Edmonton oil trade at bottom of barrel

A lack of enthusiasm from potential advertisers is the earliest of many suggestions that Edmonton's partly oil-driven economy has suffered a downturn.

EDMONTON, CANADA // The alarm bells start ringing the moment one arrives in this city's airport. In an empty advertising display case beside the luggage conveyor belts, a lonely black, plastic signboard tries to generate interest from local companies. "For Advertising Opportunities, Please Call Interspace Airport Advertising," it says, plaintively listing a 1-800 number.

The lack of enthusiasm from potential advertisers is the earliest of many suggestions that Edmonton's partly oil-driven economy has suffered a downturn. In the taxi into town, the driver Mohamoud Mohamoud paints a picture as bleak as the snow-covered landscape outside. "It's slowed down a lot," he said. "The rigs have stopped. There are lots of vacancies of houses. We're talking about 30,000 to 40,000 layoffs."

The province of Alberta, of which Edmonton is the capital, has been hit first by the plunge in oil prices and then by the global economic downturn. This week Alberta's government projected a budget deficit of C$4.7 billion (Dh13.9bn), the largest in the province's history and its first for 15 years. It stems from a drop in investment funds as well as the fall in commodity prices. Until oil prices began falling after July's record high of US$147, Alberta was enjoying a boom that attracted thousands of workers from other parts of Canada and beyond.

The windfall largely came from the oil sands, produced from an area of northern forest about 500km north-east of Edmonton that contains vast deposits of oil mixed with grit. Because of their massive scale, oil sands operations, and the employment and taxes they produce, were a gold mine for Alberta when crude prices climbed into uncharted territory. But it takes two tonnes of oil sand to yield one barrel of oil through a process that uses hot water to separate the tar from the sand in vessels resembling giant washing machines.

The sludge residue of clay, sand and water laced with toxic contaminants is poured into artificial lakes called tailing ponds to settle out. Before this can happen, forests are cut down, wetlands drained and topsoil removed, actions that helped inspire a book in local stores entitled Stupid to the Last Drop that warns of "environmental Armageddon". The Canadian Association of Petroleum Producers says landscapes are ultimately reclaimed and returned to a natural state.

The extraction process is costly, and for this reason the development of the oil sands has slowed considerably. While Gulf oil fields remain profitable at low oil prices, higher costs make the oil sands more marginal, and companies are reluctant to invest billions when a barrel costs are little more than one-third of last year's high. Although many of those people who have lost their jobs have been migrant workers who have returned to their home provinces, unemployment is increasing rapidly.

In February, Alberta shed 23,700 jobs, the province's largest monthly drop. The province's unemployment rate is now 5.4 per cent, the highest in nearly six years, albeit below the national average of 7.7 per cent. "When there's a boom, everybody thinks they're 10-feet tall and bulletproof," said Cheryl Bellouger, 36, a gas company employee from Edmonton. "For the people that moved here, it's difficult. For the people who come from here, you lose your job and become a migrant worker."

Locals complain the boom has left behind panhandlers or street beggars with nowhere else to go now the slump has set in. "They're out there on the street," said Marie Reed, 63, a financial worker. "We've got more. They came during the good times." Education institutions, such as the North Alberta Institute of Technology (Nait), have seen enrolment in technical subjects needed by the oil industry fall away.

"Next year we're down about 10 per cent," said Paul Newman of Nait's school of mechanical and manufacturing technology, which only takes students employed in Alberta. "The employers are not sending their students to school, and some have been laid off. It's new projects that have laid people off. We're hoping this is only a one-year blip." However, even in the downturn, there are still signs of the out-of-control labour demand that characterised the boom years.

At a careers fair in January, employers offered work to whole classes of Nait students taking some subjects. "When the boom started oil was at $26. At that price refineries are still working and have to be maintained," said Terry Drabuik, Nait's director of corporate and international training. "We will sustain the industry as long as the world doesn't collapse." But many locals are pessimistic about their province's prospects.

Darren Bykowski, 29, a pharmaceuticals researcher, said: "It's been through a boom and then it went through, not a depression, but a period where things looked bleak. It's going right back into it. "We're going to have a decade of increasing unemployment and provincial deficits. Then oil prices will go back up again." [e-mail] * With additional reporting by Tamsin Carlisle