Indigenous-owned businesses are seeing significant growth in contracts with the oil sands industry, which Crystal Young says is an affirmation of the business skills and expertise that have become a great source of community pride.
“Ten years ago, the companies in our group were getting recognition because they were Aboriginal, and oil producers were committed to using these companies for a certain amount of their spending,” says Young, CEO of McKay Metis Group.
“Since then, the oil sector has come to really appreciate these businesses, and producers want to work with them because they are good at what they do, not just because they are Aboriginal…There have been some excellent industry partners that have lived up to their community agreements and allowed our businesses to prosper.”
McKay Metis Group is a social enterprise owned and operated by the Fort McKay Métis Nation, located some 500 kilometres north of Edmonton, which includes eight businesses. The company says its profits are reinvested back into the community.
Young sees Indigenous businesses and communities getting smarter and progressing, and the McKay Métis Group is a prime example. Where once the spending with First Nations companies was mostly confined to janitorial services, security firms and some job-specific enterprises, Young’s group has since expanded into niche markets like chemical supplies, water treatment and engineering.
Oil sands producer spending with Indigenous businesses reached a record $2.36 billion in 2019, according to the latest data from the Canadian Association of Petroleum Producers. That continues an increasing trend from $1.54 billion in 2017 and $2.02 billion in 2018.
“Aboriginal engagement has been a core area of focus with oil companies for quite some time,” says Jared Dziuba, director of oil and gas equity research with BMO Capital Markets.
“While business spending is the most impactful data point supporting that narrative, overall community investment has also been growing, as has direct employment of indigenous peoples in oil sands operations.”
This shared prosperity is significant, not only for its financial benefits, but for the message it sends to the world.
Close to home
“This is our home, and we will be here long after the project is done,” says Young.
“We want to be part of what’s going on and not just sitting on the sidelines. In that respect, there is no greater equalizer than the boardroom table. The oil sands business model brings entrepreneurs, industry and government together, and it’s become clear that we want to, and can, do business with oil producers.”
For her part, Young has seen tremendous growth in her group that aligns with the overall increase in oil sands spending on these companies.
“In the last 10 years, we have grown drastically,” she says. “We began with a small contract worth $100,000, and last year we had over $110 million in gross revenue. Where at first we comprised two companies, we now include eight.”
As with many Aboriginal communities, the more oil producers engage these businesses, the greater the impact.
“Higher spending has been a positive thing for the McKay Métis Group,” says Young. “It gives us more money to reinvest in social programs, education, housing and infrastructure in the community we serve.”
Trend expected to continue
Despite the slowdown in oil sands investment in 2020, BMO’s Dziuba expects the trend of increased spending with the Indigenous supply chain to continue over the long haul.
“2019 was a record year in terms of spending on Aboriginal businesses, in spite of some curtailments in the oil sands due to pipeline issues. Though capital spending in the oil sands dropped by 40-50 per cent in 2020 thanks to COVID-19 and oil prices, companies are starting to increase investments in 2021, including dollars to Aboriginal businesses,” he says.
“It’s not reasonable to expect spending to increase the way it did from 2016-19; it will still go up, just at a smaller rate.”
The unaltered reproduction of this content is free of charge with attribution to Canadian Energy Centre Ltd.