gambit manufactures fit in the palm of a hand. Their customers, original equipment manufacturers (OEM), design and engineer their own products top to bottom and then contract out their various components to specialized manufacturers like Gambit. Then, they assemble and sell the end products.
Based in Edmonton, much of Gambit’s work is destined for the energy industry, including precision components for valves or downhole tools. It’s all custom work, and extreme precision is critical to safety and production. “When we make a component, usually hundreds or thousands of them, we can guarantee they will measure within tight tolerances,” says Albert. “The parts we make are often complex and it’s critical they meet our customers specs.”
While Gambit-machined parts ship 70 per cent within Canada, the majority of their OEM customers’ products are sold around the world. Here again, global demand is presenting opportunity for these businesses, but the same challenges loom.
“Like many other businesses, we are really struggling with access to skilled labour, raw materials and inflation,” says Albert. “Not so long ago, a vendor quote would be good for a month, which shortened to a week, then a day. These factors all add to an already competitive market.”
In terms of labour, NAIT continues to be an appreciated resource. “Their proximity and programming are real strengths aligned with what we do in our business,” says Albert.
With 60-plus years’ experience, Gambit is focused on the next 60, especially in remaining a stable employer for their community. “Companies that survive these downturns and recessions, regardless of the cause, tend to come out leaner, stronger and better,” says Albert.