Going Global: Study Highlights International Opportunities For Canadian Service Companies

Photo credit: Calfrac

A new, comprehensive study targets oilfield services and oil and gas technology firms that may lack the “know-how” but aspire to become successful global exporters.

The first phase of the study evaluates six markets or countries based on criteria such as their access to infrastructure, market-based pricing, socioeconomic and political context, ease of doing business, availability of services and labour, and the probability of success.

Anxious to sign their first contract exporting their services or products internationally, Canadian companies will often accept terms and conditions they would never accept domestically, a panel member told a meeting held to launch the study, which is designed to help such companies enter international markets.

“I would strongly recommend that if you’re going into a market that you don’t know, ensure that you get the proper legal guidance and assistance [and] make sure that you understand the laws, the regulations and that your commercial contract can withstand the jurisdiction that you’re going to operate in,” said Kim Matheson, Export Development Canada’s (EDC) district manager for Calgary. “The commercial contract — whether you choose to mitigate the risk yourself or you look to someone else to help you mitigate those risks — is the underlying document to which we all will look to, to ensure that you’re adequately protected and that the contract is equitable for both parties.

“Without the legal guidance you could be subject to some serious situations, some of which will have a severe financial impact to your organization,” said Matheson, whose organization provides Canadian exporters with financing, insurance and bonding services as well as foreign market expertise.

Going Global: Helping Canadian Companies Navigate International Opportunities is available as a free download on JWN’s website.

It was created by the Petroleum Services Association of Canada (PSAC) and the Canadian Global Exploration Forum in partnership with JWN with the support of the Government of Alberta, the EDC and the Business Development Bank of Canada.

The report whittled down the approximately 120 countries worldwide producing hydrocarbons into the 10 or 15 per cent of countries — 16 of them — that account for about 75 per of the world’s spending on services and supplies, and considered 35 metrics, said Bemal Mehta, senior vice-president of energy intelligence at JWN, a co-creator of the report and publisher of the Daily Oil Bulletin.

“What we wanted to do is provide the narrower short list so if you’re starting to take your first steps [into exporting] it may give you a little bit more guidance around where to focus your efforts,” said Mehta.

Those 16 countries are viewed as the most promising from a services and supplies expert’s perspective, Mehta told the launch event.

The report lists the countries’ reserves, five-year average production, the number of active explorer and producer (E&P) companies and the number of active Canadian E&P companies in each country.

The first Going Global report is focused on the Western Hemisphere because an increase in regional trade agreements in recent years has resulted in what the authors see as de facto economic zones: Argentina, Brazil, Colombia, Mexico, Peru and the United States.

The second report is expected to be released in January and will focus on the remaining 10 countries.

The current report offers insights from Alberta exporters and makes recommendations.

For example, it describes the U.S. as a mature, saturated market where except for game-changing technologies there are currently no new opportunities until the price of oil rebounds. It says the U.S. market is very regionally fragmented and Canadians have pricing advantages due to the dollar’s exchange rate.

The authors’ analysis indicates the U.S. oilfield services market provides the best near-and mid-term opportunities for Canadian exporters due to the size of the market, the ease of operating there and the proximity of major U.S. resource plays to Canadian operations.

The report points to Mexico as a market showing immediate opportunities in all sub-sectors of the service market.

“In the short term, we believe the best market is in enhanced recovery, but there is an emerging market for unconventional technologies set to take off,” it says. “With the opening of the upstream industry to foreign investment, many new exploration and development companies without existing supply chains are entering the market. This could present Canadian exporters with multiple entry points into Mexico,” the report adds.

Argentina has opportunities in all sectors of the industry with an emerging unconventional resource play likely driving future growth, while Colombia has heavy oil opportunities and a major government effort is under way to encourage enhanced recovery, focusing on developing its coalbed methane resource.

Largely unexplored Peru, meanwhile, also has enhanced oil recovery opportunities in existing fields and heavy oil opportunities in its northern region. It has a free economy with a bilateral trade agreement with Canada and a very good investment climate, the report says.

Brazil has those opportunities too, but political turmoil and issues with state oil company Petrobras make it a high-risk market right now, it advises.

Each country’s profile includes an assessment of its opportunities in conventional and unconventional resources, enhanced oil recovery, offshore and oil and gas infrastructure because those are the areas where Alberta companies excel, said Mehta. “We tried to identify and highlight the markets where those needs exist,” he said.

Also considered are what it’s like to do business and work in each country. Case studies are included.

Each country’s political, economic, social, technological, environmental and legal picture is evaluated.

Statistics illustrate how many days it takes in each country to: start a business, obtain construction permits, get electricity (ranging from 43.6 days in Brazil to 102 days in Colombia, with the U.S. somewhere in the middle at 89.6 days), and how much electricity costs in percentage of costs of income per capita.

Further statistics are on how long it takes to: register property, pay taxes, enforce contracts and resolve insolvency.

There are also lists of links and additional resources for further research.

Data was garnered from JWN’s Evaluate Energy databases, and much information was gathered through interviews and workshops with help from PSAC.

The 56-page report is not a be-all and end-all; it would have to be thousands of pages long to do so and it still wouldn’t meet everyone’s needs, said Mehta.

“At the end of the day you have got to build your own business plan which is fit-for-purpose for your organization so many of these resources will help you take the nuggets of information you need to be able to then build your own business plans to build your own business overseas,” he said.

During the last two years of the downturn, the report’s authors heard “loud and clear” from the services and supply sector that they don’t want to leave the Western Canadian Sedimentary Basin permanently, but to operate internationally and domestically simultaneously until the situation in Canada improves, said Mehta.