The Canadian petroleum industry’s top lobby group has surfaced in the midst of Canada’s federal election campaign, laying out a vigorous case for oil and natural gas to generate national prosperity.
Going head-on against the powerful forces that have knocked the industry off its once-comfortable and untouchable perch, the Canadian Association of Petroleum Producers has issued a tightly framed policy paper and sent its top executive to spread the message across Canada.
Noting that Canada has the world’s third-largest reserves of oil, yet accounts for only 4 percent of global production, while exporting its natural gas to only the United States, CAPP has argued for developing those resources to “their full potential, through leadership and fair, balanced policies to make the country attractive for investment.”
It said producers believe their industry can achieve growth and collective prosperity by concentrating on four key areas: economic and fiscal competitiveness; enhanced market access; environmental sustainability; and aboriginal engagement.
Call for pipeline projects
Market access was the primary trust when CAPP President Tim McMillan argued that whoever wins the election on Oct. 19 - the governing Conservatives, Liberals or New Democratic Party - must take an active role in advancing pipeline projects, or risk putting the national economy in jeopardy.
He told the National Post said the logjam of major export pipelines must be freed up to secure the industry’s competitive position.
“If not ... we are out of the game,” he warned.
The failure to introduce more pipelines has undercut the crude prices fetched by Canadian producers by an average US$13 per barrel lower than U.S. crude this year, further squeezing the margins in a depressed oil price environment.
The CAPP paper said strong growth in Canadian and U.S. oil production will become “constrained in the next few years” without new and expanded pipelines.
Despite the hammering commodity prices have taken and the “on-going carbon reduction movement,” CAPP said oil and gas “will continue to be in demand for the foreseeable future,” which puts pressure on the industry to find new ways to link supplies with domestic and international markets.
The organization also said improved infrastructure will enable Canada to displace oil imports, which account for 80 percent of consumption in Quebec and Atlantic Canada, reinforcing the industry’s economic role, which currently includes 550,000 direct and indirect jobs and C$18 billion in annual payments to the federal and provincial governments.
Production target down
But the combination of stalled upstream and pipeline projects has forced CAPP to lower its production target by 1.1 million barrels per day to 5.3 million bpd by 2030, although a fundamental change could see some revisions, McMillan said.
However, he suggested the economics have become even worse since June, forcing CAPP to “make a judgment call on whether this is a meaningful change.”
For now, oil has been pushed off top rung of Canada’s export contributors, returning that role to the automotive industry, while capital investment has tumbled to C$45 billion from C$74 billion last year, with the oil sands sector dropping by 25 percent.
“As the big projects drop off and nothing picks up the slack, we could see more cuts,” McMillan said, referring to the loss of 35,000 jobs in the current slump.
He said the industry is now coming to terms with the prospect of a “lower for longer” oil price outlook.
‘Heavily engaged’ in Alberta
McMillan said CAPP is “heavily engaged” with the New Democratic Party government in Alberta as it prepares to deal with panels appointed to make recommendations on climate change and royalties.
The organization is also gearing up to make its case to the United Nations Climate Change Conference in Paris that starts in late November that of all the countries exporting crude to the United States only Canada imposes carbon pricing, he said.
McMillan also argued that despite the opposition in Canada to export pipelines, Canada believes it can lift 2 billion people in emerging economies from energy poverty by supplying LNG and crude oil.
CAPP, in responding to the common wisdom, said oil and gas producers are “committed to developing solutions the world needs for a cleaner energy future.”
In its own defense, CAPP also noted that Canada is responsible for only 2 percent of the world’s greenhouse gas emissions, compared with 10 percent in the European Union, 15 percent in the United States and 24 percent in China.
Of Canada’s emissions, 25 percent were attributed to transportation and 21 percent to the producing sector and 4 percent to pipelines and refineries.
The paper said the oil sands industry, widely deemed to be the major culprit, has invested C$1 billion to share 777 technologies and best practices to find innovative ways to reduce GHGs, minimize the impact on land, reduce water use and improve the management of often-toxic tailings from mining operations.
CAPP said climate change is “a global challenge that needs to be addressed with broadly-based policies that consider production and consumption,” adding that “everyone has a role to play.”
On the sensitive issue of industry relations with First Nations, the paper noted that in 2013 and 2014 CAPP oil sands members had direct business dealings estimated at C$3.7 billion with 327 aboriginal companies in Alberta.
It said the industry is committed to building “positive and beneficial relationships” with aboriginal communities “where we work.”
