February 27, 2016

Being Resourceful with Our Resources

Oil and natural gas are part of everyday life in Canada. But we tend only to think of it when we fill up our car or turn on a gas stove.

But today the world’s energy markets are in a period of great structural change. This disruption is hurting Canadians. Canadians of all walks of life, in all parts of the country, in different industries, are feeling the crunch from the dramatic drop in world oil prices.

Unemployment claims went up more than 90 per cent in Alberta over the past year – almost double in 12 months. WestJet has cancelled 6 daily flights between Calgary/Edmonton and has shifted airplanes out of Western Canada. Moncton used to have 14 chartered flights a week to Fort McMurray. Today it has none. That’s more than 3,000 Atlantic Canadians who no longer work in the oil sands every week to support their families back home.

Canadians of all walks of life, in all parts of the country, in different industries, are feeling the crunch from the dramatic drop in world oil prices.

That's more than 100,000 direct and indirect jobs related to Canada’s oil and gas sector.

Quebec’s aerospace industry employs 40,000 people in total. Imagine all those jobs, wiped out, in one year.

More than $33 billion (40%) in capital investment has been cut from the oil and gas industry - the largest private sector investor in Canada.

This drop is more than Canada’s second-largest capital investor – the utility sector – spends in total. Imagine not a dime spent on any of Canada’s power plants, transmission lines, water treatment plants.

Revenue fell more than $60 billion (40%) between 2014 and 2015 - that's about the same as wiping out:

  • Quebec’s aerospace and Canada’s mining industries combined;
  • Canada’s entire forestry sector; or
  • 75% of Canada’s automotive manufacturing sector.

Government revenues are shrinking – the $17 billion in annual public revenues generated by oil and gas is at risk. This will impact every Canadian household – from the public services they get to the taxes and deficits they will bear.

As the Bank of Canada Governor Stephen Poloz recently said, the drop in crude oil prices has had an unambiguously negative impact on the Canadian economy.

Canada does not control the world price of oil, but we do control our choices when it comes to energy policy. Choices on infrastructure, trade, taxation, regulation and technology.

The choices we make before the end of this decade will determine Canada’s energy future for the next 20 years and beyond.

Our energy future will determine our quality of life.

So the question for Canada is this: what kind of oil and gas sector do we want to provide for our quality of life, today and for the next generation?

Will we develop our trade, technologies and expertise to give the world our best?

Will Canada lead the world in being resourceful with its oil and gas resources?

None of this is a given. It is our choice.

Canada’s energy resources are among the largest in the world. Canada is among the top five producers in the world for hydroelectricity, oil, natural gas and uranium.

In fact, Canada has the third largest oil reserves in the world. We have more than 170 billion barrels – 97% of it in the oil sands.

Canada is the leading oil country with the rule of law, human and Aboriginal rights, environmental regulations, a price on carbon, and a $1.3-billion voluntary commitment from industry to technology and innovation.

Through the Canadian Oil Sands Innovation Alliance (COSIA) industry is investing $1.3 billion into more than 800 technologies and innovations to reduce our impact on water, land and air.

Our goal is to make a Canadian oil with lower GHGs than similar oils.

This is our formula for prosperity: innovation; ingenuity; a resourcefulness with our resources.

And the benefits are shared across Canada. More than 2,400 businesses from coast to coast do business with Canada’s oil sands, including more than 1,100 businesses here in Ontario.

But for all our oil, we produce less than 4% of the world’s daily market share.

And Canada spent $17 billion last year to import foreign oil from the likes of Saudi Arabia, Venezuela, Nigeria, Angola … and the United States. More than half of the oil used in Ontario, Quebec and Atlantic Canada is imported. Canada has the energy Canadians and the world needs – our challenge is getting it there.


Because Canada lacks the infrastructure to move our own resources to our own citizens, and beyond.

The need has never been greater for Canada to have a thoughtful look at its energy opportunities. We need to take the long view on how the country can innovate to compete and grow in a changing, challenging world.

Now is the time for Canada to be more resourcefulness with its resources.

The dramatic drop of oil prices is a symbol of the tremendous structural changes in the world. Market, political and technological forces are transforming the global oil and gas market.

Demand for oil in China and emerging countries is growing at a slower pace.

OPEC countries and Russia have decided to maintain production at record-high levels, despite falling prices.

Sanctions have been lifted and Iran will soon supply another half-million barrels per day into an already over-supplied market.

Mexico has opened its oil to private investment. Mexican heavy oil is competing for markets with Canadian oil in U.S. Gulf Coast refineries.

Technological advancements such as horizontal drilling and multi-stage hydraulic fracturing from multi-well pads has produced an energy revolution in North America, especially in the United States.

This is the real challenge to our prosperity. Our only customer for our oil and gas exports is the United States, and it is rapidly becoming our greatest competitor.

Let me say it again: Our number one customer is now our number one competitor.

From 2008 to 2015, American oil production grew by 4.4 million barrels per day. That growth alone is more than all of Canada’s oil production. For the first time since Richard Nixon was president, the United States is exporting its oil overseas. Congress has lifted a 40-year-old-ban on oil exports and is selling now to China. At the same time, American natural gas production has grown dramatically. It’s gone from 0.5 billion cubic feet (Bcf) per day to 15.0 Bcf per day. Again, that growth alone is equal to all of Canada’s natural gas production.

So what is the impact on Canada?

Americans are making more of what we rely on them to buy from us. The volume of our natural gas exports is down 20 per cent. Today, about two-thirds of the natural gas consumed in Ontario is now imported from the United States. The Energy Information Administration projects that the U.S. will become a net exporter of gas by 2018.

The U.S. is Canada’s only gas customer – before the next federal election, that customer may not need to buy from us. At all.

Canada needs to find some more customers.

If Canadians get resourceful about our resources, we could turn these threats into opportunities.

For Canadian oil, we can invest more than $30 billion of private capital into pipeline infrastructure to reach more customers and expand Canada’s long-term economic capacity. Canada’s heavy oil could be exported west and east to Asia and Europe to build a more diversified, resilient customer base – one that pays higher international prices than we get today.

Let me say that again. There is $30 billion to be invested into infrastructure to build Canada’s long-term economic capacity.

  • TransMountain is a $6.8-billion private infrastructure project to build Canada’s economy.
  • Northern Gateway is a $7.9-billion private infrastructure project to build Canada’s economy.
  • Energy East is a $15.7-billion private infrastructure project to build Canada’s economy.

These projects can generate long-term, sustainable taxpayer benefits … at no cost to taxpayers.

TransMountain and Energy East would generate more than 33,000 new jobs per year for 25 years – and more than $2 billion in new government revenue per year for 25 years.

Getting the green light on these energy infrastructure projects would be a tremendous stimulus to the Canadian economy. They come without taxpayer cost. They give taxpayer benefits.

Pipelines are economic infrastructure in Canada’s national interest.

So if it takes a few more months to get to the right decisions, let’s do it. Canadians need to have confidence in the regulatory and political system. But let’s be clear – Canada needs to build more energy infrastructure.

We can grow Canada’s oil and gas industry responsibly. The National Energy Board’s recent Energy Futures report forecast:

Oil could grow by 56 per cent to 6.1 million barrels per day in 2040, driven by oil sands. Natural gas could grow by 22 per cent to 17.9 Bcf per day in 2040, driven by LNG.

But these are choices, not givens.

We will not realize Canada’s potential if we are not intentional.

Canada has no influence on world prices, but we could find better ways to get better prices.

Today, because of constrained infrastructure, Canadian oil and gas sells at a discount to prices in other markets. Nearly 100 per cent of Canada’s oil and gas exports go to one customer, the United States, who pays less than it gets on the world market for its oil and gas.

With more infrastructure, Canada’s oil and gas could reach more customers – within Canada, across North America, and around the world. By reaching more markets, Canadian resources would be sold for higher prices.

Without more infrastructure, costs for Canadian producers will increase, price discounts will widen, and investment and jobs will grow more slowly.

So what happens if no new export oil pipeline is built – no Keystone XL, no Northern Gateway, no TransMountain Expansion, no Energy East?

Even without new export pipelines, the NEB forecasts Canada’s oil sands will still grow, albeit more slowly. It will be costlier. More oil will move by rail. And Canadians will still be paid a discount on their natural resources – by as much as $10 higher than today’s discount.

If Canada’s energy infrastructure is constrained, we will not grow to match our potential.

This will have real and meaningful impact on Canadians. It will impact, government revenues. It will impact public services such as how we equip our military, how we staff our hospitals, how we build schools, and how we maintain roads to move Canadians and our goods to market.

It will impact investment and jobs – jobs that support Canadian families and our quality of life.

The United States will not import less oil; it will get more oil from Venezuela, Saudi Arabia and Mexico and less from Canada.

Those countries and their citizens will be the ones who benefit from developing their resources. And they may not do it with the same commitment to environmental standards, technology and innovation, or shared national prosperity.

The world needs more Canada, not less.

The world needs our resources – and our resourcefulness.

Our energy. Our innovation. Our technologies. Our expertise.

If we pull together, all Canadians – from downtown Montreal to northern Alberta – benefit.

The right energy choices Canadians make now and in the few years ahead will help to Canada:

  • To innovate to compete with new customers in new markets;
  • To innovate to a lower-carbon future that includes a healthy oil-and-gas industry; and
  • To innovate to remain prosperous for the benefit of all Canadians.