At ATB’s 2023 Business Summit, Chief Economist Mark Parsons moderated a panel that discussed key sectors that influence Alberta’s economy.  

The panel:

Mark Parsons (MP), ATB Chief Economist, and panel moderator

Catherine Murray (CM), former anchor for BNN Bloomberg

Jon Neutens (JN), VP & Head of Agriculture, ATB

Waqar Syed (WS) , Managing Director of Energy, Technology and Services, ATB Capital Markets

Trina Holland (TH), Associate VP of Diversified Industries & Energy Services, ATB

MP: How have companies in your spaces coped in this high inflationary environment?

TH: If I were to have answered this question six months or a year ago, I would have said we were feeling optimistic but weren’t seeing the momentum of deal flow activity we thought was out there. We’re starting to see that momentum now. Companies have either adapted, or they’ve gotten more comfortable with the uncertainty, or they’ve gotten to a place where it’s time to go. We’re feeling quite optimistic about the business activity we’re seeing.

WS: During COVID, prices of services to exploration and production companies dropped by up to 50%. But as activity picked up again and oil prices increased, prices for services also went up. We’ve seen the tightest market in specialized equipment, like the super triple drilling rigs, which are 100% utilized and have a wait time of up to eight months. The commodity rate type is still soft, with utilization maybe only 40% to 50%.

On the fracturing side, the market is balanced, but the rate of change of activity has slowed down. It’s going to be slower growth, probably in the mid to high single-digit range. With enough lead time, industry can manage their supply. So inflation is going to be much slower.

Looking at oil prices, our view is that, structurally, the market is different. And unlike the past decade, where the West Texas Intermediate (WTI) prices on average were $50 to $55 a barrel, the future is closer to over $80 a barrel for Brent and mid- to high-70s for WTI. Why? The US shales used to provide the marginal barrel that cleared the market. Now it’s coming from Middle East OPEC countries, and the break-even price required to balance those governments’ budgets is $80+.

MP: Despite the fact we have a lot of people coming to the province, employers are reporting it’s difficult to find qualified staff. What are you seeing in your areas?

CM: Nationally, there’s a real issue in terms of the red tape and not recognizing the strength that people come to this country with. We really do need to have standardized national testing across provinces, and the country needs to operate more as a country as opposed to provincial interests. It’s a huge positive that we have such a great immigration policy, but we need to make it work for the country more than it is right now.

TH: I can’t think of a client I’ve spoken to in the last 12 to 16 months that doesn’t talk about labour being an issue. It is the issue. It’s industry agnostic and everybody’s feeling it. Clients are dealing with it in a few ways. Some have tapped into supporting Ukraine, realizing there are highly skilled workers, and helping with resettlement efforts. Some are taking a long-term view and partnering with universities and colleges, supporting programs or working with institutions to develop programs. ATB has also helped out on a lot of management and employee buyout structures.

WS: In energy markets, the big struggle has been that a lot of people have left the industry and it’s harder to attract them back, for two reasons. First, the industry has been very cyclical and highly volatile. Second, the energy industry has been getting negative press for the last decade or so. Generally, it’s been the higher pay scale that attracts people. You have to pay up—that’s what gets people back.

MP: How is Alberta positioned to deal with the challenges of energy, food security and emissions reduction?

WS: Through to 2030, there’s going to be a lot of focus on lowering the emissions profile of Alberta’s energy-intensive industries through carbon capture. In the oil and gas sector, there’s a big focus at the wellsite to lower the environmental footprint. From an oilsands perspective, the Pathways Alliance has a target of reducing emissions by 14 million tonnes per year, at an investment of about $75 billion. Alberta is blessed with world-scale sequestration potential—there’s likely to be a lot of investment in carbon capture and sequestration. And there’s this perfect overlap of energy-intensive industries, sequestration potential and engineers and entrepreneurs who are well-versed in this entire value chain.

CM: The energy industry in Canada needs to be more vocal in terms of telling the story of Canadian energy and the move to renewables. And there are more and more platforms outside of general media to do that on that people are paying attention to. As a country and a sector, use all of those outlets because they’re absolutely being heard.

TH: The throughline for me is the tech ecosystem and the maturing of that ecosystem locally, and how interprovincial migration is adding to that. There’s lots of crossover in agriculture and energy and other diversified industries. That healthy cross-disciplinary tech ecosystem will be important.

After listening to the discussion, Parsons wrapped things up on a hopeful note. Yes, there’s uncertainty, he observed, but when you consider Alberta’s advantages, with its abundant resources; skilled, young workforce; improvements in market access and recent growth, “I think there’s good reason to feel optimistic about the future.”