Energy industry needs national strategy that includes pipelines and carbon tax, report argues

Canada's oil and gas industry has the potential to compete successfully in global markets in the coming decades — but only if business and government leaders come up with a coherent national energy policy, according to a report released Wednesday.

The report by PricewaterhouseCoopers, titled 2019 Energy Visions, argues that Canada's energy sector has emerged from a turbulent decade in good shape to compete in a transitioning market partly because companies planned and innovated for the future.

Even as tens of billions of dollars' worth of projects were delayed or cancelled and tens of thousands of jobs were lost during the recession, production grew and efforts to address environmental impacts were improved, the report says.

The report notes that in-situ operators have cut operating costs by 45 per cent since 2014, and integrated mining operators slashed costs by 33 per cent, according to Alberta Energy.

Greenhouse-gas-emission intensity has fallen by 25 per cent in the past decade, bringing oilsands in line with U.S. production, the report said.

"What's more, the industry continues to invest in technology that keeps production competitive," said the report.

"Despite the ebbs and flows of the past 10 years, our industry has been resilient. It has addressed and met challenges responsibly. And our industry continues to contribute to Canada's GDP, create high-paying jobs and move billions of dollars to provincial and federal treasuries — all while maintaining a global reputation for technical excellence."

New narrative

But over the past decade, the guiding narrative of the oil industry evolved in a fundamental way, the report says. And it will take a national strategy for Canada's energy sector to succeed in the new reality, it argues.

The narrative changed from being about scarcity — that oil supplies were dwindling, and demand wouldn't be met — to being about the looming arrival of peak demand, and how to compete for a share of the market.

According to the report, Meghan O'Sullivan, professor at the Harvard Kennedy School, says the ability of Canada's oil and gas industry to succeed in the new era of energy abundance will depend on further advances in cost-cutting technology and government policies that facilitate the construction of export infrastructure.

The absence of a coherent national strategy in the preceding decade led to the failure of several plans to build oil pipelines and more than 30 proposals to build LNG export projects that would have diversified Canada's market options, the report argues.

"Eight years ago, industry leaders warned the absence of an overarching energy strategy would lead to lost opportunities and let energy policy be environmental policy by default. Their predictions proved correct," said the report.

The report lists several components it says should be part of a national strategy, including a clearer infrastructure approval process, a role for government in mitigating geopolitical uncertainty, and a carbon tax strategy.

"Industry supports a strategy to reduce greenhouse gases that doesn't disadvantage Canadian exports. Carbon policies must be built around certainty and stability," the report said.

U.S. supply growth

The report says the huge growth of U.S. supply fundamentally changed the energy landscape.

"The United States is now Canada's biggest competitor," says the report, which argues that it's therefore increasingly urgent for Canada to get its oil and gas to Asia.

"Over the next two decades, the IEA (International Energy Agency) forecasts Asia will account for half of global growth in natural gas demand and more than 80 per cent of the increase in oil demand. Environmental policies in many of these new markets are also propelling demand for lower-carbon energy sources like LNG."

The report argues that the pipeline approval process needs hard time limits and should focus on the economic and environmental impacts of the project, and that broader issues like climate change need to be addressed through public policy, not the project approval process.