PSAC is focusing on getting the message out to Ontario

Talking to every chamber of commerce in Ontario

Regina – Gary Mar, president and CEO of the Petroleum Services Association of Canada (PSAC), echoed an increasingly common sentiment, that the world needs more Canadian energy, when he spoke at the SIMSA Oil and Gas Supply Chain Forum in Regina on Oct. 3.

“We represent the upstream energy services sector and manufacturing,” Mar said.

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“I spend a lot of time, particularly in the province of Ontario, talking about how the energy sector is not an Alberta business, it is not a Western Canadian business, it is a Canadian business. So. when you go to a place like Sault Ste. Marie, and you go to the steel factory there, the Tenaris plant – Tenaris hires about 800 people to work in Canada. They produce about a billion dollars worth of steel. Zero per cent of that steel goes into the automotive sector. One hundred per cent of it goes into making tubulars for oil and gas.

“So, I’ve made presentations to the Chambers of Commerce of Ontario – all of them. All 90 chambers of commerce in Ontario. And I’ve tracked down the supply chain. I’ve asked our members to show me their invoices, and then we’ve looked at those invoices, in Ontario, particularly in the 905 region, and we tracked down who is actually manufacturing, not just the distributor of something made somewhere else. And those are the chambers of commerce we really focused one, because we want the people of Ontario to be just as concerned about the 65,000 jobs we create in Ontario as they are about a GM plant,” Mar said.

“We asked people in Ontario, ‘What’s the Number 1 export of Canada?’ They always say, ‘automotive and auto sector.’

“It’s significant. You’ll see motor vehicles are about 13 per cent, but oil and gas are about double that. About a quarter of Canada’s exports are in the form of crude oil or bitumen.”

He picked up on a point Saskatchewan Minister of Energy and Resources Bronwyn Eyre had just made, namely that capital investment in the Canadian oilpatch has dropped by half. Mar added that Canadian investment abroad has gone up over the same period of time.  “It’s a staggering, staggering set of figures,” he said.

He said 99.9 per cent of Canadian oil exports goes to the United States. He noted one company did take Canadian oil via tanker from Port Arthur, Texas, to China.

Infrastructure, the ability to get Canadian oil to somewhere other than the United States, is the key issue.

He said the federal government had completely dropped the ball on the Trans Mountain Expansion pipeline project.

Global energy demand is expected to grow by 27 per cent by 2040, despite some saying we will soon see peak oil consumption. Hundreds of millions of people in places like China, and India are being lifted out of poverty and into the middle class. They are demanding automobiles and affordable, reliable energy.

“My thesis is this: Canadian energy is the most responsibly produced energy on the face of the earth. It benefits the quality of life of every single Canadian. This is the message I take when I’m on the road to places like Ontario and Quebec and Atlantic Canada.”

While places like the 905 area code area get that message, but Toronto itself and Vancouver, “are a little bit different,” Mar said.

In Vancouver, they think a lot about ethically-sourced coffee beans, he noted, “But shouldn’t you care about where your tank of gas comes from as well?”

Environmental, occupational health and safety, or labour standards all see Canada at the highest levels in the entire world, he said.

There are 450,000 jobs, coast-to-coast, in the upstream sector. The taxes and royalties raised are important to our standard of living.

“Across Canada, there isn’t a single Canadian that isn’t affected by what we do,” Mar said.

“When I feel particularly snotty, I will say there are no bits of a chopped up journalist in a Canadian barrel of oil,” he added, referring obliquely to the 2018 killing of Jamal Ahmad Khashoggi by Saudi government operatives.

India and China’s imports are rising. Oil and gas production in the U.S. is at record levels. “There will come a time when the United States will continue to buy our oil cheap, process it and sell it to someone else,” he said.

Mar spoke of changing the narrative, raising awareness of the national supply chain for oil and gas that benefits all Canadians, and highlighting manufacturing jobs.

He touched on PSAC’s revised forecasts. The average expected oil price is now US$57 per barrel, as opposed November 2018 expectations of US$69 per barrel. The AECO gas price has gone up a bit, with the July 2019 forecast of C$1.60 per mcf, versus C$1.45 per mcf.

Cash flow for 2019 is forecast to drop C$25 billion compared to 2014.

“The number of wells drilled in 2019 has dropped rather precipitously, even from the previous year of 2018. But here’s the one good news in all this: we’re drilling fewer wells, but we’re drilling longer wells. Now we have wells that are much, much longer in terms of meterage,” he said.

The number of wells off the coast of Newfoundland is also going up.

Saskatchewan’s well forecast for 2019 has dropped, from 2,562 in 2018 to a forecast of 2,035. That’s broken down as a reduction from 516 to 450 wells in northwest Saskatchewan, from 1,287 to 945 wells in west central and southwest Saskatchewan, and from 759 to 640 wells in southeast Saskatchewan.

In Alberta there are 89,217 inactive wells, while Saskatchewan has 25,857 and British Columbia has 7,382, as of November 2018, he said. “This represents an enormous opportunity for work to be done in this area, except that there are a number of companies that have responsibility for the closure of these wells, and they don’t have the cashflow in order to do it.

“The worst case scenario is for us that these 122,000 wells become orphan wells, where nobody is responsible for the closure of them. It represents a huge environmental liability. What we’ve argued for, federal and provincially, is a super flow-through fund that would allow people to put third party money in to discharge these liabilities.”

Saskatchewan and Alberta governments support the idea, but they didn’t get far with Ottawa.

“Activity is down in Canada despite the projections for strong demand over the course of course of the next half a century,” he said. “The energy demands for the world, the overall majority is still going to be in the form of fossil fuels.”

“Access to tidewater is putting the ceiling on our ability to produce more.”

Certainty from government is a negative form of certainty he noted with Bills C-69 and C-48 providing barriers for development.

“We, as an industry, should be leading the charge to say we create important jobs. We have important economic activity associated with this sector,” Mar said.

“You cannot develop any kind of economy without access to affordable, reliable energy. You cannot develop any kind of energy without having some sort of impact on the environment. So, we think the Canadian energy sector, the manufacturing sector, need to tell the story of how we overlap those three areas. We’ve got a sweet spot. We are producing energy. We are promoting our economy. And we are doing it in an environmentally friendly way, that is responsible.

“I would propose to you that we need to have more Canadian energy, for Canada, and more than ever, the world needs more Canada,” he concluded.

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