Environment and economy both stand to benefit
The International Energy Agency (IEA) forecasts global demand for energy will increase 32 per cent by 2040 driven primarily by emerging economies in Asia, and more than a quarter of the total demand will be for oil. But unless Canada can secure access to overseas buyers, the country could miss out on the significant economic benefits of a strong oil export market.
Although Canada has the third-largest reserves in the world and is the sixth-largest producer, overseas exports make up less than 1 per cent of oil production according to the National Energy Board. The U.S. is Canada’s main export market for oil, but increasing production in the U.S. could reduce demand for Canadian oil in the years ahead.
Commenting earlier this year on the release of the Canadian Association of Petroleum Producers’ (CAPP) 2016 Crude Oil Forecast, Markets and Transportation report, CAPP president and CEO Tim McMillan said Canada has an important role to play as a global supplier of oil and can do so at a standard that far exceeds other producing nations.
“Through technological innovation, world-class regulatory systems and environmental standards that meet or exceed our closest competitors, Canadian oil can be the world’s fuel of the future,” he said. “But we need the infrastructure to connect Canadian energy to the global economy.”
CAPP points out in its report that demand for oil is forecast to increase significantly in China and India. Their combined demand is expected to grow by more than 10.8 million barrels per day by 2040, according to the IEA. These two markets represent almost 84 per cent of the total world oil demand increase from 2014 to 2040.
Mary Hemmingsen, the Calgary-based global head of LNG and a KPMG Canada energy advisory lead, is a special adviser on energy in Canada and globally. She says establishing the necessary infrastructure for the overseas export of both oil and liquefied natural gas (LNG) is very complex.
“Everyone’s opinion and view is important, and it’s a challenge to effectively channel all the input into the processes that need to be in place to approve major pipelines or major projects such as oil refineries and LNG facilities,” she says.
Ms. Hemmingsen believes the way forward should be based on a compact and participation model, so that the benefits roll out directly to each community.
“We might have to redesign the way participation models are structured and the way the benefits are allocated,” she adds.
It is also important for the Canadian oil industry to continue moving forward with innovation in the sector to create legacy investments in cleaner technology and more efficient operations.
“Many oil and gas companies embrace this approach,” says Ms. Hemmingsen. “But it probably needs to be part and parcel of their core activities going forward, which will help to demonstrate that monetizing Canada’s resources comes with broader explicit legacy payoffs in improved clean technologies.”
She believes this approach is fundamental to getting greater public support and consent for the activities of the oil and gas sector.
“There’s a lot of comment in the industry about the need to ‘educate the public.’ But the fact is that the public has very definite attitudes, and there needs to be an alignment of public and industry interests to a greater and lasting good,” says Ms. Hemmingsen.
Jason Langrish, president of the Energy Roundtable, a private sector forum launched in 2004 to help define the Canadian energy sector’s role in domestic affairs and international oil and gas markets, believes consensus among all stakeholders on the development of oil pipelines to access overseas export markets will never happen.
“Staunch opponents of pipelines are opposed, full stop. They don’t really care all that much about a carbon tax or an enhanced regulatory approvals process. They want an end to the oil and gas industry,” he says. “The key is to win over moderates. I would concentrate more on workers and First Nations than on environmentalists. Gaining support of the people who stand to directly benefit from these projects is probably the best way to get social licence to operate.”
However, at some point the federal government is going to have to land more firmly on one side or the other, adds Mr. Langrish.
“I know that Justin Trudeau says his job is to be a neutral arbitrator on this issue, but I don’t think that’s realistic politically. He is going to have to say whether or not he supports new pipelines, and if so what he intends to do about it. Part of his argument is going to have to be the importance of the oil and gas sector to the Canadian economy and the direct linkage between the revenues and royalties that are generated by the industry and the social services that are provided to Canadians as a result,” he says.
ABOUT THE ENERGY ROUNDTABLE
The Energy Roundtable is a private sector forum that was launched in 2004 to help define the Canadian energy sector’s role in domestic affairs and international oil and gas markets. The Energy Roundtable delivers high-level, thematic conferences that:
Promote Canada as a stable and growing supplier of energy in a resource constrained world.
Profile innovative ideas on how to sustainably develop Canada’s vast energy resources domestically and get them to international markets.
Explore the commercial opportunities that this presents to investors and service providers.
The annual conference series gathers leaders in Toronto, Calgary and London, whose communities are invested in developing Canada’s energy future.