Canada’s oil and gas companies have long been admired as leaders in technology innovation, but it’s taken the current slowdown in the energy sector to demonstrate just how much of a competitive advantage it gives them in the global market.
Mark Salkeld, president and CEO of the Petroleum Services Association of Canada, says times are tough for the oil and gas sector everywhere, but Canadian companies are still achieving pockets of success in several markets.
“I was in India before Christmas and identified opportunities there for some of our member companies,” he says. “And earlier this year I was on a trade mission to Mexico and Colombia with the Alberta government and there is also the potential for business in those regions.”
Salkeld says in spite of the downturn, state-owned enterprises and national oil companies are still exploring and producing.
“They want Canadian oilfield technology and expertise because they know that in some areas we are light years ahead of the rest of the world,” he adds. “Our member companies are exploring opportunities internationally, because that strategy will not only help carry them through these tough times, but also strengthen their ability to maintain revenue streams during the seasonal cycles we experience in Canada even during good times.”
Rob Luini, Calgary-based account manager for Export Development Canada, says that while Canadian innovation is an important competitive advantage, understanding the global market and developing the right strategies to compete successfully is crucial.
“For example, we are seeing some smaller companies getting together to form consortiums to go after bigger contracts, leveraging each other’s strengths with national oil companies that would have been a difficult sale as an individual bidder,” he says. “That way they can offer turnkey proposals instead of individual niche services, which tends to happen when the market is stronger.”
Nevertheless, adds Luini, the global market remains very tight, although contracts are still coming out of regions like the Middle East, particularly Oman and Kuwait.
“There’s still work to be had if you know where to look and can demonstrate to your buyer why your equipment or services are better and cheaper than everybody else,” he says.
One of the challenges facing Canadian oilfield service companies is that many of them have not previously been involved in the export market, simply because there has been more than enough work at home to keep their order books full.
Salkeld says Canadian innovation is particularly advanced in areas like production optimization in existing formations.
“Even here in Canada where drilling programs are being shut down, production is still going up because it’s being optimized through better on-surface facilities, programs, and processes for newer technologies,” he adds. “Any of our member companies in design and engineering are busy. They have opportunity.”
And Canadian innovation is winning the day with overseas customers as well.
“Companies in India, for example, are looking for the latest and the greatest in technologies and services and that’s what we have to offer,” says Salkeld.
But Canadian oil and gas companies that have not been exporting have some catching up to do, says Luini.
“Realistically, it takes about 18 months to establish a viable export business, and obviously it’s better to be ready to export before you are forced to get into the global market by events such as the current downturn,” he adds.
“The moment the oil price started to drop, the phone calls to our offices began and the questions were: ‘where do we go and how do we do it?’,” says Luini. “Then a few months later we got calls from companies to say they had contracts and the questions were: ‘how do we make sure we get paid and how do we make sure the bank doesn’t cut back on our working capital?’”
Luini adds that apart from winning contracts, the good news is that there has been a fundamental change in understanding among Canadian oil and gas companies that exports help diversify their business and protect them to some extent from the boom-busts of domestic economies.