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Successful Turnarounds in the Canadian Energy Industry
Successful Turnarounds in the Canadian Energy Industry
Successful Turnarounds in the Canadian Energy Industry
CANADA IS THE 4th LARGEST OIL PRODUCER IN THE WORLD, AND THE LARGEST SUPPLIER OF OIL TO THE USA. HOW DID WE GET HERE?
This outstanding Canadian success story is primarily due to the rise of the Alberta oilsands. However, it was not always so. The Alberta oilsands industry struggled in the 1980's and early 1990's.
Then, a few key i
CANADA IS THE 4th LARGEST OIL PRODUCER IN THE WORLD, AND THE LARGEST SUPPLIER OF OIL TO THE USA. HOW DID WE GET HERE?
This outstanding Canadian success story is primarily due to the rise of the Alberta oilsands. However, it was not always so. The Alberta oilsands industry struggled in the 1980's and early 1990's.
Then, a few key initiatives were implemented that revitalized the oilsands industry. These initiatives were originally conceived, developed and proposed by a few foresighted people. I was one of them.
I also initiated the successful turnaround of CanadianOxy's OIl & Gas Division, a move from 4th Quartile performance in 1986-1992 to top of 1st Quartile performance in 1994.
Turnaround of the Canadian Oilsands Industry
Successful Turnarounds in the Canadian Energy Industry
Successful Turnarounds in the Canadian Energy Industry
WHAT DID I INITIATE OR CO-INITIATE?
A Strategic Vision that the Alberta Oilsands could become the primary economic engine of Alberta, and many of the key initiatives that achieved that goal, including:
• New Crown Royalty Terms for the oilsands, implemented in 1997
• New Corporate Income Tax Terms for the oilsands, implemented
WHAT DID I INITIATE OR CO-INITIATE?
A Strategic Vision that the Alberta Oilsands could become the primary economic engine of Alberta, and many of the key initiatives that achieved that goal, including:
• New Crown Royalty Terms for the oilsands, implemented in 1997
• New Corporate Income Tax Terms for the oilsands, implemented in 1997
• A 50% low-cost production increase at Syncrude Canada Ltd. that reduced unit operating cost by 30%
• The acquisition of new oilsands leases for Syncrude that enabled major expansion of production
• Technical innovations & reduced costs
Successes in International Energy and Mining
Successful Turnarounds in the Canadian Energy Industry
Successes in International Energy and Mining
MAJOR ACHIEVEMENTS
• Discovery of an economic borate deposit in the high Andes, now the Loma Blanca Mine.
• Overall Management of (later called) PetroKazakstan; sold for US$4.2 billion.
• Consulted with Texaco; two major acquisitions in Kazakstan, including the super-giant Karachaganak field.
• President of Odyssey Petroleum Corpor
MAJOR ACHIEVEMENTS
• Discovery of an economic borate deposit in the high Andes, now the Loma Blanca Mine.
• Overall Management of (later called) PetroKazakstan; sold for US$4.2 billion.
• Consulted with Texaco; two major acquisitions in Kazakstan, including the super-giant Karachaganak field.
• President of Odyssey Petroleum Corporation; Disposed of all FSU assets and acquired a 50% working interest in high-quality petroleum concessions in Egypt that grew to 40,000 boepd.
• Farmed out ~$40 million in exploratory wells and initiated the acquisition of the assets in the UK North Sea, leading to first oil production in 2012
A STRATEGY THAT CHANGED CANADA
THE STRATEGY FOR THE DEVELOPMENT OF THE OILSANDS
Excerpts from my letter to Syncrude of July 27, 1990, re Syncrude Corporate Strategies.
It is significant that, ~thirty years later:
- all of these strategic recommendations have been successfully implemented, and
- Canada is now the 4th largest oil producer in the world, and the largest foreign supplier of oil to the USA. ____________________________________________________________________________________
The conventional oil industry in Alberta is now entering a period of decline in terms of volumes, revenues and profits. It has served as the primary "engine" of provincial economic growth and stability for the last 40 years. Similar roles have been performed in other areas by Hydro Quebec, Ontario Hydro and the German brown coal industry, to name a few examples. In each of these cases major economic and social benefits including jobs, energy self-sufficiency and markets for industrial products have been created by these strategic industries. As the conventional oil industry declines in Alberta, it will be necessary to find a suitable replacement. I believe it is entirely appropriate for the oilsands industry to fill this role.
...
We are at a critical point in the oilsands industry. Our future could consist of, on the one hand, two struggling plants, Syncrude and Suncor and little else, or alternatively, a thriving series of plants and major expansions eventually producing over half of Canada's crude oil supply and serving as Alberta's primary engine of economic growth and stability.
...
[Endorsement of the need for new Crown Royalty and Corporate Tax terms, as I proposed at the December 1988 Management Committee meeting, where we formed the Fiscal Terms Task Force.
I successfully proposed new Tax Terms (Class 28, later to become Class 41) for a major Syncrude expansion in March 1985.]
...
Our primary asset at Syncrude is the skilled workforce and the plant operating facilities. We should use these assets as a "strategic nucleus" for development of future plants and expansions. In my opinion, splitting Syncrude and OSLO limited our strategic options and we would have been better to keep them under a single organizational umbrella.
...
The declining orebody quality at Syncrude is a significant strategic issue which must be addressed. ... we should consider acquiring a better lease for Syncrude.
...
[Discussion of continued increases in SCO production, and the mitigation of possible bitumen shortfalls, as outlined in our "Opportunities for Additional Production" proposal, which I co-authored and presented to Syncrude in 1985.]
...
Sludge management is an obvious area for sharing of information and expertise between the players in the oilsands industry.
...
My expectation is that ultimately, solid landscapes will be required and we should be working diligently to this end.
...
[Endorsement of SCO quality improvements as recommended by the SCO Task Force, which I chaired in 1990.]
AWARDS
ALLAN MACRAE, P.ENG. (retired) HAS RECEIVED THE FOLLOWING AWARDS:
QUEENS UNIVERSITY ENGINEERING EXCELLENCE AWARD 2019
- for items A through D as described below.
SOCIETY OF PETROLEUM ENGINEERS COMMUNITY SERVICE AWARD 2018
- for item B as described below.
Summary of Award Nomination Documents:
Dr. David Devenny, P.Eng., P.Geol., Past President of APEGA, the Association of Professional Engineers and Geoscientists of Alberta, Fellow of the Canadian Academy of Engineering, nominates Allan MacRae, P. Eng., for {awards}.
Some of MacRae's achievements include:
A) Initiatives that drove major economic growth of Syncrude Canada, the Alberta oil sands and the Canadian economy
In the 1980’s and 1990’s, Allan initiated (or co-initiated) and successfully proposed three of the four major changes that drove the successful growth of the Alberta oil sands. Changes included new income tax terms, new Crown royalty terms and a low-cost 50% production increase that reduced Syncrude unit operating costs by 30%. Allan also recommended that Syncrude acquire new leases for growth, and technical innovations that improved performance and reduced costs.
Allan incorporated these initiatives into a comprehensive strategy for Syncrude, which was implemented and was instrumental in the successful evolution and growth of Syncrude and the Alberta oil sands industry.
The oil sands industry became the mainstay of the Canadian economy for 15 years, with over $250 billion in new capital investments and approximately 500,000 new jobs created. Canada became the fourth-largest oil producer in the world and the most successful economy of the G8 countries.
B) Actions that prevented a potentially catastrophic sour gas disaster at the Mazeppa project near Calgary
In May 2016, Allan MacRae, as an uninvolved citizen, became aware of unsafe operating procedures at the Mazeppa critical sour gas project near Calgary. At some personal risk, he investigated, consulted with trusted colleagues, and following the Code of Conduct of Alberta's Professional Engineers (APEGA), he reported his concerns to the Alberta Energy Regulator (AER), and followed up to ensure proper compliance.
The AER quickly shut down the Mazeppa project, and canceled all 1600 operating licenses of the parent company, which was placed in receivership and bankruptcy. The Managing Director was fined and sanctioned. This was the most severe reprimand of a company in the history of the Alberta energy industry. A 2005 analysis of Mazeppa wells by the Alberta ERCB concluded that an uncontrolled sour gas release would affect an area within a 15km radius and could kill or injure up to 250,000 people.
C) Service to Calgary's Homeless
From 2002 to 2017, Allan was volunteer member of the Board of Directors of the Calgary Drop-in and Rehab Centre (“the DI”). The DI provides food, shelter and services to homeless single women and men.
According to Dermot Baldwin, the former Executive Director of the Calgary Drop-In and Rehab Centre:
Early in Allan’s tenure on the Board, there was a critical shortage of funded shelter beds at the DI. Allan was instrumental in obtaining provincial funding to increase the capacity of the DI from 600 to 800 beds during that crisis, immediately before the onset of winter.
Later Allan steered the challenging sale of a building from the DI to Inn-from-the-Cold. That allowed homeless Calgary families to live in their own rooms, instead of staying in church basements and moving frequently from church to church.
During his tenure on the Board, the DI grew from 600 funded shelter beds to over 1200, and provided 1.2 million free meals per year. Allan served on the Board Executive, the Governance Committee and the Fundraising Committee, which financed the DI’s large real estate portfolio. The Calgary Drop-In and Rehab Centre is the largest such organization in Canada.
D) Successful proposal for a new Tax Class 53 to assist Canadian manufacturing industries
In 2014, Allan proposed improved income tax terms for Canadian manufacturing industries, through his Member of Parliament Joan Crockatt. As a result, a new Class 53 CCA rate was introduced for a ten-year period in the 2015 Budget.