“A silver lining to this decade of disruption is that it’s driving oil and gas companies to innovate. No longer are oil and gas companies just considered an energy business, they’re now in the manufacturing business.”
CALGARY, May 22, 2019 /CNW/ – Over the past decade, uncertainty has been constant in Canada’s oil and gas industry, brought on in part by unknown investment outlooks, lack of market access, and a complex regulatory process. According to PwC Canada’s 2019 Energy Visions report, there are two main factors that could catalyze change for the oil and gas industry: a national energy strategy as well as further technological innovation.
The first step in creating a national energy strategy is to restart the energy conversation with a focus on the future. The federal government, in collaboration with provincial governments and energy companies, need a national policy with a clear vision that supports industry objectives as well as environmental imperatives. Having a policy of this nature will facilitate infrastructure to move Canadian oil and gas exports to non-US markets, as well as encourage further investment in sustainable energy sources.
With a policy focused on supporting the energy industry, Canada could capitalize on its competitive advantage: its vast resource base. Currently, the United States is Canada’s biggest competitor, as explosive US supply growth has shifted the global energy landscape. The Canadian industry can no longer expect US markets to absorb all of its increased production. Exporting Canadian oil and gas to expanding Asian economies becomes more urgent every year. In addition to supply, environmental policies in many of these new markets are also propelling demand for lower-carbon energy sources like LNG.
“Canada’s energy sector has faced evolving issues in the past decade, but it has always responded with effort, innovation and resilience,” says Reynold Tetzlaff, National Energy Leader, PwC Canada. “Today, the expanding number of challenges has created an overall lack of clarity and pathways for future progression. Complexity is now the norm in a capital intensive industry, used to making long term decisions, but now faced with many shorter term challenges.”
A silver lining to this decade of disruption is that it’s driving oil and gas companies to innovate. No longer are oil and gas companies just considered an energy business, they’re now in the manufacturing business. Margins and return on capital have become important metrics of success, and technology is seen as an opportunity to speed up resource recovery and lower unit costs as production has increased.
“At PwC we believe companies have an opportunity to turn disruption into opportunity and technology is a major part of the equation. Today, technologies centred around data are having a profound impact. The industry produces a lot of data and advanced analytics like machine learning and artificial intelligence give new ways of interpreting the data and creating previously unknown insights,” added Tetzlaff.
Past technology investments are paying off as operating costs have been reduced by nearly half since 2014. Also, greenhouse-gas-emission intensity has fallen by 25% in the past decade, bringing oil-sands barrels in line with US production. What’s more, the industry continues to invest in technology that keeps production competitive. However, there is a growing innovation gap. Canadian companies are investing money in the early stages of technology development (testing and validating the technology) only to have other countries commercialize it.