Forced to diversify, Alberta tech sector expands out of oil

The downturn in theoil and gas businesshas hit Mike Nagusand Charger Industrieshard.

Like manypeople in Alberta,Nagus, who runs the company's technical operations,would have been much happier if the boom had continued.

But his Calgary company is an example of a painfulsilver lining in the fall of oil prices.

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Charger's main source of income is making and selling sophisticatedbatteries used in oil drilling. Long and tubular like the drill bit to which they are attached, the high-poweredbatteries withstand tremendouspressure, temperature andbrutal shaking four kilometresunderground.

Charger'sproduct iscrucial to modern drilling techniques, powering a suite of underground devicesmost of us never knew existed.

Cutting edge

The company,which started in 1998, has never seen an oil bust.But as drilling declines, being on the leading edge of oil and gas know-how may not be enough to save the firm.Business is drying up.

That's why Nagus and his team have stepped up a year-long scheme to findalternative uses for Charger'stechnology. Nagus says it may be a matter of life and death for the firm.

"It's obvious we have to go somewhere," saysNagusover ascratchy cellphone line, "because we can't rely on oil."

Charger is already developing products for what's called the downstream or customer-focusedsector of the business that is relatively untouched by fallingprices.

One project involves using their batteries to run"pigs," devices that bounce along inside a pipeline, measuring and reporting conditions without interrupting the flow.

Worst shock

But that may not be enough. Nagus and his research team are searching for other applications, includingthe military or maybe oceanography or space, places that need batteries that can sustain what Nagus calls the worst shock-and-vibration environment on Earth.

Unlike what you might think, research bythe University of Alberta's Dev Jennings shows that innovation doesn't happen when booms are at their peak, when there is plenty of money to go around.

Instead it comesseveral years after a boom goes off the boil. Perhaps boom times mean there is too muchwealth, lettingexistingbusinesseslive off thefat of the land.

Certainly since oil fell from more than $100 a barrel last summer to about $50 now, the industry has been widely criticized for its inefficiency.

Experts say the crash in prices has concentrated minds.In the world of business, the urge to survive, as you might say, is the mother of innovation.

KristinaWilliams, head of the Alberta Enterprise Corporation, saysthat even while oil companiesreducespending on exploration and drilling,small startups that attract investment are ones that prove they can help the oil business cut costs.

But in many ways,she says, oil and gas has become too big and too rich, pricing other sectors out ofbusiness.

Nancy Knowlton, co-founder of one of Calgary's best known non-oil technology companies, Smart Technologies,says it may be no coincidence that she and her husband were able to bring their world-famous Smart Board interactive whiteboard to market during the previous oil downturn.

Sucking out the oxygen

She says that especially when it's booming, the oil industry "really does suck the oxygen right out of the room."

Knowlton says high salaries mean energy isa magnet for the best people, including the essential back office staff such asIT, legal and finance. In that way, her lateststartup Nureva, which is working on a new learning and thinking tool, may benefit from the currentfall in oil.

People I spoke to in the venture capital businesswhichprovides investment for startups say there are already signs the oil decline ispulling down wage rates for skilled professionals as the oil and gas sector lays off staff and no longer picks off all the talent coming out of university.

But redirecting its cast-off technology and employees isn't the only way that Alberta's energy sector is contributing to the province's diversification. Indirectly it is also contributingcash and a pool of entrepreneurial talent.

Like the dot-com billionaires who made their fortunes in one business and then used their cashto invest in another, Alberta entrepreneurs are taking profits made in oil and hoping toturntheminto technology gold.

Art Robinson,a partnerat Calgary-based private equity firm32 Degrees Capital, made his pile after selling atransportation companythat did most of its work in oil and gas.

Now some of that money is going into Charger Industries, helping it diversify out of oil and gas, and at the same timehelping to redirectAlberta's plentiful reserves ofdrive and human energy into building an economy that is durable,whatever the price of oil.