Canada’s oil and gas sector is keeping its collective fingers crossed for good news in the coming 12 months to ease investor concerns and help get Canada onto a more even playing field with global energy competitors, according to Jason Langrish, president of the Energy Roundtable, a private sector forum launched in 2004 to help define the Canadian energy sector’s role in domestic affairs and international markets.
“There are several questions marks hanging over the sector,” he says. “One has been answered – the LNG Canada project in British Columbia has its Final Investment Decision. If the Trans Mountain pipeline project gets shovels in the ground again, and if there are positive developments on the Keystone XL project – or even if two of these three things happen – the mood will brighten.”
However, Mr. Langrish cautions that even positive developments will probably not make a huge near-term difference to the price Canadian energy fetches – the differential between the West Texas Intermediate, a benchmark in oil pricing and what Canadian crude producers receive – but it should improve investor sentiment. It could also lead to some money flowing into the sector in the expectation that the differential will narrow in the future. In the meantime, producers need to keep lowering their costs by focusing on more technological innovation.
While question marks hang over the sector in general, Mr. Langrish points out that the increase in activity in the Canada’s tight oil and gas liquids-rich regions, such as the Montney and Duvernay formations in Western Canada, are world-class assets and are drawing investment.
“The output from these plays is of a higher quality than bitumen and very heavy oil from oil sands and therefore tends to fetch higher prices or have less of a differential from the Western Hub pricing,” he says. “The problem is they are not a substitute in terms of job creation and scale of investment for what the oil sands were a few years ago.”
But the bottom line for the longer-term success of Canada’s energy sector, says Mr. Langrish is: “Market access, market access, market access.”
Advertising produced by Randall Anthony Communications. The Globe’s Editorial department was not involved in its creation.