Monday, October 03, 2011

Reaching $1,000,000,000


Shell Canada marks a major milestone with its aboriginal oilsands contractors
This article appears in the October issue of Oilsands Review 
By Peter McKenzie Brown
As the CEO of no fewer than 15 companies, Phil Peddie is a pretty busy guy.He is the chief executive officer of the Fort McKay First Nation, and it's a hefty job.

Seven of the companies he leads are wholly owned by the Fort McKay First Nation. The rest are joint ventures – 51% owned by the band and the balance owned by non-aboriginal business partners. His companies specialize in doing oilsands-related work, and they couldn’t possibly be closer to their customers. Oilsands mining companies encircle the aboriginal community.

Fort McKay is smack in the middle of the cluster of mining projects now producing or under development – those operated by CNRL, Imperial (Kearl), Shell, Suncor, Syncrude, and Total (Joslyn). The community’s location and business acumen are fascinating in themselves, but to put their success in perspective it is worth noting that over the last six years, the Athabasca Oil Sands Project (AOSP) contracted more than $1 billion in services and supplies with aboriginal companies– many of them at Fort McKay. In 2008 alone, more than C$210 million local spending went towards purchasing supplies and services from such aboriginal groups as the Athabasca Chipewyan First Nation.

To put that number in perspective, Syncrude – which began operations in 1978 – couldn’t boast $1 billion of total work with aboriginal contractors until a quarter-century after start-up.

As the crow flies, the closest plant is part of Shell-operated AOSP. Owned by Shell, Chevron and Marathon, the project includes the Muskeg River and Jackpine mines and the Scotford upgrader, near Edmonton. According to the Shell consortium, more than 70 aboriginal businesses participated in the $1 billion spend. Collectively, they provided a wide range of services and products. These include facilities management, general maintenance works, technical expertise, earthmoving, health and safety services, bussing, camp construction, catering and waste management, and many others.

In terms of social and economic renewal, the rise of aboriginal business in the oilsands areas has come at a critical time. One reason is that there are chronic shortages of labour in the oilsands areas, and they are unlikely to go away. Aboriginal communities can provide reliable local labour. The oilsands industry has become Canada’s largest employer of aboriginals by far.

The other reason is that these communities have traditionally been important sources of untapped entrepreneurial talent. To help develop this area, for a quarter of a century the industry has been helping develop aboriginal entrepreneurs to meet its business needs.

Local Labour
According to Shell vice president John Rhind, this is more than a win-win. “Labour shortages are likely to be with us for a long time, and aboriginals have traditionally been an under-represented demographic for the industry. They can bring a lot of value to the oilsands producers. This not only applies to the Fort McMurray area, but to all producers throughout northeastern Alberta. There’s no question SAGD operators can benefit as well.”

According to Rhind, the surge in First Nations businesses was partly driven by the region’s big producers. “Some years ago the oilsands companies around Fort McMurray made a strong commitment to engage with the communities in the area. These included aboriginal communities – Métis and First Nations. But it included other communities as well – for example, non-aboriginals who were not recent hires, but had lived in the area for many years."

These stakeholders in the Fort McMurray area – Rhind calls them "citizens of the environment” – have “a lot to gain from this, and we thought it was important to make this commitment….It isn’t about the dollars. It’s about members of the community participating in our business.”

Until he was appointed to his present position last March, Rhind was general manager of operations for Albian Sands, the joint venture company that operates an oilsands project for the Shell consortium. I asked him to tell me about the project’s aboriginal partnerships. “We’re about developing the ability of aboriginal people in Fort McKay so that when the oilsands is done, decades or centuries in the future, we will be leaving a sustainable culture and economy behind.”

Shell and the other operators in that area have done this in a number of ways, Rhind says. For one, “we look for aboriginals to become part of our workforce.”

He says Shell’s experience is that there is “no difference at all between a First Nations employee and one from any other background….The key is that first that you have to train your employees. Be clear about what expectations the company has of them and give constructive feedback. Second, if there is any systemic racism you have to be relentless in getting it out of the system. That enables people to contribute at the level at which they’re capable, but it also removes any barriers that might stand in the way of their becoming successful in working in an oilsands business. Once you have a cohort of aboriginal workers in the company which includes people in management, then you have a sustainable system that welcomes new aboriginal employees.”

Part of that welcome arrives through Shell’s aboriginal employee network, an internal human resources system developed to support First Nations, Métis and other aboriginal employees. According to a Shell statement, it “draws together aboriginal and non-aboriginal employees and provides a diverse range of learning and social opportunities for employees.”

Local Business
According to the Athabasca Tribal Council, which represents the interests of five Treaty Eight First Nations in northeastern Alberta, there are approximately 5,000 Cree and Dene people in the region. Besides employing aboriginal workers from these communities directly, Rhind notes that his company and others in the area have “appointed people to work with aboriginal individuals to help them develop successful businesses. We want to work with local aboriginal businesses successfully and in a mutually beneficial way.”

That’s the view through the corporate window. Multiple-CEO Phil Peddie picks up the story. He operates in the world of aboriginal entrepreneurialism.

Peddie oversees a large group of companies which collectively employ nearly 1000 men and women. A Shell news release quoted him as saying that “working with Shell and the Athabasca Oil Sands Project over a number of years has enabled the Fort McKay group of companies, joint ventures and entrepreneurs to grow, and has brought significant opportunity to develop skills, establish businesses and further our community.” This reporter phoned to find out more.

The Fort McKay First Nation has seven wholly-owned companies which, collectively, provide a large number of services mostly targeted at oilsands-sector project maintenance and development. These include, for example, light earthmoving, fuel distribution, fleet maintenance and a variety of environmental services: According to the band’s business website, “Our land reclamation services encompass the entire process from start to finish.”

The Fort McKay Group also has a number of joint venture companies in which the aboriginal community forms partnerships with established non-native companies to provide specialized services. For example, Fort McKay Landing Services, which specializes in camp construction, is a partnership with modular facilities giant ATCO Structures and Logistics.

From the First Nation’s point of view, there are many reasons to like these joint ventures. For one, the community has control of a business that is adequately financed. In addition, the venture transfers managerial and technical skills to the local community and contributes to local employment. Also, of course, for their businesses the status Indian shareholders receive their earnings tax-free.

According to Peddie, each of these companies is operated by a management committee with equal representation from both sides. “It brings together the technical and management expertise of our partners plus the labour we can supply. Our unwritten goal for each of these enterprises is 30% aboriginal content. In every business we own, our goal is 30%.” Achieving that percentage of aboriginal employees isn’t easy. “It’s difficult to achieve because the unemployment rate in Fort McKay is quite low. A lot of people are employed by Shell, Syncrude, Suncor, and so on, so for some of our companies we are below that mark and for others we are above it.”

Oilsands employment has transformed the local economy, he says. “Only 30 years ago, the people of this community were primarily trappers. A European boycott of Canadian furs destroyed the trade,” and very tough times followed.

Now a hamlet of some 700 souls, Fort McKay is mainly composed of status Indians from the Fort McKay First Nation. The social fabric also includes a Métis community of perhaps 200, non-treaty aboriginals, and small numbers of individuals of other origin. The Fort McKay Group of Companies can’t strictly draw from the local community to reach its “aboriginal content” goals because most working residents hold fulltime jobs with Syncrude, Shell, Suncor or another big local producer.

According to Peddie, 13% of local people work for the Treaty Eight band’s wholly-owned companies. A similar number work for its JV partnerships. “So to try to reach our content quotas, we employ aboriginal people from all over the region.”

Being Canadian
Like representatives of other companies in the Fort McMurray area, John Rhind says that “working with aboriginal contractors is one way Shell benefits the communities where we operate. We announced our billion-dollar milestone to thank the businesses and partners we worked with during those six years.”

Shell’s achievement is impressive, and certainly something to brag about. However, it is worth remembering that Syncrude began developing business partnerships with aboriginal communities in the 1970s: During the construction of the plant, chairman and CEO Frank Spragins visited aboriginal communities, and let contracts before the plant produced its first barrel of oil. This policy was spurred by Spragins’ successors, Brent Scott and Eric Newell. The company’s ground-breaking efforts were both visionary and transformational.

As the company’s initiatives were coming to fruition, Newell addressed the triumph of Syncrude’s pioneering efforts in a speech given15 years ago. “We’ve brought two decisively different belief systems…those being business and spiritual… together in understanding and cooperation,” he said. “We’ve drawn strength from each other to leap the hurdles and head down the road side by side – on a journey not only to secure Canada’s energy future, but also to explore what it really means to be Canadian.”

One outcome of Syncrude’s initiatives is that today, Phil Peddie is a pretty busy guy.
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