How do you diversify the economy of a city? As Calgary tries, look south for inspiration

Samir Kayande made a living in Calgary for two decades, analyzing the financial details of the oil and gas industry. But now it’s making a change.

The research firm he worked for was bought by a new owner earlier this year. Rather than resist or look for another job in the oil area, Mr. Kayande wants a new career outside of the industry. This is partly to avoid the risk of a future layoff in a business full of them.

The 48-year-old professional would like to stay in Calgary with his family, but he is concerned not only with the availability of jobs, but with the quality of what is available as the local economy suffers from the chronic energy crisis. A global change in the energy sector was only accelerated following the COVID-19 pandemic.

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“There are many people who were previously very happy to work their 35 hour week and get paid very well for it, and not have all the existential fear that people all over the world face regarding job security goes, ”says Mr. Kayande. “But it’s going away. It’s not just for people who are losing their jobs, but the jobs that remain will be worse. “

It is no secret that Calgary suffers. The industry on which it was built has contracted for more than half a decade, forcing it to rethink its economic future. Mass layoffs have become commonplace as oil companies merge to wring efficiency and cut costs. It is trying to bridge the gap with technology, agribusiness and logistics companies, but their workforce is a fraction of the size that energy used.

This is the city’s dilemma as a white-collar workforce evaluates its options. Its officials have scrutinized other energy jurisdictions such as Houston, Texas for guidance on diversification, a process that is difficult to embrace and even more difficult to enact. It’s a trip that could take a decade or more, says Calgary’s head of economic development, but necessary to make the city’s economy more capable of absorbing future blows to a single industry.

“We’re kind of where Houston was a few decades ago when they embarked on their diversification strategy,” says Mary Moran, CEO of Calgary Economic Development. “But they are still focused on energy and their problems are far less complex than ours.”

Houston is still the undisputed capital of the US oil industry, but its economy is more diverse. Being a much larger city, with a population of 6.4 million, it is closely linked to the vast US economy, which was steadily growing before the pandemic. However, much of its diversification is in the offshoots of oil and gas. It is aided by access to global markets through its naval channel in the Gulf of Mexico, an export advantage that Calgary does not have.

It wasn’t child’s play. Like Calgary, Houston suffered tens of thousands of job losses in oil and gas exploration and production after global crude oil prices plummeted in late 2014. Even today, its unemployment rate is slightly higher. to 9%.

However, a $ 50 billion construction boom in petrochemical plants helped revive the economy after the oil price plummet, said Patrick Jankowski, researcher and senior vice president of the Greater Houston Partnership. Over the past decade, while oil companies have increased drilling to exploit shale oil formations in the state, associated natural gas and gaseous liquids have produced cheap raw materials for petrochemical plants.

“So when upstream it suffered, downstream it went very well with the construction. But now we’re at the point where neither is doing very well thanks to COVID, “Jankowski says. Employment has remained relatively stable, while profound job losses have affected much of the rest of the US economy.” In this economy, the apartment is the novelty, “he says.

Houston’s real advantage has been its focus on the high-tech and life sciences sectors, exemplified by its “innovation corridor” that runs between its crisis core and Rice University and Texas Medical Center. The city relies heavily on institutions to attract top-tier employers and puts its leaders at the fore and the center of economic development efforts, says Jankowski.

Over the past couple of years, such efforts have led to big names, including Google and Microsoft, opening offices in Houston or making new big investments. The city has also attracted technology incubators such as the Silicon Valley-based Plug and Play Tech Center and Massachusetts cleantech specialist Greentown Labs, which are cultivating a number of start-ups.

Calgary has adopted a similar game plan to woo new businesses, partnering with post-secondary institutions like the University of Calgary and the Southern Alberta Institute of Technology to churn out job-oriented graduates in the new economy. He also established the Opportunity Calgary Investment Fund to support companies in the sectors he aimed at in his diversification strategy.

The pandemic has aggravated an already difficult situation. Aside from the blockades that have had a severe impact on the service and tourism sectors, the collapse in energy demand and the oil price war between Saudi Arabia and Russia have hit the city hard.

In September, the unemployment rate stood at 12.6 percent, up from 9 percent nationwide. The city’s forecasts don’t see the rate drop below 9% until 2025.

The prediction was made before Suncor Energy Inc. announced it would reduce its workforce by 15%, or 2,000 people, and Cenovus Energy Inc. revealed that the acquisition of Husky Energy Inc., announced last month, could lead to the loss of another 2,100 people. jobs, mostly in Calgary.

The shrinking energy economy is clearly shown in the vast empty caverns of Calgary’s office towers, which were built for the boom times. In fact, the city has more offices per capital than any other in North America – 42 square feet per person, compared to nine square feet in Houston.

The latest statistics show vacant offices in the downtown core are approaching 30 percent, or about 13 million square feet. This is equivalent to approximately 148 Canadian soccer fields. This has all resulted in a decline in tax revenues, shifting the burden on businesses outside the core and on residents.

It wasn’t long ago that Calgary’s freewheeling economy was the envy of the country. Businesses thrived on low Alberta taxes and an army of educated young workers. Transportation companies like Canadian Pacific and WestJet Airlines Ltd. are based in Calgary, but the real engine of economic growth has been oil and gas, as crude oil has risen above $ 100 a barrel.

There is enough office space available for 130,000 workers and the question is how to fill them. The energy industry could add 20,000 if all of the recently announced provincial stimulus programs to develop hydrogen, geothermal energy and – like Texas – petrochemicals are realized, Ms. Moran says.

The biggest opportunity is the tech sector, which she believes could generate up to 50,000 jobs over the next decade. This leaves another 60,000 potentially available workspaces that could be filed by other major industries in the city or by convincing major new employers to open a store.

In 2018, Calgary was running for the second Amazon headquarters lottery and had developed 11 detailed plans for office space. The race team promoted perks such as city lifestyle, a young and well-educated workforce, and efficient public transport. It was passed in favor of Arlington, Virginia. Ms. Moran says Amazon executives have been candid about why the Calgary proposal was unsuccessful.

“They said, ‘Yes, we’ve seen all of this, but the reality is, when we looked at your talent pool and looked at the pipeline coming out of your secondary posts, we could see that you didn’t have the right talent to deal. with sectors like ours, but above all, dealing with sectors like yours that will be affected by digital technology like a tsunami. “”

Calgary has a high concentration of energy-oriented engineers, and Amazon has acknowledged that some may be making the transition. But the city requires software engineers, data scientists, programmers, programmers, project managers for the technological world. This was the wake-up call, he says.

Mayor Naheed Nenshi says economic recovery will rely on the talent of the workforce, the attractiveness of the city as a place to live and work, a good business environment and the ability to innovate. It will enlist the help of other levels of government for redevelopment and work to attract new investment, including from outside Canada. “We cannot think of the transformation of the economy as something that will happen sooner or later. We need to land things now, “he says.

The biggest hurdle, however, will be finding new industries that consume as much capital and require as much labor down the supply chain as oil and gas in the past, says Kayande.

Calgary has yet to develop as a technology hub that has “proven worldwide expertise,” he says. “The key issue is that when you lose an export sector you can’t easily recreate the value it has brought.”

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