Taking Care of the Extractive Sector

Taking Care of the Extractive Sector

Meet three unique Canadian firms that are taking their environmental expertise abroad, making the oil and gas sector more sustainable on a planet increasingly thirsty for fuel.

Natural gas pipelines around the world are aging, making them prone to leaks that can have devastating environmental consequences. Enter Sealweld, a Calgary-based company that seals pipeline valve leaks around the world to prevent harmful methane from seeping into the atmosphere.

The firm’s system allows damaged pipeline valves to be repaired without unnecessary shutdowns, providing potential cost savings of millions of dollars a day.

“It’s an effective way to reduce global warming,” says Sealweld president Dean Chisholm, adding that methane causes 21 times more pollution than carbon dioxide, the major contributor to the greenhouse effect.

Turning raw gas into clean energy

Across the country, Xebec Adsorption of Blainville, Quebec, designs, engineers and manufactures innovative solutions that transform raw gases into marketable sources of clean energy – mainly used as transportation fuel. The company focuses on biogas upgrading, natural gas dehydration and hydrogen purification.

Exports account for 80 per cent of sales for Xebec, which has received EDC credit and pre-shipment financing. Asia and the U.S. are its leading foreign markets and the company has established a manufacturing and sales office in Shanghai.

Xebec is leveraging its Chinese supply chain to reduce its procurement costs. It also gives the company proximity to its major market, says Eric Favreau, Xebec vice-president and chief financial officer.

Good riddance to oil waste

Farther east is West Mountain Capital of St. John’s, Newfoundland. Its subsidiary Phase Separation Solutions uses a thermal system that separates hydrocarbons (chlorinated and non-chlorinated, including oil, PCBs and pesticides) from materials like soil
and sludge.

China now comprises 100 per cent of the company’s sales. “We have two joint ventures in China that are focused on oil recovery from oily sludge products and another focused on soil remediation,” says Paul Antle, president and CEO of West Mountain Capital.

The company processes waste in everything from tanker ships to oil storage facilities for resale or reuse. There are no emissions from the system, which also recycles water. “It’s a really benign clean technology that allows us to reduce waste and generate value from that waste,” Antle says.

Securing the world’s pipelines

Drilling for natural gas

Drilling for natural gas, depicted here, has environmental impacts that many Canadian firms – using cleantech and other advanced technologies – are mitigating globally.

Sealweld, a family business founded in 1969, has worked on almost all the world’s major pipelines for customers like Trans-Canada Pipelines, Russia’s Gazprom and Saudi Arabia’s Saudi Aramco.

Business is booming, as most pipelines are more than 50 years old and have gone far beyond the 35-year lifespan for which they are typically engineered.

“Pipelines are getting older and everybody is laying off maintenance staff in an effort to increase profits. The result is more leaks,” says Chisholm, noting that aging pipelines can last for a long time if they’re well maintained.

Sealweld focuses on repairing natural gas pipelines; since the gas is dry, the tiniest pipeline scratch could result in a leak. Crude oil pipelines don’t experience as many leakage problems since the oil is self-lubricating.

The company can repair pipelines whether they’re onshore, offshore, above or below ground. “The valves are the same and the solutions are the same.”

Exports comprise 80 per cent of sales and the company has done business in more than 90 countries in the last 10 years; its biggest clients are in China, the U.S., Russia, Saudi Arabia and the EU.

These exports have seen explosive growth of 300 per cent in the last five years, thanks to Sealweld’s emphasis on its ValvePro training program, which teaches its clients’ technicians to seal damaged valves themselves.

The program has been used by clients in more than 30 countries and translated into several languages. Courses are taught in company classrooms in Calgary, Houston and China, and even in remote Sakhalin Island, Russia.

“Technology transfer is a huge activity for us,” says Chisholm. Trainees become very good customers and receive ongoing or advanced training. An instructor certification program is also available.

As a bonus, the training courses have resulted in new customers. When Chinese pipeline engineers who received the training were transferred to Uzbekhistan, they placed a large order with Sealweld to repair leaking valves there too.

Offering customers more options

Sealweld’s pipeline valve repairs reduce client costs and greenhouse gases. Photo: Courtesy of Sealweld Corporation

Sealweld’s pipeline valve repairs reduce client costs and greenhouse gases. Photo: Courtesy of Sealweld Corporation

For over 10 years, Sealweld has made use of such EDC services as accounts receivable insurance, pre-shipment financing, bank guarantees, and advice on the credit worthiness of international customers and their countries’ risks.

“It’s a huge advantage because it gives me options to offer my customers. Otherwise it would be payment upfront (we’d require) or we wouldn’t do business.”

EDC services have become even more important to Sealweld since the global financial crisis of 2008, which has since made it more difficult to deal with many banks, Chisholm says.

For example, when Uzbekhistan’s state pipeline company wanted to pay with a letter of credit to Sealweld’s bank, the two institutions couldn’t agree on the letter’s terminology.

“This went back and forth for weeks and weeks.” Chisholm finally solved the problem by obtaining export insurance from EDC.

Ups and downs of the road

Xebec transforms raw gas into clean energy. Photo: Courtesy of Xebec Adsorption Inc.

Xebec transforms raw gas into clean energy. Photo: Courtesy of Xebec Adsorption Inc.

Favreau of Xebec says that low natural gas prices have temporarily slowed investments in cleantech, but he sees a strong demand for his company’s products in coming years. These range from gas dryers for natural gas vehicle refueling stations to biogas upgrading plants and hydrogen purifiers for hydrogen recovery.

Favreau expects both the U.S. and Canada will soon adopt energy legislation that will lead to strong growth in sectors where Xebec excels.

In particular, Xebec’s purification technology can help to clean associated gas (natural gas found in association with oil), which can then be used to replace diesel, propane or heating oil.

Prospects are also good for its natural gas dryers; “there is a big push to convert diesel engines into natural gas,” among large truck fleets. Favreau predicts that such refueling stations in North America will increase from 1,000 today to about 15,000 in 10 years.

Right now, “California is where it’s ‘happening,’ with environmental regulations that are creating a demand for our products.”

However, Favreau says protectionism in the U.S. poses a threat to exports. To help counter Buy American policies, Xebec will likely open a U.S. plant near the New York-Quebec border in the next two years.

Moving farther afield

West Mountain’s Phase Separation Solutions gets oil out of soil and sludge. Photo: Courtesy of West Mountain Capital Inc.

West Mountain’s Phase Separation Solutions gets oil out of soil and sludge. Photo: Courtesy of West Mountain Capital Inc.

Antle of West Mountain Capital began to look farther afield than Canada and the U.S. after coming to the conclusion those markets are too mature for the company’s products.

After examining the BRIC countries (Brazil, Russia, India and China), the company settled on China as a market with excellent growth potential. China’s fairly stable tax base and its decision to address pressing environmental issues were among the reasons, Antle says.

“People still worry about the communist government, but it’s more open than it has ever been,” he says. “They move fast, they put their money where their mouth is and they really are voracious when it comes to technology adoption.”

As well, adds Antle, Chinese society has woken up to the fact that it does not have to live with pollution. As a result, more pressure has been brought to bear on the government to tackle environmental issues.

“Chinese people don’t want to be living in heavy smog every day. They want clean air, clean water and fresh vegetables that are not laced with pesticides. We hit that market at just the right time, when the government was changing policy.”

But when West Mountain entered the Chinese market, it went against the grain. Instead of teaming up with local partners to bid on projects, as Antle has done in many other countries, he realized the conventional way of cracking this new market wouldn’t work, in this case.

Instead, the company gambled and made an investment in China before landing a contract. It committed to invest in technology transfer in 2010, set up a small plant in China, sought out and secured the right local partners, built those relationships and, after manufacturing a soil treatment unit, landed its first solo contract in 2012.

When the company was close to securing this and other contracts in China, but needed additional capital, EDC helped out with a loan guarantee. “Without it, we would never have gotten bridge financing from our bank.”

For added protection, West Mountain secured political risk insurance from EDC, which covers its equipment.

Field of dreams

“It’s a ‘build it and they will come,’ approach, rather than trying to find some catalytic event that’s going to bring you into the country,” Antle says of his China experience.

The Chinese like to see that companies are committed to the country before providing them with contracts. “We took the gamble and it paid off.”

The company now has three major joint venture projects underway in China, which are focused on soil remediation and on oil recovery from oily sludge.

Antle admits to occasional frustration in trying to understand how business works in China and to what he calls the Chinese method of never-ending negotiation. But such problems are small compared to the market’s enormous promise.

“The market is so big that it would take me 20 lifetimes to deal with the number of opportunities over there. Recently we have been turning some away, given the size of the market.”

6 Export Tips

Eric Favreau of Xebec Adsorption:
  • Focus on foreign markets where it’s easier to sell. Some countries have non-tariff barriers to trade that make it very hard for Canadian firms to export.
  • Establish a U.S. presence. This can partly counter Buy American policy effects.
Dean Chisholm of Sealweld:
  • Teach people abroad how to use your technology. “It’s a fantastic door opener when you can say: ‘We can teach your people how to do it themselves.’”
  • Attend trade shows and conferences. That’s where Sealweld convinced many companies there are alternatives to shutting down pipelines in need of repair.
Paul Antle of West Mountain Capital:
  • Go against the grain, if necessary. West Mountain gambled and won by establishing a presence in China before it landed a contract there.
  • Accept lower price points for your exports when it makes sense. Potential high work volumes in countries like China can more than replace lost margins.

Global demand for cleantech has nowhere to go but up…

So says Reid McDougall, a screening and evaluation manager at Sustainable Development Technology Canada (SDTC). The organization has some $85 million invested in 29 oil and gas cleantech projects.

“We’ve seen increasing interest and adoption of cleantech solutions from the oil and gas sector. It’s really driven by companies trying to get more competitive, increase shareholder value and drive bottom-line growth – and doing that by managing their environmental footprint,” McDougall says.

While SDTC provides financial help to companies developing clean technologies, EDC assists in providing financing to export these technologies. Last year they signed a collaborative agreement to further develop Canada’s international capabilities in cleantech.

“Between the two of us, we work to develop great export markets for a lot of the innovative work that Canadians are doing in cleantech,” McDougall says.

SDTC funds clean technology projects, on behalf of the Canadian government, to bridge the gap between technology development and commercialization. Its goal is to build a cleantech infrastructure that will yield jobs, growth and export opportunities.

Categories Asia & Pacific, Clean Technologies, Mining & Energy

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