As governments work toward reopening and rebuilding the economy, Canada’s oil and natural gas industry is positioned to play a critical role in developing solutions and delivering results. Oil and natural gas is one of Canada’s largest employers and most significant economic growth generators, and can drive a robust economic recovery to the benefit of the entire country.
“A strong industry creates jobs for Canadians and generates desperately-needed revenues for government,” says Tim McMillan, president and CEO, Canadian Association of Petroleum Producers (CAPP). “The oil and natural gas industry is crucial to our country’s economic well-being and can help lead our recovery, as well as be the foundation for long-term resilience.”
Over the past few months, the oil and natural gas sector has worked closely with the federal government to identify measures to support economic recovery while managing the health risks of COVID-19.
The role of oil and natural gas
The oil and natural gas sector is Canada’s largest industry, generating more than $100 billion in gross domestic product (GDP) annually and supporting half a million jobs across the country. The industry is also the biggest source of international investment and produces the country’s largest export commodity. 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 Indigenous reconciliation and climate change.
“The oil and natural gas industry is crucial to our country’s economic well-being and can help lead our recovery, as well as be the foundation for long-term resilience.”Tim McMillan
CAPP notes that oil and natural gas projects are shovel-ready and shovel-worthy. They can immediately put Canadians back to work with a multi-billion-dollar national supply chain, offer economic and self-sustaining opportunities for Indigenous communities and generate desperately-needed revenues for governments in the form of taxes and royalties. These objectives can be achieved while leveraging the sector’s leadership in emissions reduction, water protection, and land and species management.
As global economies re-open, oil and natural gas demand around the world is expected to rebound. Long-term energy demand is driven by trends like population growth and rising standards of living. As a top 10 producer of both oil and natural gas in the world, Canada’s recovery can be driven by supplying responsibly produced energy to the world. A strong oil and natural gas sector will create good jobs and economic growth, in turn generating revenues that will help Canada address issues of debt and unemployment.
According to CAPP and McMillan, it will be important for the sector to continue working collaboratively with other industries and the government. A key area will be investment: Canada will be competing with every other jurisdiction in the world for limited investment dollars. And with rising national debt resulting from the economic crisis, attracting capital will be critical to growing Canada’s economy and getting Canadians back to work.
“Provincial and federal governments have stepped up to provide critical support to industry during this crisis, but we cannot rely on government spending alone for recovery,” says McMillan. “It is crucially important we make the right policy decisions so Canada can compete for investment dollars in what is going to be a hyper-competitive international market.”
A recommended path forward
CAPP has publicly released letters it submitted to the federal government through the organization’s ongoing work with a number of ministries to stabilize Canada’s economy and position the country for recovery. The May 27, 2020 letter focuses on economic recovery and outlines three areas of recommendation to provide certainty to capital markets and attract investment back into Canada’s resource industry. The recommendations to the federal government include:
- Visible federal commitment to work with industry to provide clarity and certainty to capital markets that Canada is a supportive and competitive place to invest over the long term.
- Develop and implement fiscal tools that enhance and level the investment playing field, with a priority on full, immediate deductibility for sector capital investments, including clean technology. This is a powerful tool for attracting large-scale investment and jobs back into Canada’s economy.
- Evolve the existing COVID and Market Crisis Federal Joint Working Group (JWG) to create a panel or round table group for investment and major projects. The group would have senior representation from industry as well as major relevant federal government ministries governing natural resources, climate and finance.
McMillan adds, “Canada’s oil and natural gas industry is committed to creating good jobs, generating benefits for Indigenous communities and advancing Canada’s environmental leadership. By working collaboratively with the federal government we have an opportunity to reset the national conversation about energy and bring Canadians together to build value across the country.”