The Alberta Government Urgently needs to Increase Competitiveness in the Oil and Natural Gas Sector: CAPP
September 26, 2018 – Calgary, Alberta
The Government of Alberta needs to take action to close the competitiveness gap for the province’s oil and natural gas industry if it wants to be the global energy supplier of choice, according to the report, Update: A Competitive Policy and Regulatory Framework for Alberta’s Upstream Oil and Natural Gas Industry, by the Canadian Association of Petroleum Producers (CAPP).
Alberta can be a leader if the province improves regulatory efficiency and certainty, effectively implements climate policies that mitigate trade exposure and encourage innovation, and strengthens fiscal terms.
At a time when energy demand and capital spending is increasing globally, total investment in Canada’s oil and natural gas sector is expected to fall to $42 billion in 2018 from $81 billion in 2014, and total annual spending in the oil sands dropping for a fourth consecutive year.
Investor confidence continues to remain low due to a number of factors such as market dynamics and commodity price trends; market access challenges; regulatory complexity and uncertainty; fiscal policy (including tax reforms in the United States); and, the rising cost of doing business in Canada (including regulatory costs).
Alberta’s vision for the oil and natural gas sector needs long-term direction and strategic focus in government decision making. We encourage the government to further address industry competitiveness and recommend the province:
- Articulate a vision for future development, complete with specific goals and performance metrics such as investment, production, and project approval-related targets;
- Require all ministries working with the oil and natural gas sector adopt a mandate to improve competitiveness as a key consideration in their decision-making processes;
- The Alberta Energy Regulator (AER) continues to work with industry to substantially streamline the regulatory approval process;
- Effectively implement climate policies with protection mechanisms for energy-intensive, trade-exposed (EITE) sectors, and re-invest any carbon-related revenue to EITE industries through recycling and innovation funding; and,
- Strengthen its support for liquefied natural gas (LNG) development on Canada’s West Coast, with the same level of commitment as its efforts on the Trans Mountain Expansion project (TMEP).
- In 2017, CAPP recommended the province adopt a “whole of government” approach to strengthen Alberta’s investment attractiveness while achieving policy objectives. Despite recognizing the important role competitiveness plays in the energy sector, government still needs to make a more concerted effort towards improvement.Industry recognizes the government’s commitment to advancing market access but this issue alone isn’t enough to ensure a competitive future for oil and natural gas development. CAPP encourages the province to redouble efforts to enhance competitiveness, and commit to goals and targets.
The Canadian Association of Petroleum Producers quotes: Tim McMillan, President and CEO
“Market access is a key factor driving industry competitiveness, but it is only one part of the equation. We need government to address the policy and regulatory challenges that make Alberta less competitive compared to other jurisdictions.”
- “In order to improve competitiveness we need to streamline the regulatory process by reducing timelines, modernizing our current regulations and improving efficiency.”
- “Canada is a global leader with a system of strong environmental standards and regulations. We have a high-quality product and should be the supplier of choice to meet increasing future energy demand.”
- “The U.S. is making tax reforms while the combined federal and provincial corporate taxes in Alberta have increased to 27 per cent, putting us at a significant disadvantage to our competitors and spurring foreign investment.”
- As global energy demand increases by 2040, oil and natural gas will be the largest sources of energy with demand accounting or 27 percent and natural gas accounting for 25 per cent by 2040.
- Capital investment is forecast at $42 billion in 2018, down from $81 billion in 2014. This is indicative on decreased confidence from investors in Canada’s oil and natural gas industry and the Canadian government in their ability to get projects completed.
- Currently the oil and natural gas industry contributes:
- $109 billion in direct real GDP in 2017 (6.25 per cent of Canada’s total);
- $12 billion in average annual revenue to governments between 2014 and 2016;
- 533,000 direct and indirect jobs in 2017 (includes the range of 200,000 in the service sector).
The Canadian Association of Petroleum Producers (CAPP) represents companies, large and small, that explore for, develop and produce natural gas and oil throughout Canada. CAPP’s member companies produce about 80 per cent of Canada’s natural gas and oil. CAPP’s associate members provide a wide range of services that support the upstream oil and natural gas industry. Together CAPP’s members and associate members are an important part of a national industry with revenues from oil and natural gas production of about $110 billion a year. CAPP’s mission, on behalf of the Canadian upstream oil and natural gas industry, is to advocate for and enable economic competitiveness and safe, environmentally and socially responsible performance.
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