“Canada is a trading nation and a global resource powerhouse...Canada is also a significant participant in the global market, as both a producer and consumer.”
is issues manager with the Canadian Association of Petroleum Producers
It’s no secret why foreign investors are active in Canada’s energy sector, says Travis Davies, issues manager with the Canadian Association of Petroleum Producers (CAPP).
“Canada is a trading nation and a global resource powerhouse,” he says. “Canada is also a significant participant in the global market, as both a producer and consumer.”
He says it’s a plus that Canada’s governments own the energy resources and set the rules for their development – for both operations and environmental protection – as well as having approval over exports and setting the rules on royalties and taxation.
“Then international companies investing here must meet all these rules,” Mr. Davies says.
He notes that the global petroleum industry is highly competitive for investment sources, and that private capital looks internationally for the best return on investment, adjusted for political and social risk.
Moreover, he says that the Canadian upstream petroleum industry embraces the major underlying principles of the domestic economy: capitalism, free markets, private property and the rule of law.
“While not applicable in all instances within the Canadian economy, these principles form the basis and backdrop for evaluation of economic benefit and decision-making,” Mr. Davies says.
While exploration and development costs tend to be higher in Canada than in many parts of the world, Mr. Davies explains that this is offset by the low political and social risk to investment capital. He points to oil and gas industry statistics that help to attract foreign investment.
• National accounts: The industry brings in annual revenues of $100 billion, representing more than six per cent of the country’s gross domestic product, and employs about 550,000 Canadians, directly and indirectly.
• Reserves: Canada has the third largest reserves of crude, behind Saudi Arabia and Venezuela. More than 80 per cent of the world’s reserves are state-controlled, and less than 20 per cent of that is accessible to private capital. There have been recent technological advances in the development of shale gas, tight gas and coal-bed methane.
• Production: Canada is the largest source of imports of crude oil and natural gas to the United States. Canada’s oil and gas account for 16 per cent of total exports.
Mr. Davies says that with $55 billion in capital spending in 2012, up from $54 billion in 2011, the oil and gas industry is the largest private sector investor in Canada.
“It’s dependent on both foreign and domestic sources of capital – shareholder equity and foreign direct investment,” he adds. “As access to capital is extremely important to this industry, CAPP would not support any proposal amendments that would restrict such access.”