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An oil pump jack in Gull Lake, Saskatchewan.Bayne Stanley/The Canadian Press

Canada's energy industry must tame high costs and secure access to new markets to weather an extended price slump and regain ground lost to U.S. shale producers, the head of the sector's top lobby group says.

Tim McMillan, president of the Canadian Association of Petroleum Producers, said on Monday that Alberta's share of North American investment in oil and gas has plunged sharply in the past two decades as more capital flows to U.S. shale zones such as North Dakota's Bakken and the Eagle Ford play in Texas.

It fell from 36 per cent in the mid-1990s to less than 20 per cent today, he said, even as the world's major oil companies sank billions into developing the oil sands. "The competitive position of Alberta has decreased fairly dramatically," Mr. McMillan told The Globe and Mail editorial board.

"The size of the pie has grown but the options of where capital can flow have increased," he said.

The warning on costs comes as the industry struggles to claw back expenses to cope with the dramatic drop in U.S. and world oil prices to less than $50 (U.S.) a barrel.

Companies have already shed thousands of jobs and cut billions from capital budgets since the industry downturn began last year.

In recent weeks, the cutbacks have accelerated amid expectations from analysts and executives that energy markets will remain depressed for much longer than originally expected – a stark challenge for oil sands companies that grew accustomed to triple-digit prices over the past decade.

In Alberta, the industry also faces the threat of rising costs as a result of a provincial review of royalty rates and higher levies on carbon emissions.

Mr. McMillan said the industry must redouble efforts to slash costs and boost access to new markets to remain competitive at lower prices.

"If the price of oil is going to be between $40 and $60 in the next two decades, we need to be technological leaders," he said.

"We need to have our costs in line. We need to clear the barriers. We can't afford to pay [a] $20 toll per barrel to get our products to market."

The industry has benefited from improved pipeline access to the key U.S. Gulf Coast market, but other projects such as TransCanada Corp.'s $8-billion Keystone XL remain delayed indefinitely.

At the same time, major expansions that would give oil sands producers access to richer global markets off Canada's east and west coasts have emerged as a flashpoint on the federal campaign trail.

Liberal Leader Justin Trudeau has pledged to enact a ban on oil-tanker traffic off British Columbia's northern coast – a move that would effectively kill Enbridge Inc.'s $7.9-billion (Canadian) Northern Gateway proposal.

New Democratic Party Leader Thomas Mulcair has said he would toughen environmental reviews for such projects, giving more weight to the industry's greenhouse gas emissions in deliberations.

Mr. McMillan warned against tightening the existing regulatory system and said policies targeting the sector's soaring carbon emissions are best left under provincial jurisdiction.

"I would want to ensure people had a full understanding of the system and what it offers to ensure that we aren't recreating the wheel," he said.

Follow Jeff Lewis on Twitter: @jeffalewisOpens in a new window

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