OILPATCH GETS SET FOR NEW ROUND OF TRUDEAUMANIA
Ready or not, Justin Trudeau is Canada’s prime minister at a critical time for the oil and gas industry.
The Liberal leader — relentlessly mocked in Conservative attack ads as “Just not Ready” — led his party to a majority government Monday after a marathon election campaign as the country teetered on recession and Stephen Harper’s plan for Canada to be an “energy superpower” has been undermined by low oil prices, limits to market access and concern about climate change.
Getting Canadian oil and natural gas to global markets, regardless of the changing political landscape, remains the most critical concern for the industry reeling from red ink, deep spending cuts and tens of thousands of job losses.
For all the boosterism from Harper’s Tories over nine years, it didn’t get many pipelines built.
“If you don’t get market access right, nothing right else matters,” one longtime industry executive cautioned ahead of Trudeau’s come- from- behind victory.
“If you don’t get it, in five or 10 years you’ll have a half- dozen big companies running the basin because those will be the only ones with the capacity.”
Think that’s industry fear mongering? Think again.
When the Calgarian Harper became prime minister in 2006, the Canadian Association of Petroleum Producers had 150 member companies. Canada is now the world’s fifth biggest oil producer — oilsands output has more than doubled to almost 2.3 million barrels per day — but today CAPP has only 82 members.
In an industry being transformed by big companies and unconventional resources, from shale gas to oilsands, mid- cap and junior companies have largely disappeared. Consolidation is likely to continue, with oil closing at US$ 45.89 a barrel Monday as industry adjusts to a “lower-forlonger” price scenario.
The Liberal majority removes the uncertainty of a widely speculated minority government and gives the changing industry political stability in Ottawa, CAPP president Tim McMillan said.
“It allows us to get down to work on what our priorities are, which really haven’t changed regardless of the election,” he said, listing access to markets and fiscal competitiveness.
Oilpatch investment firm Peters & Co. predicted Monday that capital spending would decrease 39 per cent from 2014 this year and fall 14 per cent in 2016 to mark only the third time since the modern industry emerged in Canada in the 1950s that capital spending will have declined in consecutive years. The others were in 1986- 87 and 1998- 99.
Thirty- five years ago this month, Liberal prime minister Pierre Trudeau responded to a global oil crisis with the heavyhanded National Energy Program. The NEP hiked taxes on producers, which led to years of federal- provincial hostility in Western Canada. His son acknowledges he must live with that legacy.
“I’m the leader of the Liberal Party of Canada, my last name is Trudeau and I’m standing here at the Petroleum Club in Calgary,” Trudeau said in announcing his climate change policy in February.
“I understand how energy issues can divide the country.”
He’s said Harper’s intransigence on climate has left Canada divided, isolated internationally and challenged to sell growing volumes of oilsands crude on international markets. In February, Trudeau said he would set “pragmatic” targets on greenhouse gas emissions and allow provinces to develop their own policies to meet the obligations, but more recently he’s said he won’t set a specific reduction target.
“What we need is not ambitious political targets,” he told CBC- TV earlier this month. “We need an ambitious plan to reduce our emissions in the country.”
On pipelines, Trudeau supports Keystone XL to the United States, conditionally supports Trans Mountain expansion but opposes Northern Gateway in British Columbia and withheld judgment on Energy East to New Brunswick. He promised to end subsidies to oil companies but offered $ 200 million a year to support innovation and clean technologies in forestry, energy and agriculture, and $ 100 million to clean technology companies.
The first big international stage for Trudeau, as well as Alberta’s newly elected Premier Rachel Notley, will be the UN’s climate change summit in Paris early in December.
The combination of an NDP government in Alberta and the once- hated Liberals in Ottawa — after years of industryfriendly Conservative regimes in both jurisdictions — presents challenges to the oil and gas sector but they are hardly insurmountable, cautioned Michal Moore, a professor at the University of Calgary’s school of public policy.
“You’re working with difficult situations from their perspective but ones that could produce a very consistent and probably predictable future as far as regulations go,” Moore said. “My guess is that’s something they can live with if the expectations are made clear as far as working with them.”
He noted the Conservatives talked a good game in support of oil and gas but then left the industry to do the legwork on critical files from climate change to First Nations.
Nobody expects a wave of Trudeaumania in the oilpatch, but after the Harper experience, less may well mean more.