SERVICE SECTOR STRATEGY
COMMITTEE RECOMMENDATIONS

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PREPARED FOR:
Honourable Richard Neufeld
Minister of Energy & Mines

PREPARED BY:
Service Sector Strategy Committee

October 2, 2003

BACKGROUND

This report was prepared in response to an invitation extended by Honourable Richard Neufeld, Minister of Energy and Mines, to key stakeholders in BC’s Oil and Gas Service Sector.  Stakeholders were asked to participate in a provincial government initiative that would assist BC’s Oil and Gas Service Sector to develop its competitive advantage to become the service provider of choice in the province’s rapidly growing oil and gas industry.

The Minister requested that a committee be formed with representation from the Northern Society of Oilfield Contractors and Service Firms, The Northeast Aboriginal Business Centre, Canadian Association of Petroleum Producers and member firms, Treaty 8, The Fort Nelson Chamber of Commerce and the BC Oil and Gas Commission.

This initiative supports the British Columbia government’s Strategic Plan, The Premier’s Energy Summit (hosted in Fort St. John, BC in January 2003), the Heartlands Economic Strategy, and is a key component of the Province’s Oil and Gas Development Strategy, which was announced by Minister Neufeld on May 30, 2003.

EXECUTIVE SUMMARY

In 2002, the sales value of British Columbia’s oil and gas production was estimated at $4.2 billion, which provided direct revenue to the province of about $1.2 billion.  Industry expenditures in the province were $4.4 billion.  The Oil and Gas Service Sector in northeastern BC was able to share in the industry expenditures, however based on surveys in recent years there is still room for increasing the share to BC based companies.  There is anecdotal evidence that suggests the BC Service Sector is not capturing the greatest percentage of the work available, rather the greater percentage of work is being awarded to firms based outside of BC.

Improved competitiveness is the key objective of BC’s Service Sector Strategy.  Northeastern BC’s Service Sector is challenged by its proximity to Alberta, that province’s highly developed competitive Service Sector and the current seasonal nature of the oil and gas industry in BC.  The season concentration of work does not lend itself to developing and retaining a local, stable workforce.

Provincial borders create a significant impact on service sector business operations, which challenge BC to continue to harmonize, wherever reasonable and possible, regulations and standards across the western sedimentary basin.

The Service Sector Strategy Committee was mandated to examine the business environment within which the northeast oil and gas service sector operates, identifying those elements that support and/or challenge business growth.  The Committee was tasked to recommend achievable strategies that:

The Committee met three times over the period May – August 2003.  A workplan was developed and each Committee member worked to collect and analyze information on specific issues, which they then presented to the larger committee as proposed recommendations for consideration.  These recommendations were discussed by the full committee, and consensus recommendations have been brought forward for consideration to form this final report.

The Committee grouped recommendations in five main key areas.  These are:  procurement, business competitiveness, growing the industry, employment and training and jurisdictional/regulatory issues.  Delivery of these recommendations will assist all stakeholders in achieving the goal of having the BC based Service Sector positioned as competent and competitive, and utilized to its full capacity.

The Committee has prioritized recommendations.  It should be noted that some issues are being dealt with in other forums; these issues, while crucial to increasing business competitiveness, are being addressed by other processes and therefore have been referred to the appropriate venue for action.

The next steps, as recommended by the Committee, are to:

1)      Ensure government and industry recognize that this report is only the first step toward achieving the goal defined above.

2)      Appoint a lead within the Ministry of Energy & Mines to champion this strategy.

3)      Develop and execute a work plan for each recommendation.

4)      Work collaboratively with the Service Sector and Industry in delivering these recommendations.

5)      Facilitate a comprehensive marketing campaign highlighting BC’s successes and the abilities of the BC based Service Sector.

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SERVICE SECTOR STRATEGY
COMMITTEE RECOMMENDATIONS

ISSUE:  PROCUREMENT

To more fully participate in exploration, production and drilling opportunities in northeast BC, BC’s Service Sector companies need to understand how procurement decisions are made. This includes identifying what types of goods, services and labour are required and when; how BC companies can access procurement opportunities; and how BC companies can better market their services to the Canadian Association of Petroleum Producers (CAPP) members to realize these opportunities.

RECOMMENDATION #1 – GATHERING PROCUREMENT DATA

That corporate procurement data be obtained through the Ministry of Energy & Mines ‘Economic Impact Assessment of the Oil and Gas sector on BC’ (Marketing and Fiscal Analysis Branch). This study will: quantify the value of goods, services and labour sourced from within and outside of BC, identify standard procurement practices, and provide industry with suggestions to increase sourcing of goods and services from within BC.  The results of this study will serve as a baseline from which success can be measured on an annual basis.

RECOMMENDATION #2 – DEVELOPING AN OPEN PROCUREMENT PROCESS

That Industry, the Northern Society of Oilfield Contractors and Service Firms (NSOCSF), the Fort Nelson Chamber of Commerce (FNCOC), and the Northeast Aboriginal Business Centre (NABC), based on the information and analysis garnered from recommendation #1, collectively develop a transparent procurement process that ensures BC companies are provided with a full, fair and timely opportunity to bid on a competitive basis for contracts.

BENEFITS – PROCUREMENT RECOMMENDATIONS

ISSUE:  BUSINESS COMPETITIVENESS

The Province of BC has recently announced significant changes to corporate and personal tax structures, infrastructure development initiatives, royalty reductions and commitments to deregulate.  These initiatives are designed to spur long-term investment in the province.

BC’s Service Sector companies need to take advantage of BC’s improved business climate by ensuring that their products and services meet industry needs (based on technology, quality and other factors), are delivered according to industry-specific timelines and are competitively priced.  Further, companies need to market aggressively to ensure that industry members understand the advantages of doing business with BC’s local companies.

Data collected through a NSOCSF/FNCOC member survey in preparation for the Premier’s Energy Summit (January 2003) indicated that 39% of businesses (46% return rate) had grown in proportion to the overall growth of the oil and gas industry in northeast BC.  Although a segment of local operators is actively benefiting from supplier opportunities to the industry, other companies are lagging behind.

RECOMMENDATION #3 – ENERGY & MINES MARKETING STRATEGY

That the Ministry of Energy & Mines launch an aggressive marketing campaign messaging ‘BC’s Competitive Advantage’.

RECOMMENDATION #4 – SERVICE SECTOR MARKETING STRATEGY

That the Ministry of Energy & Mines provide one-time funding to the Northern Society of Oilfield Contractors & Service Firms, the Fort Nelson Chamber of Commerce, and the Northeast Aboriginal Business Center, to allow them to collectively develop and deliver a marketing strategy on behalf of northeast service sector firms that will build upon the Ministry’s marketing campaign and will be informed by the procurement data and analysis identified in recommendation #1.

RECOMMENDATION #5 – RECOGNIZING BEST PRACTICES

That the experience of companies developing year round activity and applying new technologies as well as the experience of successful Service Sector firms be recognized and shared through a yet to be formed Service Sector Best Practices Committee that is sponsored by the Ministry of Energy & Mines.  Furthermore, these successes be publicized through forums such as the annual Oil and Gas Conference.

RECOMMENDATION #6 – KNOWLEDGE TRANSFER PROGRAM

That a Knowledge Transfer Program, building upon the work of the Best Practices Committee and upon procurement data (recommendation #1), be developed and delivered, on a

cost-recovery basis, as a partnership between Northern Lights College, NSOCSF, FNCOC and NABC.  This program would harness and share the experience and skills of successful Service Sector firms.

BENEFITS – BUSINESS COMPETITIVE RECOMMENDATIONS

ISSUE:  GROWING THE INDUSTRY

Calgary-based geologists and other planning professionals need to be aware that the oil and gas industry in BC is beginning to develop year round capacity.  New technologies, all-weather gravel access roads, the Summer Royalty Relief Program and other initiatives are making year round activity possible.  Further technological research is required to build upon and foster future successes.  Risk managing road bans and replicating the successful OGI2 program offers practical and immediate mechanisms to extend the season.

RECOMMENDATION #7 – REPROGRAMMING THE 1^st QUARTER MINDSET

That an awareness campaign be mounted by the Ministry of Energy & Mines and the Canadian Association of Petroleum Producers to get the message out that BC is no longer a ‘winter only’ province.

RECOMMENDATION #8 – RESEARCH AND DEVELOPMENT

That the federal and provincial governments, in partnership with industry, invest further in research and development for mat technology, multi-well pads, low-bearing pressure vehicles, helicopter access and other initiatives that build upon current research ‘to grow the industry’ and supports the mandate of a ‘healthy service sector’.  Specifically, any technology that will extend the winter or summer working seasons must be explored.

RECOMMENDATION #9 – ‘FIT FOR PURPOSE’ ROAD BANS

That the Ministry of Transportation District Managers be granted the authority to risk manage road bans based on actual road conditions and not on calendar month.

RECOMMENDATION #10 -  OGI3 PROGRAM

That the Ministry of Energy & Mines replicate the successful OGI2 Road Rehabilitation Program on northeast BC public roads used by the Oil and Gas Sector companies.

RECOMMENDATION #11 – SUPPORT THE OIL AND GAS DEVELOPMENT STRATEGY

That the Ministry of Energy & Mines continue to promote and evaluate the success of initiatives announced as part of the OGDS, such as:

BENEFITS – GROWING THE INDUSTRY RECOMMENDATIONS

ISSUE:  EMPLOYMENT AND TRAINING

Resource sector industries, internationally, are competing for workers in an increasingly expensive and shrinking labor pool.  The new approach to apprenticeship training in BC will mitigate some projected shortages, in some trades, over the long term.  In the short term, efforts must be extended to encourage new entrants into the oil and gas workforce.

Youth, First Nations and women are under-represented in this sector and offer a largely untapped resource.  Training local people will serve to create a stable workforce and increase provincial tax revenues.

Under-represented groups have distinct needs within subgroups but share some commonalities.  One of those commonalities is the need for support services.  Support services such as recruitment, learning assessments, individual education planning, mentoring and placement services increase the learner’s opportunity to succeed in programs.  Without these services retention rates remain low despite ample programming.

On-the-ground contracting/training opportunities will develop skill sets in aspiring

First Nations’ contractors.  These acquired skill sets will enable them to develop their businesses competitively.

RECOMMENDATION #12 – RECRUITMENT AND SUPPORT SERVICES

That recruitment of under-represented groups to Trades Programs, and support services for these students, particularly at the post-secondary level, be strengthened and addressed through the Northern Opportunities initiative.

RECOMMENDATION # 13 –WORKER RECRUITMENT/JOB PLACEMENT

That a forum for worker recruitment/job placement for students from local trades programs be developed and formalized through the Trades Advisory Committee at Northern Lights College, under the umbrella of the Northern Opportunities initiative, with the overall intent of meeting the needs of the employer.

RECOMMENDATION #14 – ABORIGINAL BUSINESS DIRECTORY

That the Ministry of Energy & Mines provide support to the Northeast Aboriginal Business Centre to facilitate the development of an ‘Aboriginal Business Directory’, with linkage to NSOCSF, to encourage aboriginal business people to have a greater voice in the northeast Service Sector, share expertise and possibly resources.

RECOMMENDATION #15 – ON-THE-JOB TRAINING PROGRAM

That First Nations, industry and government develop an ‘entry opportunity’ program for under-represented groups (women, youth and First Nation people) that will provide on-the-job training.  Industry should be offered a financial incentive to participate through tax breaks. Feedback on performance would be a critical element of this program.

BENEFITS – EMPLOYMENT AND TRAINING RECOMMENDATIONS

ISSUE:  JURISDICTIONAL/REGULATORY

The Service Sector Strategy Committee identified several regulations and jurisdictional issues that created challenges for the northeast Service Sector companies.  The Committee felt generally that the provincial government needed to harmonize regulations across sectors (i.e. mining/forestry/oil and gas) and then had to work towards harmonizing regulations and labor standards with the Province of Alberta.

RECOMMENDATION 16:  REFERRING TO THE BEST PRACTICES COMMITTEE

That jurisdictional and regulatory issues identified by the Service Sector Strategy Committee be referred to the Joint MEM/OGC/CAPP Best Practices Committee and to the Northeast Regional Transportation Advisory Committee (RTAC) as appropriate, for action.  Issues include reporting requirements for interprovincial/international fuel tax, equipment assemblage, 1/3^rd and 1/36^th rules (PST), road laws and road bans (see recommendation 9).

BENEFITS – JURISDICTIONAL/REGULATORY RECOMMENDATIONS

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Appendix 1

SERVICE SECTOR STRATEGY COMMITTEE
TERMS OF REFERENCE

BACKGROUND:

To grow and stabilize northeast British Columbia’s Oil and Gas Service Sector, the sector must develop its competitive advantage.  This sector is challenged by its proximity to Alberta, an established leader in the oil and gas industry with a correspondingly well-developed Service Sector to support the industry.

The development and implementation of a northeast BC Service Sector Strategy supports the British Columbia government’s Strategic Plan, the Oil and Gas Development Strategy, the Heartlands Economic Strategy and builds upon the Premier’s Energy Summit hosted in Fort St. John, British Columbia, in January 2003.

MANDATE:

The Service Sector Strategy Committee (The Committee) is charged to examine the business environment within which the northeast Oil and Gas Service Sector operates, identifying those elements that support and/or challenge business growth.  The Committee will be provided with a preliminary list of action items as a starting point for deliberations.

The Committee will submit a final report to the Minister of Energy & Mines no later than August 15, 2003; recommending achievable strategies that:

The final report to the Minister will include detailed implementation and communication plans.

COMMITTEE COMPOSITION AND RESPONSIBILITIES:

The Committee is constituted with membership from:

Other agencies may be requested to participate at the discretion of the Committee on an ‘as required’ basis.

This Committee is a working committee.  All members will be requested to carry out work between meetings, as required, to meet the completion date of August 15, 2003.  All members will be required to communicate the progress of these discussions with their constituents.

The Ministry of Energy & Mines will prepare agendas, distribute decision point/action item Minutes, develop and distribute the Committee’s workplan and draft the final report on behalf of the Committee.

ACCOUNTABILITY:

The Service Sector Strategy Committee will provide a final report to the Minister of Energy & Mines no later than August 15, 2003.  The Minister’s response to this report will form British Columbia’s Service Sector Strategy.

MEETING FREQUENCY:

The full Committee will meet three times in Fort St. John, British Columbia.

Anticipated outcomes:

Issue identification and preliminary priority setting

Detailed workplan

Final prioritization of recommendations

Outline of Final Report to Minister of Energy & Mines

Committee sign-off of Final Report

Submission of Final Report to Minister

The Committee may choose to hold conference calls outside of full committee meetings and sub-committees may be required to meet outside of full-committee meetings.

COMMITTEE DURATION:

5 months (September 2003)

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Appendix 2

SERVICE SECTOR STRATEGY
COMMITTEE MEMBERS

Bob Fedderly
Northern Society of Oilfield Contractors & Service Firms
Fort St. John, BC

Bill Streeper
Fort Nelson Chamber of Commerce
Fort Nelson, BC

Randy Stamp
Canadian Natural Resources Ltd (CNRL)
Fort St. John, BC

Paulette Flamond
Northeast Aboriginal Business Centre
Fort St. John, BC

Chief Garry Oker
Doig River First Nation
Treaty 8
Fort St. John, BC

Richard Dunn
Encana Corporation
Calgary, Alta.

Derek Doyle
BC Oil and Gas Commission
Fort St. John, BC

Rob Carss
Canadian Association of Petroleum Producers
Calgary, Alta.

Patrick Smyth (Chair)
Ministry of Energy & Mines
Victoria, BC

Last Updated June 02, 2006