‘Urgent action’ needed to restore competitiveness of oil and gas industry

Investment in Canada’s oil and gas industry is expected to fall again this year as higher taxes and regulatory uncertainty persuade investors to spend elsewhere, says the head of a group that represents Canada’s oil and gas industry. “We need some urgent action, now,” said Tim McMillan, CEO of the Canadian Association of Petroleum Producers, citing in particular recently reduced corporate taxes and regulatory burdens by the U.S. under President Donald Trump. “We’ve seen other countries announce that in light of the tax changes just recently in the U.S. — China, Japan, Russia — have all said they’re going to look at their tax policies to ensure that they are competitive,” he said. “No country is closer to or more challenged with competition with the U.S. than Canada.” McMillan appeared at a news conference in Ottawa one day before the federal budget is to be presented, but the event was cast as the introduction to a series of economic reports, not a prebudget submission. He said regulatory confusion and delays in Canada have prevented the timely completion of pipeline projects such as the Trans Mountain expansion, leading to difficulty in getting crude oil to markets, as well as the current steeper-than-usual discounts being paid for Canadian oilsands crude compared with benchmark New York-traded oil. Poor pipeline access has also hurt Canadian energy company stock prices, which have underperformed U.S. companies since the downturn of 2008-09, according to a report by analysts at Calgary-based AltaCorp Capital Inc. published Monday. “The absence of adequate market access for crude oil out of Canada has repeatedly impeded equity valuations and is once again driving a wedge between the performance of Canadian investments and global alternatives,” it said. McMillan said initiatives including the recently proposed replacements of the Canadian Environmental Assessment Agency and the National Energy Board are harming Canada’s reputation as a transparent and fair place to do business. “There are 50 policy and regulatory initiatives that are currently being considered by federal and provincial governments,” he said. “The scope and pace of these changes are creating investor uncertainty as well as unexpected and unnecessary costs and delays for our industry.” He said capital investment in the oil and natural gas sector increased globally in 2017, but fell in Canada to $45 billion — down 19 per cent from 2016 and 46 per cent from 2014. Spending last year increased by 38 per cent to $120 billion in the United States, McMillan added. Suncor Energy CEO Steve Williams said on a conference call earlier this month that “Canada needs to up its game” to attract investment away from the U.S.