B.C. key to market access for oil and natural gas

By Geoff Morrison, manager of B.C. Operations, Canadian Association of Petroleum Producers

Image courtesy of Apache.

Image courtesy of Apache.

As Canada’s window to the Pacific, British Columbia’s role in expanding and diversifying markets for Canada’s oil and natural gas resources cannot be overstated.

Responsibly producing and trading our abundant natural resources creates jobs, generates taxes and royalties, contributes to stronger, more prosperous communities, and benefits the country economically as a whole.

At present, the United States is Canada’s only customer for oil and natural gas exports. Natural gas exports to the U.S. declined 16 per cent over the past five years and are projected to drop further as abundant and affordable supply makes the U.S. increasingly self-sufficient. Likewise, U.S. demand for oil is flat, a trend expected to continue in the medium term, while Canadian production is poised to double over the next two decades.

In Asia, meanwhile, demand for oil and natural gas is growing at a rapid pace. The International Energy Agency estimates world energy demand will increase 35 per cent by 2035, driven in large part by expanding economies such as China and India. From a supply perspective, Canada’s oil and natural gas assets represent a significant wealth opportunity for all Canadians, provided we remain competitive and develop the infrastructure necessary to connect to these markets.

British Columbia’s proximity to Asia and its tidewater access make it key to supplying Asian markets.

Planning and regulatory work continues on proposed B.C.-based pipeline projects, such as Enbridge’s Northern Gateway, Kinder Morgan’s expansion and many proposals to liquefy natural gas and ship it to world markets.

Image courtesy of Apache.

Image courtesy of Apache.

We recognize the public’s concerns related to crude oil pipelines and marine transportation proposals in B.C. are genuine and substantial. We believe these concerns can be resolved to the public’s satisfaction through continued responsible resource development, implementation of world-class operating practices and leading spill prevention and response capabilities.

Canadians expect the oil and natural gas industry and governments to ensure environmental risks are mitigated while realizing the jobs and economic growth. We agree and are committed to doing so, contributing to the high standards of living we have come to expect and enjoy due to our abundance of natural resources, and the planning, investment and innovation of previous generations of Canadians.

For example, oil sands development is expected to generate $117 billion in economic activity in Canadian provinces outside of Alberta over the next 25 years. About $28 billion will be generated in B.C. alone, according to the Canadian Energy Research Institute. Transportation infrastructure, including pipelines, is critical to ensure these benefits are realized.

In addition to the work underway on oil projects, diversifying natural gas markets through exports of liquefied natural gas (LNG) is critically important to the Canadian natural gas industry.

Abundant supplies have seen North American natural gas prices drop to the lowest level in a decade. Due to transportation costs and competing U.S. supplies, western Canadian natural gas is now less competitive in its traditional U.S. and eastern Canadian markets.

To adapt to this new market reality, ensure an outlet for production growth and capture a share of the growing global LNG markets, the natural gas industry is focused on building LNG terminals on the West Coast and exporting the product to Asia, where demand is growing and prices are currently much higher than in North America.

Australia and the United States are only two of Canada’s international competitors for offshore natural gas markets. And both are ahead of Canada in terms of established LNG infrastructure development and commercial relationships with consuming nations.

Canada can be a competitive supplier to offshore natural gas markets. To do so, however, we must have a collective sense of urgency and shared commitment to compete in these global markets.

B.C.’s royalty regime, which governs the producing part of the natural gas industry, is competitive with other jurisdictions and generates significant resource revenue for the province. That same type of competitiveness must extend to the fiscal framework LNG exporters need to attract the substantial investment capital that will be needed to open new markets for a resource that otherwise may be stranded in the oversupplied North American market.

If LNG projects do not move forward, reduced market access will ultimately result in reduced investment activity and jeopardize the economic benefits of natural gas development.

A calculation based on a 2012 report by the Canadian Energy Research Institute shows the proposed LNG facilities on the West Coast could generate about $150 billion in taxes and $500 billion in GDP growth across Canada over the next 25 years.

In summary, Canada’s oil and natural gas industry is positioned to continue to create significant value for all Canadians as global energy demand increases. To achieve these benefits, however, we must remain competitive, we must maintain the confidence of the public that we are acting responsibly, and we must align within Canada to compete effectively on the global stage.

It’s an opportunity for today’s generation to act as those before us and to seize the opportunity to not only sustain but better the quality of life for all Canadians.

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