Alberta consulting engineers face worrisome future
Ken Pilip, P.Eng., Consulting Engineers of Alberta's chief executive officer, reflects on what the downturn in the oil sector will mean for engineering companies in the province.
The drop in the price of oil to below $50 a barrel is shaking up economic plans across Canada. While some sectors and some regions could benefit from the low fuel prices, the oil rich provinces like Alberta and Newfoundland face a sharp drop in tax revenues. Canada’s Finance Minister Joe Oliver has said he will delay the next federal budget until April until they can sort out the complexities of a shifting national economy.
But engineers in Alberta are facing a worrisome future. The province is rethinking its spending on projects, including the $5-billion southwest ring road around Calgary. In the oilsands itself, Suncor is laying off 1,000 people and cutting $1 billion from its capital spending program.
Ken Pilip, P.Eng., who heads up Consulting Engineers of Alberta as chief executive officer and registrar, says the province has a challenge, but still he remains upbeat: “The Premier of the province has indicated it [the depressed price of oil] leaves a pretty sizable hole that needs to be dealt with in some fashion. It could be in the order of $5 to $7 billion. There will probably be some ramifications this year and next, and then hopefully we pull out of it.”
He believes consulting engineers have diversified to help them to weather the storm: “We’ve been down this road before,” he says, and as a result “Many of the companies and building firms in Alberta don’t necessarily have all their eggs in one basket. They may have a certain percentage of their work coming from an industrial side, which would be the oil or industries, [but they also do] other aspects of engineering…. Hopefully what the companies can do is find a way of deploying people into other areas.”
He sees that there is continuing work in infrastructure, for example: “We had a session hearing about what the city of Edmonton has on their books for the coming year, and the price of oil is not even affecting what they’re going to do next year. There is a large amount of work — LRT work, again, sewer upgrades — everything that a city needs. About 30,000 new people came to the city last year and approximately 100,000 people in total come to the province. They’re still coming, so you need to provide housing, etc.”
The economic situation can actually work out well for construction projects, he says. “Using smart borrowing, you can actually get significant value for doing some things that are necessary because labour and goods and services are going to be at depressed prices. So if you invest, say in a road or a bridge that is needed, instead of paying at the high end of a cost cycle, you are getting it at a bargain rate and therefore you are able to do more with the same dollars.”
“Obviously we’re going to feel some pain,” he adds “At the same time hopefully others understand our plight and make decisions prudently so that in fact we all come through this and are ready to be there when the good times come back, which they will.”
Still he has concerns: “The problem that consulting engineers have is that we’re a knowledge based industry. It takes a long time to build up the teams that are necessary to do certain aspects of engineering. We don’t have a lot of resilience, so if this [situation] lasts too long, people start to lose their jobs.”
He recalls the 1980s and the effects of the National Energy Program in Alberta. “We reduced our overheads by reducing salaries, hours of employment and by laying off staff. The consulting industry did what was necessary to survive. The effects of that major economic downturn is still with us today, as engineers that lost their jobs did not return when times returned to normal.”
Pilip concludes: “For an industry that is critical to Canada’s and each province’s economic welling being, smart borrowing at this time and public spending on infrastructure projects helps to sustain a knowledge based industry in difficult times and maximizes the value for tax dollars spent when prices are depressed.” These difficult times require strong leadership from all levels of government working together and everyone needs to their part to weather this current economic downturn. It too will pass.”