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CAPP urges feds to ensure Canadian oil, gas benefit from growing global energy demand

CAPP urges feds to ensure Canadian oil, gas benefit from growing global energy demand

Photo by Reuters

4th April 2018

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – Despite surging demand globally for all forms of energy, Canada’s oil and natural gas industry is at risk as the cumulative effect of federal and provincial policies and regulations are fast thinning the country’s market opportunity by thwarting industry growth, competitiveness and market access, a new report by the Canadian Association of Petroleum Producers (CAPP) points out.

The association, whose members produce about 80% of Canada’s natural gas and oil output, outlined overarching recommendations that are meant to help the federal government take a leadership role in defining Canada’s vision for oil and natural gas that positions the country as a “supplier of choice” to meet the world’s growing oil and natural gas needs.

The CAPP urged government to support this vision through a coordinated effort with industry, provincial and territorial governments, and individual Canadians to create an effective policy and regulatory environment that encourages investment in Canada’s oil and natural gas resources, ensuring those resources are produced with environmental and social responsibility.

Such a vision must include a focus on accessing world markets (particularly lower- to middle-income countries), a commitment to innovation, and global environmental stewardship. The report urged action on the part of the federal government to undertake efforts that enhance energy awareness and actively cultivate and grow support from Canadians for the responsible development of Canada’s resources.

The vision must also encourage governments to align costs associated with environmental policies in other jurisdictions, to support industry competitiveness and technological advancements that allow for continued innovation in the sector.

“It’s time to be realistic about Canada’s future. We have an opportunity to be a global supplier but we are limiting our opportunity to meet global demand with policies that constrict future growth. The demand for oil and natural gas will continue to play a significant role in the future energy mix and Canada could be the supplier of choice, but only if we take steps today to ensure our competitiveness for the future,” CAPP president and CEO Tim McMillan said in a press release.

GROWING ENERGY CONSUMPTION
The International Energy Agency’s ‘World Energy Outlook 2017’ had forecast that demand for all forms of energy – including oil and natural gas, as well as renewables and nuclear – will grow by about 30% by 2040, as the global population balloons to 9.2-billion.

In 2016, the world consumed about 94-million barrels of oil per day – or about 32% of the total energy demand. By 2040, the IEA estimates total world oil consumption will be about 105-million barrels a day – the largest share of any fuel source. Similarly, in 2016, the world consumed about 129-trillion cubic feet (Tcf) of natural gas, which is expected to swell 45% to 199 Tcf by 2040.

Emerging economies and urbanisation in countries such as India, China and throughout South-East Asia, along with rising gross domestic product (GDP) will drive the increasing need for energy, but estimates show that despite the global energy mix being expected to change over this period, oil will continue to grow and be the predominant energy source to 2040, while natural gas production will grow to become the world’s second-largest energy source overall.

According to the report, the majority of global oil and natural gas reserves are held by nationally owned companies that face little to no climate legislation and associated costs. It argued that if Canadian production is constrained owing to the cumulative effects of regulatory burden and lack of market access, global energy demand will simply be met from other jurisdictions that have less stringent to no environmental policies – effectively enabling a wealth transfer to other countries with poorer environmental standards.

With the world’s third-largest reserves of oil, and one of the most stringent regulatory environments globally, the CAPP argued that Canada has an opportunity to become the world’s energy supplier of choice, serving global markets with responsibly produced energy that displaces production from countries with poorer environmental performance. However, this can only be achieved if Canada’s oil and natural gas industry remains competitive by attracting investment, stimulating innovation and gaining access to new global markets to leverage its leadership position in environmental stewardship and responsible energy production.

“Canada has an opportunity to ensure growing energy demand will be met by the most responsibly produced fuels possible. However, government costs and regulatory barriers are on the rise – making it harder to grow our industry and support employment for Canadians. Competitiveness continues to be one of our biggest challenges. Investment in Canada’s energy industry, and jobs for Canadians, will continue to leave for other countries unless there are changes to regulatory policies to enable growth industry can build on,” McMillan stated.

CAPACITY IMPASSE
Last month, the CAPP said rising government costs, the burden of inefficient regulations, and the lack of infrastructure to move Canadian energy to growing markets were undermining investor confidence in Canada.

Canada urgently needs to expand its existing four-million-barrel-a-day pipeline network, which is operating at capacity. The bottlenecks are expected to intensify up to 2030, by which time Canadian oil supply is expected to grow to 5.4-million barrels a day.

Scotiabank recently quantified that the impasse on building new pipelines cost the Canadian economy C$15.6-billion a year, or 0.75% of the country's gross domestic product.

Meanwhile, the Western Canadian province of British Columbia is actively undermining plans to expand the country's pipeline infrastructure, prioritising environmentalism over the economic welfare of Canadians. It has deployed delay tactics on the proposed – and approved – multibillion-dollar Trans Mountain Expansion project, that would triple the volume of diluted bitumen reaching tidewater, and which could lower petroleum prices in a region paying the most in North America for the critical fuel commodity. Meanwhile, Canada's biggest crude customer – the US – is set to become the single largest crude oil producer globally, surpassing Russia, in the future as it embraces using new technologies to find and drill oil and gas.

In 2017, CAPP commissioned a report titled ‘Global Energy Pulse’, in which researchers surveyed 22 000 people in 32 countries about their views on energy in general, and on Canada as an energy supplier in particular. A key finding was that while respondents prefer to obtain energy from their own country’s resources, 31% ranked Canada first among 11 producing nations as the preferred supplier of oil and natural gas, based mainly on the perception that Canada’s industry is inventing and using leading-edge technologies to reduce environmental impacts.

Edited by Creamer Media Reporter

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