Natural gas and oil crucial to Canada’s economic recovery

Vision document outlines industry’s huge potential to create new jobs and government revenues, while addressing emissions.

The Canadian Association of Petroleum Producers (CAPP) has released a vision for Canada’s post-pandemic economic recovery. The document highlights the role of Canada’s natural gas and oil industry in driving the creation of jobs, investment and revenues, all within the context of industry’s environmental leadership and innovations to reduce pe- barrel carbon emissions.

Titled A Vision for Canada’s Recovery, the document notes, “Canada’s natural gas and oil industry is positioned to play a critical role in developing solutions and delivering results. This sector is one of Canada’s largest employers and economic growth generators, and can drive a robust, sustainable economic recovery to the benefit of the entire country while continuing to drive down emissions.”

The vision highlights how strategic investments and federal government policy choices that coincide with the projected global rebound in energy demand could enable Canada’s natural gas and oil industry to drive a strong recovery, creating opportunity and building value by employing Canadians while shrinking the country’s deficit. The right policy environment would result in annual incremental impact through 2030 of $20 billion per year in investment, 120,000 additional permanent jobs, $45 billion increase in GDP, and $7.5 billion per year increase in government revenues.

A robust oil and natural gas industry would create jobs, investments and revenues Canada desperately needs.

Canadians support recovery that includes oil and natural gas

Natural gas and oil are essential not only to post-pandemic recovery but also to human progress and quality of life, in Canada and around the world. From fuels for heating, cooking, agriculture, manufacturing, construction and transportation, to making everyday items like contact lenses, running shoes, carbon fibre for lighter and more efficient vehicles and plexiglass for personal protective gear, oil and natural gas underpin virtually every aspect of Canada’s economy — and Canadians’ lives.

A recent survey by Ipsos indicates the majority of Canadians support the upstream energy industry, and understand how vital Canada’s oil and natural gas are to daily quality of life. Ipsos data shows nearly two-thirds of Canadians (64 per cent) say natural gas and oil must be part of Canada’s recovery, and more than half (55 per cent) believe supporting jobs in Canadian natural gas and oil is more important than ever to kick-start the economy.

The COVID effect

The vision document also provides a close examination of how Canada’s upstream industry has been impacted by the pandemic-related lockdown and resulting reduction in global demand for oil and natural gas. In 2020, Canadian producers decreased output by 740,000 barrels per day (b/d) and announced $8.7 billion in capital investment reductions, representing a 32-per-cent decline compared with 2019. The impact on provincial gross domestic product (GDP) is real and severe, especially in Newfoundland and Labrador (forecasted 7.7 per cent decline in 2020) and in Alberta (forecasted 8.4 per cent decline in 2020). These cuts are estimated to cost the Canadian economy $15.2 billion annually in export revenue – an economic impact that could continue until 2030.

In addition, an estimated 28,000 direct and 107,000 indirect jobs have been lost in the oil and natural gas sector in 2020. The outlook for 2021 is highly uncertain and additional jobs losses are possible. Notably, because of the industry’s widespread supply chain, job losses have impacted every region of the country.

Aligned with climate, reconciliation objectives

In addition to contributing to Canada’s economic recovery, a strong oil and natural gas sector can help advance the federal government’s objectives related to both climate change and Indigenous reconciliation.

A thriving Canadian industry will drive ongoing innovation to improve environmental performance, by developing and applying technology within the industry that reduces emissions. These technologies can also be utilized by other sectors and shared worldwide to drive global emissions reductions. As a part of the highly integrated international energy system, Canada’s oil and natural gas industry is well positioned to provide expertise in both science and technology to reduce emissions at home and around the world. Canada can take a leading role in reducing overall global emissions, enabling this country to maximize our unique expertise, innovation and technology to contribute to global emissions reduction.

Regarding Indigenous prosperity, the industry’s strongest role is through ‘economic reconciliation’ — identifying feasible ways to share economic opportunities arising from resource development, while continuing to improve and grow relationships based on trust and respect. Responsible development contributes to overall reconciliation and Indigenous self-determination by supporting the growth of sustainable Indigenous communities.

Rising global energy demand

Prior to the pandemic, the global demand for natural gas and oil grew continuously for 20 years. Worldwide energy demand is expected to rebound in the post-pandemic period, though projections of the time frame for demand recovery are continuously being revised.

Recovering demand in India, China, the Asia-Pacific region and elsewhere presents an opportunity for Canada to supply four to six million barrels per day (b/d) into the global market. Securing additional international customers for our natural gas and oil will enable greater revenue generation for Canada — and help address climate change on a global scale, because Canada’s resources are produced using advanced technologies that reduce emissions intensity.

Recommended actions

The vision document includes recommendations for policy decisions to position Canada for success in a hyper-competitive international market for private investment. This includes making a visible commitment to work with industry to provide clarity and certainty to global capital investors by promoting Canada’s leadership in environment, social and governance (ESG) performance. Investment dollars will not only support growth in the energy industry but are also vital to developing and commercializing technologies that reduce emissions. The vision document calls on both industry and government to work together to achieve this goal.