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Partner Profiles

I love my job. People who know me well, know I love my job. I tell people that I’m in charge of special projects. As I’m almost 60, this gets a laugh or two but in a way it’s true. Special projects to me are all those things you wish you could do but can never find the time to do them. You know that your business could use them but they just never get out of the incubator or if they do, they fail because you don’t have the time to implement them properly and they never catch on. We don’t want that to happen at IR.

One of the hardest things to do with a business of any size is to influence a culture or part of a culture–the way people think about certain things. Our world today is all about instant results and we all have high expectations about this. It is also about easy. The goal is to find the fastest and surest way from Point A to Point B.  It is often thought that the best way to be efficient in business is to treat everyone alike by lumping them into the same mixing bowl. One solution for all. And that’s where it ends.

I like to think that at IR we are different than that. I do know that here in special projects, we have gone to great lengths to build a corporate culture that looks at every client as being distinct, with their own set of problems.  And that we have the solutions to help solve those problems. I believe this sets us apart from other businesses in our field. I also like to think that IR has vendors—partners–who are also different in that respect.  It is with these differences in mind that I thought I would start a series of articles that describes our major vendors and why we at IR think you should look closely at what they have to offer.

There are very good reasons why we have chosen the vendors we have.  Though nobody is perfect, we do vet our vendors and have high expectations of them, as they do of us. I think that over the last 15 years or so we have learned a lot about our long-term suppliers and I’d like to share some of that knowledge with you. I will try to be brief, but there is some history behind our relationship with each of our vendors.  This history takes you back from the type of business they are today, to what they were when we started together.  I believe it is not only interesting, but vital, to understanding how we all got to where we are today. By no means are these articles exhaustive. They are simply my own abbreviated observations of what has evolved over time and why I believe the products and services from these companies should be on your short list of options.

So watch for the first of the series in the coming weeks.  First off: QSA Global.

In the meantime remember…for the unknown there’s NDT, for NDT there’s IR.

Brian Sargent
IR Supplies and Services

 

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E-Commerce & NDT

IR is always seeking out the best ways to do business with you, and our e-commerce website is one of those ways.  Because of that we are always on the lookout for businesses who have been successful in e-commerce, so that we can discover ways to enhance what we do.  I recently came across an article on an on-line company named Brandless that is growing at a phenomenal rate.

Operating out of San Francisco, Brandless is flying high as it competes with the likes of Amazon and Walmart.  The thing is, they really aren’t competing with Amazon and Walmart, because they are doing it differently. Brandless has a select number of products—about 300—that are used every day by the average household. Each of their products sell at the unlikely price of $3.00. They are able to do this by cutting out the middleman and shipping directly to the consumer. While offering their products at this low price, they also ensure each item they carry is of high quality.  It seems that quality is the new brand, or in this case the new Brandless.

Running a NDT service company in the 70s and 80s was never the easiest way to make a living, especially when you only have access to a small supply of products and brands. That was the case before we started IR. Today the internet is flooded with NDT products.  What factors will make you choose a particular brand or product over another? It can’t just be price.  If it was, China would rule the world. Chinese products are hit and miss.  A select few are great and many are not. Some are great one minute and not the next. Quality is a difficult problem with products from China and sorting it out is not a fun endeavour.  I can tell you that from firsthand experience.

If cheap products aren’t the answer then European or American brand names should work better.  That is sometimes the case but not always. Made in USA, or Germany, or Switzerland, can be a place to start but what happens when you have a problem such as a part that needs replacing or you need a calibration? So many manufacturers are small ventures that are here today and gone tomorrow. Don’t get me wrong, we carry products from small companies but they are high quality products and the companies are run by long-time business people who have a good track record.  Both SciAps and Danatronics come to mind.

Some brands meet ISO standards, some ISO and ANSI, some just ANSI.  Some are country of origin or none at all. Are they CSA approved?  Do they need to be? To figure out what quality-standard you need to satisfy for a selected piece of equipment, you need to think about what you may want to accomplish now and in the future. If you buy this product today, will you be limited on what you might want to do down the road?

Wow!  Choosing a product these days is like buying a chocolate bar.  The selection is endless. I always revert to my old favourite, a Snickers bar. The problem with that approach is that I may be missing out on some new taste sensation that could really make my experience better.  I just need to be willing to give something new a shot.

Brandless has it right. They carry 300 quality products that we need every day.  If it meets strict quality requirements, is at a price point that is reasonable for the quality then it’s the right choice. Brandless takes out the guess work for its customer. They only have good products at a good price. Hold on! This may work for every day household products but can you do this with NDT tools and consumables?  Yes you can.  Welcome to IR.

When we started IR we put strict quality guidelines in place for all our products and we continue to do so today.  The products we carry must withstand the rigours of the petrochemical industry including its quality standards and environmental conditions.  Plus they must be price competitive. The brands we carry need to be able to beat any comparable product for price.  They must be the best we have to offer.

In some ways we liken ourselves to Brandless.  Like Brandless with their product focus, we carry all the products that an NDT technician might use in his day-to-day endeavours and all of those products are of exceptional value.

The top brands that we offer were not all top brands when we started.  When we became a distributor of many of the brands we selected, we knew early on what most of you now know: they are exceptional products and are offered at a fair price.  We have done our homework so that you don’t have to.  We back these products with our service and our loyalty to you. If you are not happy then we are not happy, and we will do everything in our power to put a smile back on your face.

Sentinel, Carestream, Sonatest, Labino, LC NDT, Armorlite, Exposure and other great brands that we carry were all unknown or little known brands in Western Canada.  But they are all quality companies with great products.  Some are even the best products. We are in the quality business so we need products that we can trust and rely on. If on the odd occasion something does go sideways, we are here so that you have a place to go to get the help you need. That promise holds when you make your purchase through our e-commerce site too.

The big difference between IR’s e-commerce site and Brandless, is we have boots on the ground.  We are able to assist you. Our staff is trained to help you navigate the endless sea of tools and consumables to suit your needs now, and in the future. E-commerce sites are everywhere now but they are usually without a face and a name. IR has an e-commerce site but we also have Lindsay, Jessica, Robbie, Pieter, Heather, Jenna, Jacob, Andrew, Byron and Johnny.  That’s just the short list. Visit our e-commerce site. Visit our showroom.  However you shop, the products we carry will do the job at least as well as the big brand names and often better.

If you get an extra minute we’d love to have your comments on our e-commerce site.  It’s there for your convenience so we want to know it’s working for you.  Just drop us a line at marketing@irss.ca.

And remember…For the unknown there’s NDT, for NDT there’s IR

Cheers!

Brian Sargent
IR Supplies and Services

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Perception verses Reality in China

Several years ago I wrote an essay that was entitled Perception verses Reality. In that essay I discussed the CNSC’s problem of what was really true and what the world perceived as true. Governments and their respective agencies, or in this case our regulatory commission, tend to have to deal with their mandates in ways that not only satisfy  the truth of the problem but also the perception of the propaganda they have developed or has been developed by others.

Free trade is a good example of perception verses reality. The participants in these agreements have always protected the portions of their economies that are susceptible to their trading partner’s cheaper exports, which could do harm to political aspirations and to their respective economies.  This is the reality. Free trade agreements are really only agreements to manage trade in a way that organises the practices so that countries won’t take advantage of each other. Countries agree not to harm each other’s sensitive parts. There are sacrifices and there are wins but the sacrifices are hopefully made up by the wins and the damage is minimal, or at least not politically damaging. It is a trade agreement with the understanding that some losses are inevitable but with the hope of the average Joe that his job won’t be sacrificed.  Economists David Ricardo, and Adam Smith before him, suggested that it is the hope that most business sectors will flourish and be more competitive with a freer flow of goods and services.

China has a perception verses reality problem. At home they have mislead their people into believing that they are a military world power and technological giant. They suggest that they are a developed nation, which is equal or even superior in real power to Europe, Japan and the US.  The rest of the world reads their propaganda too, and it makes them uneasy.  That’s the perception. Recently however, the Chinese have started to pull back and are actually downplaying their abilities in a way that is closer to reality. Why is this?

Internal & External Problems

One reason is that China has modernized and urbanized at a tremendous pace and it has cost them. China has one of the highest level of debt, ranking 13th by Wikipedia and higher on others lists.  Its spectacular run is coming to an equally spectacular end. Unless they can find a way to spread wealth and prosperity to the poorer regions of the Chinese empire they will likely be in trouble. Internally they are facing a demographic cliff that has been exaggerated by the one child policy. The one child policy has produced a male population in excess of the female population to the tune of 33.4 million. Lonely men cause problems. Even more importantly lonely men can cause rebellions and war. China has a lot of problems internally and so its elite have put all their eggs in the Xi basket hoping that this will give the party enough flexibility and agility to target and extinguish problems before they get big enough to cause significant upheaval to the status quo. This will be done, as much as possible, with perception vs reality-style propaganda.  But when push comes to shove, shoving may also work. Bringing perception closer to the truth may lower expectations and give Xi’s dictatorial government more time to effect change.

Not only does China have internal problems but there are external problems that have developed due to  China’s need to be seen by its people as a world power capable of holding their own, and perhaps even exceeding other great powers, in all things. To maintain stability its people need to believe in a united China that’s worth believing in.

The World Gets Worried

As China fills its people with images of condominiums, BMWs, military might and technological advancements, the rest of the world is getting worried.  Perhaps this is the second reason China is making a U-turn on its super power propaganda. Japan who is historically is an enemy of China, and nations bordering the South China Sea, are nervous.  Neither of the Koreas trust China. Australia, India, the US and Japan are forming what they call a “Quadrilateral” alliance, specifically to control China’s ambitions. It was only a matter of time that the US would lead the charge on curbing China’s exporting policies. As much as the US trade sanctions are about keeping US jobs they are also about controlling China’s subsidized export machine. Even Canada is looking at steel sanctions against China to stop the flood of Chinese steel from entering our country as US sanctions now make it an attractive dumping ground. China’s One Road, One Belt initiative is also starting to look like a plot to make countries such as the smaller have-nots under Chinese influence, indebted for infrastructure loans.

China needs to balance its propaganda at home with the effects it has on its trade partners or even trade competitors around the world. It is one thing to rally the sentiment of the people but it’s another to look confrontational to the world. A trade war isn’t any good for anyone and we are not in a trade war yet.  It’s more like a squabble.  China has much more to lose that anyone else. It will be more than interesting to see how this plays out but I wouldn’t be surprised if we see the protectionists keep the pressure on China.  Even with Canada, a free trade advocate, joining the ranks of protectionists it could cause escalation to a level that has some real impact.  This is at a time when the world could use a freer flow of trade rather than more protectionism.

Our Lucky Winner

I want to take this opportunity to congratulate Joshua Mitchell, RT Foreman at Spectrum NDT, who won a very nice Leatherman for simply filling out an in-store survey we had ongoing for the last few months. It is always great when we can give back a little for all the support we have received from our clients and colleagues over the years. Our open houses, and other events are fun and allow us to show our gratitude.

Giving Back

IR recently held our annual open house and once again we had well over 100 attendees. They are a great way for our clients to interact directly with our vendors.  We try to have as many vendors join us as we can.

A couple of weeks ago, we announced at our open house that we were able to make an important donation to the NDT program at NAIT.  It is because of our great relationships with our vendors that we have been able give back to the industry that received us so well over the last 14 years. It was with great pride that IR was able to rally our vendors, free up our people, and provide a considerable amount of resources to make this substantial donation to the future of NDT. It has always been our goal to lead by example: though innovation and consultation with vendors; superior support and service; and now with our backing of materials and equipment to NAIT.  We are committed to the NDT industry. Of course none of this would be possible without our clients who have supported us so well.  So please take a bow.  It is because of you that we can give our future professionals the support they need so that they can become the future of NDT in Canada.

That’s all for this issue of Brian’s Blog.  Remember: For the unknown there’s NDT and for NDT there’s IR

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Leader in Non-Destructive Testing Makes Significant Contribution to NAIT’s Program

IR Supplies and Services Teams Up With Educator to Further Skills of Developing Experts

Edmonton, Alberta—In conjunction with NAIT’s recent celebration on their record-breaking fundraising campaign and the upcoming opening of their Productivity and Innovation Centre, IR Supplies and Services is pleased to announce their contribution to furthering the studies of future professionals in the NDT (non-destructive testing) industry.

Robbie VanHoek, Manager of Business Development at IR spoke about the company’s commitment during Tuesday’s announcement.

“Over the last year we have had the opportunity to partner with NAIT on helping to expand their NDT program in the new centre.   By working with our vendors, IR has been able to donate new equipment and additional support to NAIT. The number one resource in our industry is our people – the future generation of NDT.  Supporting that is a priority for us.”

NAIT’s NDT program will be housed in the new Productivity and Innovation Centre (PIC), scheduled to open this fall. PIC will be NAIT’s front door to industry, offering services and solutions to help Alberta companies become more innovative, productive and competitive.

As the technical aspects of the NDT industry continue to evolve, the need for new equipment and supporting the training for the use of that equipment is important for those who undertake the program.

Brian Pardell, NAIT’s Associate Vice President of Continuing Education and Workforce Development said it’s important for the polytechnic to collaborate with industry. “IR’s donation of equipment for NAIT’s NDT program is a true testament to the partnership between industry and NAIT. This donation allows NAIT to ensure that our programing is aligned to the changing needs of industry and that our graduates are trained and ready to work with the right skill set when they begin their careers.”

IR’s contribution could not have been made without the cooperation of their suppliers, with whom they share a valued relationship.

About IR Supplies and Services

IR Supplies and Services has been a trusted source for NDT equipment in Canada since 2004.  They supply top products and brands, perform non-destructive testing research, provide NDT training courses and perform maintenance, repair, and equipment calibrations. IR leverages both outside partners and internal capabilities to bring the most comprehensive and high-quality NDT equipment to customers.

Website:              https://irss.ca/

Facebook:           https://www.facebook.com/irsuppliesandservices/

LinkedIn:             https://www.linkedin.com/company/irsuppliesandservices/

About NAIT
The Northern Alberta Institute of Technology (NAIT) is a leading Canadian polytechnic, delivering education in science, technology and the environment; business; health and trades. With nearly 60,000 credit and non-credit students and a 95 per cent employer satisfaction rate, NAIT grads are essential to Alberta’s prosperity. Known for hands-on, technology-based learning, NAIT engages with business and industry in applied research and innovation and provides corporate training around the world. Recognized as one of Alberta’s top employers, NAIT provides outstanding returns on investment for its graduates, partners, the provincial government and the people of Alberta.

SOURCE IR Supplies and Services

For further information contact: Barbara Daley, Marketing Manager, IR Supplies and Services, barb@irss.ca, 780-452-4761

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Warranty, Installation, Repair and Calibration (WIRC) Shop

I thought we should send out a short note about what’s going on at IR’s WIRC Shop lately. It’s been nothing short of crazy. We have ramped up our commitment to you, our clients, to service just about everything we sell and many things we don’t sell.  This includes competitor’s equipment and other NDT products that may not be part of our regular inventory.

One area that we have been expanding our skillset on is ultrasonics. As the Sonatest line that IR carries takes off, we are now able to support each purchase.  Repairs and calibrations will be one of the ways we do this. While we already service thickness gauges, our team has received training from Sonatest on flaw detectors, and are now performing calibrations.  Repairs are something that we are working on as well.

In addition to ultrasonic equipment, we are factory authorized for, or capable of, repairing and/or verifying calibrations of:

  • Comet X-ray tubes as well as other x-ray equipment
  • Sentinel equipment as well as most iridium, cobalt and selenium projectors
  • Magnaflux and all other brands of yokes
  • Magnaflux and all other brands of UV lamps
  • Light boxes and film viewers
  • JME crawlers
  • Survey meters and electronic dosimeters
  • Vidar digitizers
  • Hardness testers
  • Densitometers

Plus, we are currently in the process of training in light meter calibrations.

IR has been growing again and for those of you who haven’t been by in a while there are some new faces at the shop. This growth is partly due to IR’s expansion into aerospace and the nuclear industries. Supplying those two industries means we increase our attention to quality. One aspect of this is the prevalence of counterfeit parts. Though this is a major problem in the aerospace industry it is becoming a problem in all industries. Now that IR is moving deeper into the electronics world, both our QA and mechanical parts are evolving. The last thing we want to do is repair your equipment with a part that is not OEM authorized or sell you a counterfeit part.

In the past, counterfeiting has been a particular problem for QSA and Sentinel parts with their exposure devices. We have been working on some ideas around this, and taking steps to stop the unauthorized distribution of OEM parts. It is a breach of our vendor contracts to sell parts to unauthorized distributors.  It is also part of our quality assurance program to see that these parts are used as intended—QA is the new safety.

We are in the quality business. It’s important to us. Because of this, we plan to initiate prequalification for OEM retail parts, on top of our own purchasing requirements. This will really be apparent for critical equipment like flaw detectors, exposure devices and other NDT test equipment. All parts will be OEM approved and all sales of parts to clients will need to be approved. It seems that parts, or rather critical parts, will likely start becoming harder to get as these ISO and industry quality initiatives and controls become a larger part of our daily lives.

Before I end this note I should mention that when delivering equipment for repair, any and all details of the problem and/or incident that caused the problem should be submitted with the equipment, along with any accessories that were used at the time. This is especially important when assessing problems with radiography equipment. An incident report will allow us to look for other related issues at the time of the repair.  That’s better that then finding out after you get it back from repair. Radiography equipment has that isotope issue that we need to be concerned about.  Plus there’s the CNSC reporting requirements. If IR knows all the details and we have all the accessories, controls, and guide tubes along with the device and source assembly, we can often foresee CNSC requests and act on them so that you don’t experience a hold-up. It is much safer for our staff as well.

Well that’s enough for now so let me just extend a big thank you for your support and we look forward to helping you solve whatever equipment problems you may be having, right here at IR’s WIRC Shop.

And remember…For the unknown there’s NDT, for NDT there’s IR

Cheers!

Brian Sargent
IR Supplies and Services

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Iranian nuclear deal gets Trumped! But why now?

Trump has had several opportunities to back out of the Joint Comprehensive Plan of Action, (JCPOA), or the Iran nuclear deal, so why now? One theory is that American and Iranian interests, are no longer aligned since ISIS has been all but defeated. Iran wants to have influence in Syria, and has already solidified a presence in Lebanon.  It wants to continue to expand its influence into Iraq. Iran is in a position where it could become the dominant force in the Middle East, re-establishing the Persian Empire.  That would not be in the best interest of America or most of its allies.

At home Iran is having some trouble.  Now might be a good time for the US to stir the pot a bit. Iran is fighting through a severe drought that has driven farmers to the point of breaking.  This has led to protests for financial aid from funds that are in short supply due to the cost of Iran’s push west. The economy has not grown as most Iranians thought in should have after the original sanctions were removed. This is partly because of the price of oil but also because Donald Trump has said enough throughout his term as president that western investors are hesitant to invest in Iran. This has caused some dissention in the Iranian political system and there are definite lines of opposing views in Tehran. Financial pressures could cause a destabilization of the Iranian political system. Iran is also threatening Turkey and to a greater extent its sworn enemy Israel with its expansion ideas.  With the latter a war is brewing in some form and will probably be fought from Lebanon via Iran’s proxy, Hezbollah. An all-out war between Israel and Iran may force the US back into conflict with boots on the ground and the US does not want to increase its presence it wants to decrease it.

The US has looked to be weak on the Korean dispute, unable to do much with South Korea’s distaste for taking the punishment that the North would surely inflict on it, and especially Soul, if the Americans attacked. Being tough on Iran may put a little more pressure on North Korea, perhaps foreshadowing that the Americans won’t back down. This may also take some pressure off the US from some of its security wards like Japan and Taiwan, who are hoping the US will also play the same brand of hard ball with North Korea. This type of about face also makes the US look unpredictable, which they really seem to be and puts everyone off balance.

By putting some internal and financial pressure on Tehran, the US may allow some time for Turkey and others to expand enough into Syria to keep no one entity from dominating in the Middle East.  That, after all, is the US strategy, to keep the Middle East off balance with no one interest having control.

 

Oil Independence: One More Good Reason

Fracking and drilling technologies has reduced the cost of a barrel of oil to all-time lows, especially in North America where these technologies were created. Don’t kid yourself, the Saudis and the OPEC producers saw this coming and in the beginning they tried to cripple the frackers by increasing production. Oil surpluses made it difficult for frackers but eventually all their efforts lead to was a glut of oil and that killed the price and crippled their economies and those in many other countries as well. In an attempt to right the ship, OPEC and a few non-OPEC members decided to reverse gears and curtail production.

I must now pause to apologize. I called OPEC out and said that there was no way they could make this happen.  History was my source of wisdom—it seems I was wrong. OPEC and a few non-OPEC producers have reduced the glut of oil and prices are escalating. I’m not sure if it will last as demographic trends are against growth over the next several years, but I must say I am happily surprised.

So now we have US oil being produced at all-time highs and in no time at all the US will be the world’s largest producer. And that is another side effect that Trump can live with. A USA that is no longer dependent of foreign oil is just one more reason to play hard ball in the Middle East and everywhere else for that matter.

 

So what does this mean for Canada?

Well, with higher oil prices comes more work for Canadians. Higher prices for oil is good for Canada, even with higher gasoline costs. I recently read someplace that if we adjust for inflation the price of oil and gasoline and factor in the better fuel economy autos are getting today, we are actually paying about $200 less per year for gas now than we did in 1972. Go figure.

In Canada we still have a problem with transportation and investment dollars leaving for other places. We now have to compete with an oil producing giant on our boarder that has a competitive advantage and a president that is incentivising that advantage. We need American refineries to transform our oil into products because to do this ourselves and be competitive, we would need to build refineries at exit points.  For Canada this means tide water. If we can’t get a pipeline built we are never going to have a Baton Rouge in Vancouver. We can build all the refineries we want inland but we would still need to get the products to market.  We consume all we make now.  Refineries need to be built at exit points to be profitable.  The Red Water Sturgeon project is a great example, which is now at 8.5 billion and counting. If these inland projects were sound, industry would be doing them. That’s why basically 60% of all US refining capacity is in three states: Louisiana, Texas and California.

Our problem reminds me of a kid’s joke about two scientists who decide to plug an elephant’s butt with a cork to see what happens. Like the elephant, Canadian politicians have plugged our transportation system so that all goods, from grain to oil, are backing up.   Soon the system will be unable to withstand the pressure and, well you know, there will be a mess to clean up. In the joke, the scientists are unwilling to remove the cork themselves, and after some length of time, train a monkey to remove the cork.  This does not go well for the monkey as you can imagine. In reality it will be taxpayers, (the monkeys), that will ultimately pay the price.  Hopefully, once we realize the mess we are in, we will train some new scientists. I have to say that I am totally amazed that a country the size of Canada, a net exporter of mostly raw materials that is so dependent on transportation of its goods, has not protected its transport system with more passion. If Canadians showed half the passion and ferocity for our transport systems as Iran has for its expansion into Syria, Iraq and Lebanon, we would have a very envious economy.

There is still a lot of uncertainty out there and especially here in Canada. NAFTA, rising interest rates, China, European Union, Brexit, carbon taxes, Russian cold wars, President Trump, crypto currencies, public and private debt, stock market corrections, aging demographics and oh yah, an expanding elephant.  It’s a wonder we sleep at night.

 

Planning for Sustainable Growth

When the 2014 oil crisis hit, we knew that IR needed to have a plan for an uncertain and likely volatile future and part of that plan was to offer some of our products for rent. This would accomplish a couple of things: allow us to put underutilized inventory to use, and offer a way for our clients’ businesses to ebb and flow with what we saw as slower but also opportunistic times. We felt that oil and natural gas prices would rise and fall and that companies would need to expand for a short while but they would also need to be able to reduce overhead quickly when these short cycles went negative. By renting exposure devices, x-ray tubes, and other capital intensive equipment we could help ourselves and help our customers too–win-win as they say.

That spawned Rentals at IR.  Today we have a robust rental business that has been working just as planned. So instead of jumping into a large capital expense, why not look at renting for a time until you are sure that our economy is back on track and not just cycling volatility once again? Like I stated in a recent blog, there is a lot that can still go wrong.  Until some of the intangibles I mentioned disappear or clear up, gearing up with equipment that might not get used consistently, may not be the best choice and may just be a liability. Play it safe and try Rentals at IR.  It just may allow you to sleep at night without those nightmares of that elephant in the room.

Cheers!

Brian Sargent

And remember…for the unknown there’s NDT, for NDT there’s IR.

 

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Is Change Coming, Again?

It has been some time since I sat down and mused on the macroeconomics of our planet. The reasons for this are many and I will go through some of them at the end of this letter but as we are seeing some major changes around the world that are and will have dramatic effect on our lives, so too have we seen great changes at IR. Perhaps not so dramatic as Xi’s consolidation of power in China or Donald Trumps suspected affair with a porn star, but we hope they will make an impact on the experiences you have at IR and in a good way.

It seems to me that about every 20 years or so we see some kind of fundamental technological creation that follows some socioeconomic shift that affects the way we live our lives. As I was growing up computers were starting to make their way into our lives.  This lead to the internet of things, and now we are staring at an energy shift. There are many geopolitical events that have affected our lives, the fall of the Soviet Union and the end of the Cold War, before that the two world wars and currently a nationalism movement and a push away from free trade. I believe we are in the middle of a brand new geopolitical event and probably some new technology as well, but before I start let’s be clear on one thing.

USA: the Only Superpower

The USA is the only superpower on this planet and no individual nation can come close to dislodging them. This is fact. They have a superior military by far and control all of the oceans and seas. They control 25% of the planet’s GDP and they hold the reserve currency, as 60% of all transactions are done in USD. The USA is self-sufficient in energy, in fact, if not the largest producer of oil and gas in the world it is neck and neck with Russia. And none of these conditions are about to change anytime soon.

This is terrifying to many other countries and disconcerting to others. It is the reason that the US is seen as an aggressor and opportunistic, bullying others into situations they don’t want to be in. Trump has leaped to the top of the hill, king of the bully’s and is playing the role to a T. The world is appalled at his blatant lack of social skills and overbearing rhetoric but not at all surprised at his focus: the United States of America. Americans are bullies and that’s just a well-known fact. But is it true? Is bullying just built into America’s DNA or is there something else that forces this to happen. It is true, America has pushed its might around! But what would happen if the US was to become passive, lay back and bask in the sun?  Take an extended vacation? Perhaps not show up for the next few NATO meetings? Take a few months off work to reflect on their position?  Have a midlife crisis?  Do a 180?

Hmmm, I have an idea but it would be fun to speculate over a few beers. It might make a great board game: America takes a vacation. Within a few years, definitely less than a decade, I think someone or several someones would fill the gap. Russia and China would not just take a nap or crawl back into their own sandboxes and become content playing with their own toys. History is full of wars caused by ambitious dictators and geopolitical imperatives long before the United States of America was even dreamt of.

The US has trading partners in every corner of the world, and because they have been so successful at trade they have developed a navy and military to protect this trade. As we look at the history of the conflicts of the world we see that most if not all major wars are due to nations trying to protect or project their economies. As their economies grow their power expands, the need to protect that expansion builds military power and military power allows nations to have influence over others. Sometimes it is direct conflict but often it is protection from rivals or economic aid in trade for setting up a strategic military alliance. Powers ebb and flow.  The superpower of the day uses its influences to grow its economic power that can be used to build military might. Mighty powers like the Romans and the Ottoman Empire grew strong, eventually went too far and were beaten back for numerous reasons. Sooner or later all superpowers mature and fall victim to their own bureaucracy. The US is nowhere close to this stage in its evolution. It has many years yet of being the boisterous immature brat that it ostensibly is.  But again, if not the US then it must be someone else.

Power corrupts and Absolute Power Corrupts Absolutely

If I have learned anything, it is that people everywhere are the same. Power corrupts and absolute power corrupts absolutely, as the saying goes. I don’t care if you’re Chinese, Japanese, Russian, American, Canadian, Pakistani, Indian, Native American or Jewish. Also if you stake out a territory you will defend the territory almost to oblivion, especially if you can send others to do the fighting like we see in the proxy wars of the Middle East. And you will defend the interests that are profitable to your existence the same way. This is the human way and it is what we have seen in almost every culture and society in recorded history. I don’t like it but it is reality.

The study of geopolitics tell us that geography is the defining factor in how a country must protect its interests and how its’ political system will likely develop to make the most of its advantages and safeguard its disadvantages.

Russia and China Revealed

Russia is a great example of this. A land locked nation with very little year round access to the trade routes of the oceans, it must rely on its ingenuity and might to see to its well-being. The reason for holding dearly onto the Crimea of the Ukraine–once the Crimea of the USSR–is to illustrate power and keep some access to the Black Sea.  In days gone by when its power was at its peak it conquered surrounding territories as buffers to its central core–mother Russia–most recently creating one of the most powerful nations on earth, the Union of Soviet Socialist Republics, USSR, or Soviet  Union. Today the Russian economy is in tatters and their power to influence through might and prosperity is merely a shadow of those glorious days since the First World War. Russians are a proud people, strong of will. They have had to be to survive in a northern territory surrounded by hostiles both in the form of other nations and the environment. They need a strong central government with a stronger leader and Vladimir Putin has emerged as that leader. Putin knows that he has to keep the Russian image alive so he is projecting as much outward strength as he can: backing the Syrians, confronting the USA, holding steady in central Asia and trying to project superiority by election meddling and other seemingly technological accomplishments. Other appearances of power have come from the recent pronouncement by Putin that Russia has supersonic missiles that are so fast and accurate that they are unstoppable using conventional anti-missile defensive systems. Supersonic and the next evolution hypersonic missiles, are the future and are likely here already in some forms, but whether Russia is leading in this technology would be unlikely. Even if they were they are not the ultimate weapon Putin would like you to think they are.

China is appearing as the next great super power on the horizon and its development has been nothing but spectacular. The US is threatened only by China’s ambitions. China is the second largest economy in the world commanding about 15% of the world’s economy according to IMF numbers. It would be third if we counted the EU as one country but we don’t, it is merely a brief experiment in history.

China has big ambitions but it has huge geographical limitations with the Himalayas on one side, the jungles to the south, and vast Mongolia and Russia to the north. Japan, Taiwan and the Philippines, who are all more or less American allies, sit right in the middle of its ocean trade routes. China is trying to project its economic influence through its one-road-one-belt initiative, building infrastructure, and throwing dollars around in countries it needs to fulfill its ambitious trade plan. China knows that the US can cut off its trade routes with its naval might so it is building its own fleet in response, but it is decades away from being able to influence the US at sea. An overland route is an ambitious but intelligent alternative in the meantime. Taiwan is a major concern as it is very strategic and has always been a negotiating point for China and the US but this is changing as the US has decided to move from the Nixon-era position of not recognizing Taiwan as a separate nation. This will get interesting.

China is however at a turning point in their economic growth, riddled with economic rot from its artificially induced forced growth spurt. This rot is systemic and has been spread through corruption and debt-fueled bubbles and overbuilding of industries and infrastructure. China seems to be nearing a crisis point and the recent political developments have only added fuel to this assumption. At the recent National People’s Congress, Xi Jinping received the honor of having his leadership granted indefinitely. Since he became leader, Xi has been purging his enemy’s and inserting his allies. He has now solidified his position for as long as he is needed. Also during the congress many institutions and high level departments were purged of power, amalgamated and or eliminated. This was done to maintain Xi’s control, centralize power, reduce the chance of dissension and streamline policy effectiveness.

China the country, is made up of many smaller societies and cultures.  There is something like 290 languages in China. It is diverse and this has been a problem throughout history as China has seen many unions formed only to fall apart over time. Like we are seeing in the European Union, differences are always there and are built into cultural heritages and not easily forgotten or put aside.

The coastal areas of China are where the wealth is and it is has been the bane of many emperors throughout history to distribute this wealth amongst the many poor in the interior parts of China. This will likely be Xi’s biggest test as he must keep the poorer parts of China, and that is most of it, from rising against the rich. Wealth distribution is his only choice and this will likely cause some of the rich to lash out also, especially as we see growth slow. It is a fine line Xi walks, changing the economy to a sustainable one, feeding the poor and keeping the rich, well rich, or at least rich enough.

Xi’s grab for power, just like Putin’s display of power, is not because these men are power hungry monsters, though they may be.  It is simply that the times dictate the hierarchy that runs their respective political systems needs men like them to defend the country’s continuity from its own internal circumstances. Russia’s is one of weakness and an economic morass, and China’s is from its record-breaking growth experiment, ethnic diversity and uneven wealth distribution. If not Putin and Xi, then someone else would have been chosen and it would be men just like them.

US and China Trade War

In the mix we now we have Trump the immature president of an immature superpower who is locked in chains because his support is the small minority that can tolerate his blunt bullying. Others who he needs to enact his reforms and ambitions on are either too afraid to back his policies because of his brashness, or are truly dead set against them. I stand by my words that this man, The Donald, if remembered for nothing else, will be known as the President that defined the lines that separate all of the tensions in American society. Hopefully they will take a long look at those divisions once he is gone and work to repair them. They likely will have no choice.

Currently the US is threatening China with $50 to 60 billion in trade sanctions and of course China is threatening back. I have said in earlier letters that one day the world would start to hold China accountable for its trade and incentive practices and this adds more urgency to the reforms they are initiating along with the necessity of a powerful leader to enforce them. US sends about $115 billion worth of exports to China and China sends about $480 billion to the US. Trump is right when he says a trade war is easy to win, but it would not be without its consequences. My best guess about this is: look for US sanctions to become more of a way to force China in line with the rest of the world than a trade war. (I hope.)

Canada Asleep at the Wheel

In our own back yard we see our socialist governments more worried about environmental issues than economic, mostly because we have missed and are oblivious to the warnings of the 2008 financial crisis. The IMF recently identified Canada as one of three countries that are most likely to have a banking crisis. At the moment votes are all that matters as our economy hums along, even as oil hovers around lows not seen for 20 years. The elite class is focused on how we can further reduce our energy consumption–less than 2% of the world’s—and thus save the planet. A pipe dream of the wrong kind.

Crisis Brewing

China is going to have some kind of crisis, in what form who can say but the Chinese are preparing for this, there is no doubt. The US in initiating a trade war and are due for a recession. And Russia will continue to make headlines meddling in everyone’s affairs, even if they can’t do much else. These are all items that will impact our economies, if and when they happen, while our Canadian governments have their collective heads in the clouds dreaming of pot, tax increases and solar power in a country that has no light for 6 months of the year. I think all of this is going to bring about some kind of change. It may not be anything we see in a specific event but as these things play out we will need to adapt in some way.

Opportunities in Change

The earth is an enclosed system there is no doubt we are having an effect. Whether you believe in carbon as the cause of climate change or not, the trend is towards a healthier planet and that’s a good approach. Look for NDT opportunities in change. Outside of our petrochemical industry, in alternate energies and environmental initiatives, there will be a growing need for specialized NDT…because we do need to clean up our act.

IR Adds People, Products and Training

That last sentence is a nice segue back to IR and all of the new events we have been undertaking over the last several months. Right off the top is the addition of Heather Addley to our business development team. As most of you will know, Heather has been in the NDT business for as long as many of us can remember. She has run her own successful businesses and managed successful business for others. Her addition to IR will provide us more strength in our UT department and in mag and die. Her management experience and mentoring skills will add immensely to the growth of our younger staff members. We are very pleased that Heather chose to come to IR as we knew she had many other options.

Also new to IR is Barb Daley. She comes to us as our Marketing Manager, a new position for IR and one that we have desperately needed.  Barb has many years of marketing behind her.  It will be a lot of fun seeing how she works with what has been achieved so far through a tremendous effort by our staff, despite two old pipe-liners who started this company. From the looks of what she has done in very short order, I feel we have found the right person indeed.

Also added this year is Jacob in calibrations, whose background is theoretical physics and electronics, and Sharel who adds her constant smile and valuable experience to our accounts department.

IR has also been quietly developing our technical side with our Warranty, Installation and Repair Center, (the WIRC shop).  Our technicians have been relentlessly pursuing manufacturers training and our list of products that we are authorised by the manufacturers to repair and/or calibrate is growing by leaps and bounds. Our goals have always been to repair, service and install in-house all of the products we offer to our clients, and we still continue to strive for this goal.

One of the problems attaining our goal of service and repair of products we sell is that we keep on bringing in more products. This year we have added flawed specimens from Sonaspection and reference tools from PH Tool, both very high quality manufacturers.  We have also added thickness gauges, as well as handheld LIBS carbon analyzer and XRF analyzer, both by SciAps. The latter two you have to see to believe.

And that’s not all, we are working on more, more products from outside vendors but also we have new Exposure Products. IR has commissioned Armorlite to build an Exposure exclusive NDT lab we call the Freedom Series. They will be totally self-contained with no hookups, no truck installations, and no through the box bolt downs. They will sport many other benefits as well and will include Exposure’s brand new processing tank design that has been several years in development. Our tank trials are over and they are now being offered for sale and are as leak proof as is possible in the environments we work in, garnering impressive reviews from those who are using them now.

Well this is all I have for now, perhaps it is a little long but it’s been awhile and I think we can see clearly now the great, the wannabe, and the waning powers of the earth and their imperatives. China to keep on increasing its influence while maintaining social stability in a growing and maturing economy. Russia needs to look like it is still a mighty force to keep its proud people from questioning its economic disparity as it fades far from its former self, and the US, a still growing, bullying, adolescent superpower that’s far-reaching tentacles will continue to meddle wherever its interests lie. All of them have potential crises on their horizons that could disturb our quite slumber here in Canada. I’ll be keeping an eye on how things develop and be in touch in a few months.

Cheers!

Brian Sargent

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“There will come a time when it isn’t ‘they’re spying on me through my phone anymore. Eventually, it will be ‘My phone is spying on me’.”
― Philip K. Dick

“I know there’s a proverb which says ‘To err is human,’ but a human error is nothing to what a computer can do if it tries.”
― Agatha ChristieHallowe’en Party

All of the biggest technological inventions created by man – the airplane, the automobile, and the computer – says little about his intelligence, but speaks volumes about his laziness.
― Mark Kennedy

 

Contents

  1. IR and Technology
  2. Smoldering Fires and Tax Reform (Just an Opinion)
  3. A World in Turmoil
  4. Interest Rates and the Canadian Dollar Mean An Early Christmas for IR Clients
  5. Tennessee, Memphis and Nashville

IR and Technology

As most of you know, we have been working to automate a number of the processes at IR. Our filling system has been redesigned and standardized, and we have an accounting and inventory system of some significance. We have also implemented a work flow system that will auto-generate certificates. It draws from a data base, which means that mistakes caused from entry errors are almost nonexistent.

Technology does, however, cause its own problems. Our database system has been overwhelmed by the volume of data we have accumulated over the last year and a half. This has slowed the process and is extremely frustrating. Never a quitter and always looking for the best way (see Mark Kennedy’s quote here), we have invested in the development of a new platform. This platform is meant to to handle all of our needs and increase speed and carrying capacity to the point of it “never being a problem again” (I’m rolling my eyes).

We are very happy with the workflow and its advantages, so much so that we are going to add it to most (if not all) departments at IR. Our own experiences will be used to create many more advantages for our clients. We hope to share these advantages with you in the very near future. I guarantee you what we have planned will be nothing short of amazing.

 

Smoldering Fires and Tax Reform (Just an opinion)

Over the last several years, there has been a smoldering fire that is slowly spreading. It’s being debated at work and in lunch rooms. It’s being debated around the after-hour sociables at local taverns, and at dinner tables. It is part of a larger wildfire that has spread to developing and developed countries alike all around the globe. In some places, it has erupted into infernos that have changed political landscapes. In others it just waits, creeping through the underbrush.

Here in Canada, it has sprung up as a political change; social issues that have trended into the forefront of our political system. This movement has been called several things, such as fascism and communism. In reality, it is none of those things. However, it is a significant shift and it is happening everywhere.

Most recently, our own smoldering burn pile has flared up in the form of tax reform. Our finance minister has decided to close some small business “loop holes” that have been seen by some as unfair advantages for small business owners. This flash flare-up could ignite a full scale blow-up and may spark a significant change. This change could cause even greater polarization of our social and political ideals for some time to come.

The threat is that even small business owners will fall into the category of “abusers of the system;” That they are looked upon as part of the problems perpetrated by the “one percent”.

Small business owners are the backbone of our democratic economies. They invest in our communities; they are the trees that make up the substance in our economic forest. The Amazons and Apples of the world are the giant sequoias, important in their own majesty, creating micro-economies and projecting national and global influence as they eat up the forest floor around them. However, the average business is what the forest ecosystem revolves around. It’s where the sequoias sprang from and it is where they get the nutrients and intellectual resources needed to sustain them.

Large corporations are the worst innovators. It is small businesses that take the risk in developing new ways. It is small businesses that transform these new ways into viable business opportunities. The large corporations feed off of these new start-ups. It is here where they add to their own growth through acquisitions and mergers.

I’d like to make it perfectly clear: the tax items being debated right now are not loop holes. They are intentional tax breaks to foster, protect and promote small business, including family farms. Much has been written about the effects of Bill Morneau and the Justin Trudeau liberal tax plans, good and bad. However, the very health of our social and economic system in Canada is what is at stake.

It is very apparent that the tax system is out of date and in need of reform. The tax incentives right now may not be the best, but unless some other incentives are in place, the small business community will be stunted.

Under these new reforms, the forest may eventually turn into a barren landscape of a few towering old growth giants. Or, in the best case scenario, the forest will succumb to slow, rotting decay, dragging the Canadian economy along with it.

Politicians are shamelessly using every conceivable trick in the book to try and capture votes – without one thought to how this kind of sensationalism is promoting the trend towards protectionism (think Donald Trump here). No stone will be left upturned if it garners a vote. The notions of inequality and unfairness have been used in every campaign. Words like unfair, loop holes for the rich, the one percent and patronage are the keys in statements promoting distrust and even hate. We are better than this.

No one should ever underestimate the power and the importance of small business. They are the innovators of the good and the bad. They promote competition, keeping prices reasonable. The reason small business is such a high risk affair is because very few new ideas ever pan out. However, while they are in business, the small businesses often drive prices down and keep even the giants competitive. Sometimes, new ideas work out and that is when everyone takes notice; but it is the failures that help keep the rest honest.

Only the strong survive, and that is the way it should be. The law of the jungle. A new shoot springs up and the rest of the forest does little to encourage it. In fact, they often try to destroy it.

A new business must have customers, just like a sapling must have light; if it isn’t positioned properly it will wither and die. It is wrong to artificially support start-ups by clear cutting the forest, but some pruning here and there will help it flourish. Supporting the healthiest saplings will also eventually support the forest as a whole.

Small businesses need to be encouraged, and tax incentives are a great way to do this. I don’t necessarily support the current tax breaks. Sprinkling of incomes to family members was done to benefit family farms. It does nothing for the single entrepreneur. Passive corporate investment income, however, can and is being abused by some professional services, so let’s change that instead.

However, we must be sure to have something to replace the policies with before we just mow the forest floor. Let’s not use them to stir a fiery protectionist movement just for the sake of votes. It is not wrong to make money, in fact it is required.

The needs of business owners (from start up to retirement, income to profits, succession or sale) need to be looked at. A modern tax plan needs to be developed. But this is the way it used to be. Now, everything needs to have a line drawn – have someone to blame. Burning passions created bombastically over imaginary lines however, draw votes.

 

A World In Turmoil

We have been talking to friends and associates in BC, Houston, and now Florida, where wildfires and hurricanes are tragically real life events right out of a Hollywood horror movie. I can’t imagine the pain and anguish those affected must be going through.

An 8.1 quake in Mexico and another storm, Jose, brewing in the Atlantic have all got us wondering what we can do to help. All I can say is be careful: phishing scams are starting to pop up, so donate to well-known foundations and charities through equally well-known channels.

There are those who think that this type of environmental destruction creates future growth because of the jobs created to repair the damage. Unfortunately, the cost is ultimately high, and destroying your perfectly good infrastructure with the idea that rebuilding it is a boom to the economy is false. This could be the trigger that pushes the US into thatcyclical recession we have all been wondering about.

The weather is one thing, but it seems that Russia, China, the US, and Europe (among others) are all jockeying to maintain their relevance as well as protect or project their self-interests. A lot of pushing and shoving is going on. We need to keep abreast of the importance of these gyrations and especially how it affects commodities and the Canadian economy.

Interest Rates and the Canadian Dollar Means Early Christmas for IR Clients

Our central bank, the bank of Canada, has been steadily increasing interest rates. The economy is improving as GDP has risen beyond expectations, however, inflation has not. I am always amazed by the numbers we get related to GDP and unemployment. I have no explanation, just wonder.

For instance, before the fall of oil prices, we would advertise for a position and get 1 or 2 resumes. Seriously, 1 or 2. Now we advertise and we get somewhere between 500 and 800 resumes? Hmmm. Alberta is hovering at about 8% unemployment (it was 7 something before the oil crash) and the national average is about 6.5% (a point below what it was before the oil crash). Seems odd but what do I know?

I believe that interest rates are headed up to try and stop the overheated housing market, private borrowing, and subsequent indebtedness. We have reached 95% GDP public debt level, and private debt has increased year over year; it is now 165% of income. Mortgage debt is huge, but home equity loans may be even bigger. Poloz is hoping he can slowly defuse a ticking time bomb, but he may just be speeding up the inevitable.

The original idea was to lower savings rates by lowering the Central Bank rate. This was done in hopes that investment would flow out of savings accounts and into the economy. Well it worked, as savings rates are close to an all-time low- even in an aging baby boomer society.  Low interest rate policies have created housing bubbles and spending sprees because they made money almost free.

So the idea now is to slowly pull the drugs away from the drug addict and hope that they can handle the withdrawal. Anything is possible – I’d be prepared for any scenario. There’s liable to be a tipping point; the world is in one big experiment right now.

The one good thing coming out of this is that the Canadian currency is gaining against the USD, which is allowing IR to chop some prices as inventories roll over. You will begin to see some significant price decreases if you have not already. Word of caution: in our opinion, we do not think it will last. We feel the US dollar has perhaps fallen close to its bottom, so perhaps you should get, while the gett’in is good?

Under these new reforms, the forest may eventually turn into a barren landscape of a few towering old growth giants. Or, in the best case scenario, the forest will succumb to slow, rotting decay, dragging the Canadian economy along with it.

Politicians are shamelessly using every conceivable trick in the book to try and capture votes – without one thought to how this kind of sensationalism is promoting the trend towards protectionism (think Donald Trump here). No stone will be left upturned if it garners a vote. The notions of inequality and unfairness have been used in every campaign. Words like unfair, loop holes for the rich, the one percent and patronage are the keys in statements promoting distrust and even hate. We are better than this.

No one should ever underestimate the power and the importance of small business. They are the innovators of the good and the bad. They promote competition, keeping prices reasonable. The reason small business is such a high risk affair is because very few new ideas ever pan out. However, while they are in business, the small businesses often drive prices down and keep even the giants competitive. Sometimes, new ideas work out and that is when everyone takes notice; but it is the failures that help keep the rest honest.

Only the strong survive, and that is the way it should be. The law of the jungle. A new shoot springs up and the rest of the forest does little to encourage it. In fact, they often try to destroy it.

A new business must have customers, just like a sapling must have light; if it isn’t positioned properly it will wither and die. It is wrong to artificially support start-ups by clear cutting the forest, but some pruning here and there will help it flourish. Supporting the healthiest saplings will also eventually support the forest as a whole.

Small businesses need to be encouraged, and tax incentives are a great way to do this. I don’t necessarily support the current tax breaks. Sprinkling of incomes to family members was done to benefit family farms. It does nothing for the single entrepreneur. Passive corporate investment income, however, can and is being abused by some professional services, so let’s change that instead.

However, we must be sure to have something to replace the policies with before we just mow the forest floor. Let’s not use them to stir a fiery protectionist movement just for the sake of votes. It is not wrong to make money, in fact it is required.

The needs of business owners (from start up to retirement, income to profits, succession or sale) need to be looked at. A modern tax plan needs to be developed. But this is the way it used to be. Now, everything needs to have a line drawn – have someone to blame. Burning passions created bombastically over imaginary lines however, draw votes.

Tennessee, Nashville and Memphis

The end of October brings the Fall ANST conference and exhibition, and this year it is in Nashville, Tennessee. Almost religiously, a number of us attend the conference and we also often bring our wives. This year will not be the exception; in fact, the wives are insisting they come along and have decided a side trip to Memphis is in order.

A visit to Graceland and Beale Street is not an option, but a necessity. The trip has been planned the weekend before the ASNT conference. If you are interested in tagging along with us, drop me an e-mail at brian@irss.ca, and I will include you in our plans for accommodations and reservations.

We are not planning on many days in Memphis- just a day or two before we’re off to Nashville. It is likely we will take some form of group transport like a rental bus, limo, or van. It’s a 3 hour drive or so. We thought it might be fun to fly to Memphis and then drive to Nashville. The more the merrier.

I will close now with a last comment as this letter has gotten rather long. At IR, we record and investigate every comment made to us by you. It is how we improve. It has been estimated that only 20% of client problems are relayed back to the service provider. We do get very few but I know we are not perfect. Please, if you do have a comment let us know. We do take them seriously – and thanks again for your patronage. You can contact anyone at IR, but Jessica’s inbox (Jessica@irss.ca) is where they will end up.

And remember,
For the unknown there is NDT,
For NDT there is IR.

Cheers!
Brian Sargent

 

I think NDT, therefore, IR.

 

Our mailing address is:
8108 McIntyre Rd
Edmonton, AB
T6E 5C4
(780) 452-4761

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Brian’s Blog August 2017

Brian’s Blog

August 2017

Low oil price here to stay

Sadly our predictions for under $60.00 barrel oil for 2017 seems to be right on and perhaps a little optimistic. Never to worry, fracking and other new technologies has pushed the costs of recovering oil to new lows as well but our land locked position here in Canada is a problem and needs a quick remedy.

Even though commodity prices are tanking, or are still in the tank, the CAD seems to be rallying. As an old friend from my childhood would say “Hmmmmm, Expect that to change, I would”.

The Saud’s and the Russians are heading faster and faster down the path of civil discontent as oil prices are nowhere near a level to replenish there cash reserves and so pain is going to increase for those in charge.

It is interesting and worth a few moments to look at why we are in the oil slump that we are.

Drilling for shale oil costs less per project than conventional plays of years gone by. There are two general types of costs: capital costs and operating costs. Capital costs are the investment required to drill and complete the well and build the facilities onsite to manage it. Operating costs are the ongoing costs after the well has been drilled. These are measured either in dollar per thousand cubic feet or in dollar per barrel.

The total well cost – the entire amount of investment required to set up a new well, including land, permits, drilling and completion – varies by location but runs consistently in the low millions of dollars. A report by the EIA estimated that the average completion cost per well is around $5 million to $9 million, depending on the location of the deposits. Some companies, however, are able to drill and complete wells much more cheaply.

According to the EIA, drilling accounts for 30-40 percent of all capital costs. Completion costs, which include the actual fracking process, account for 55-70 percent. Facilities costs, which include erecting onsite buildings as well as road construction to transport oil away from the site, account for 7-8 percent of well costs.

The same EIA report analyzed well completion costs across a number of companies and locations and determined that average costs, in terms of dollar per barrel of oil equivalent – an approximation of energy released by burning one barrel of oil – declined 7-22 percent from 2014 to 2015 and 25-30 percent from 2012 to 2015.

Importantly, some wells are drilled but not completed when funds dry up or when oil prices dictate that the well is no longer economically viable for the time being. In this scenario, the oil driller has effectively used the low permeability of the sedimentary layer to store oil until it’s ready to frack the deposits.

Once the oil starts to flow, operating costs tend to vary. Gathering, processing and transporting can range from $2.25 to $5 per barrel for oil or higher, depending on how far and the mode it needs to be transported by. Water disposal can range from $1 to $8 per barrel. Other general and administrative expenses range from $1 to $4 per barrel.

New drilling techniques can expedite the completion process and thus drive costs down further. Several years ago, a new well might have taken 3-4 weeks to drill. Now it can take as few as 7-10 days. Not only does this cut down on the overall costs of producing a barrel of oil, it also gives producers flexibility to respond to higher prices and to expand their operations. In fact, now that so many shale plays are known to produce, exploration is less risky, so companies are more willing to operate there.

Since capital and operating costs are so varied, there is no single break-even price for shale oil. But if we average wells by location, we can get a sense of which prices generate profit and which do not.

Russia and Saudi Arabia can still produce oil cheaper than the US can, in the $10 to 15 dollar range. Their problem is that the Russians and Saudi’s are so dependent on oil to finance there economies that they literally need $100 oil to maintain the status quo.

US Recession

The US “IS” going to have a recession. It’s just anyone’s guess when that happens. Statistically it is due anytime. The US Federal Reserve is gently upping interest rates to have some dry powder available for when it does happen. It is however, the rest of the world that will suffer the most, as the US is self-sufficient in energy and is not nearly as dependant on others to drive its economy. It derives most of its GDP from its own consumption unlike many countries such as Germany and China.

ISIS

The Islamic State is looking more and more like it will fail in its bid to create a Caliphate in Syria. News of cholera and polio outbreaks are seen as a loss of control in their abilities to provide even basic services. It will now be of interest to see how ISIS regroups and where they pop up. Although before that there is still a bit of work to do routing them out of there strongholds. Now Israel, the US and Turkey will have to decide how they will deal with Assad and his band of terrorists. None of them wants a strong Syrian and Iranian alliance.

Protectionism

So there you have it, more of the same coming up. Growth is slow to non-existent and it is only growth that can increase the use of commodities. So the oil glut will remain until such time as production falls due to lack of revenues and any rise in revenues will result in a rise in production, a circle jerk if you will. The other way out is we somehow initiate growth, but the world is due to shrink in population in the near future so growth may be difficult. Our opinion is that even if we do see growth it may lack the longevity of past booms and will likely be spurred by India and North Africa and a few others. In any event we are a few years away from a demographic trend that will lead to any kind of recovery and nothing indicates that much else can change that. What will probably effect economies as much as anything in this stagnate climate is geopolitical issues arising from civil unrest and protectionism probably caused, at least in part, by the economic slowdown.

At Home

At home here, we are sitting on the boondoggle that is the North West Redwater Refinery that has blossomed from a 4 billion to an 8 or 9 billion dollar project. If this was a viable project in the first place industry would have built it, another reason why government should keep its nose out of business. The only profitable refineries are those that are built to serve the markets that surround them or those that are situated in a place that makes shipping easy like the gulf coast. Albertans will be paying for this for decades.

IR is beefing up its rental lines. Currently we are offering Sentinel 880, SCARPro Selenium 75 and 330 Cobalt 60 devices, Open Vision, Sonatest flaw detectors, Comet 300 Kev spot tubes, Vidar digitizers and we lease Armorlite RT labs. IR is now so much more than just a one stop shop for NDT products and services, and keep your eyes and ears open for other products and services soon to arrive like calibration of light meters, and x-ray tube repairs.

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Brian’s Blog July 2017

BRIAN’S BLOG

July 2017

Hello everyone!

It’s been awhile since I have sent out a letter but we have just wound up our open house event here at IR Edmonton and I wanted to thank everyone for the great turnout and support. It’s always great to see some old friends and make a few new ones.

Our open house was billed as “A Taste of New Orleans”. It was held in conjunction with our maintenance and source retrieval courses developed and run by QSA Global with Mike from the Houston office and Theo from the Baton Rouge office, as the instructors. Theo Ewing the maintenance instructor also brought his immense talents to the kitchen as he prepared his famous Jambalaya and Crawfish Étouffée and as promised it was the hit of the party and didn’t last long.

Mark Sermazeski with Cruelty Free Cartoons, mark@crueltyfreecartoons.com was with us again and as always he entertained like no one else can. Mark is warm, very social, humorous and a great caricature artist who is engaging the world with his exceptional talents. We were very thankful that he took the time out of his very busy schedule to come to our event (he had another event in Vancouver that same night).

Also in attendance was Rebecca Rudolf of Comet, Jeff Darby with Carestream NDT, Charles, (Buddy), Lehmann of QSA Global, and all the way from England James Denton and Steven Shepherd both with JME. Thanks guys and gals it was great having you and the technical information you provide to our clients is always a main highlight and one of the reasons these functions are always so successful.

James and Steven brought JME’s famed crawler, newly updated and redesigned, (I believe it’s the only crawler in the world that meets the RED Act) and their 6.5 MeV Betatrons for display. It is amazing how much power such a small generator can provide, the complete unit would fit in the trunk of most medium size cars. The new crawler incorporates X-ray and can also be converted to use an 880 exposure device as a Gamma crawler.

Rebecca was here to show off our new demo and rental tubes, The 300 KV EVO Smart tube, real beauties that will be ready to go very soon. These new tubes are rugged, and almost operate themselves.

Before I get on to other topics I want to thank our staff as well for all the hard work in preparing for this event, they take the time out of there busy days to help organize and then implement all the necessary arrangements and still put in a full day’s work. Thank you all, you are tremendous and make IR what it is.