Reimagining Canada's energy policy

Pipelines vital to national energy strategy as global landscape shifts

Over the past decade, uncertainty has been a constant in Canada’s oil and gas industry, brought on in part by short-term political thinking and regulatory constraints. While the government needs to lead a more effective energy strategy, industry can influence the direction as it finds new ways to create value.

How we got here

“Without a coherent and overarching vision on energy development, Canada will not fully capitalize on its vast energy potential.”

—Energy Visions 2011

Catalyzing change

Eight years ago, industry leaders warned the absence of an overarching energy strategy would lead to lost opportunities and let energy policy be environmental policy by default. Their predictions proved correct.

Without the right national policies in place, efforts to build pipelines to diversify oil markets haven’t materialized. Various pipeline projects were cancelled or left in limbo. And a series of more than 30 planned liquefied natural gas (LNG) export projects faced a similar fate, as uncertainty over regulatory, financial and fiscal conditions—along with opposition from environmental groups—stalled development.

How can Canada take advantage of its energy potential? It’s a question we’ve asked in our Energy Visions reports since 2011. And the answer has been consistent: the federal government, with support from provincial governments, needs a national energy policy with a coherent vision on development that supports environmental imperatives and industry objectives. What’s more, it needs to reduce the industry’s reliance on the United States and create new markets in Asia.

Industry at a turning point

A national energy strategy

While the Canadian energy sector dealt with its own set of challenges, the global energy market is undergoing major change.

The United States is now Canada’s biggest competitor. Explosive US supply growth has shifted the global energy landscape. By 2025, it’s estimated the United States will account for one-fifth of global oil production and one-quarter of global gas production, according to the International Energy Agency (IEA). Canadian industry can no longer expect US markets to absorb all its increased production.

Exporting Canadian oil and gas to expanding Asian economies becomes more urgent every year. Over the next two decades, the IEA forecasts Asia will account for half of global growth in natural gas demand and more than 80% of the increase in oil demand. Environmental policies in many of these new markets are also propelling demand for lower-carbon energy sources like LNG.

In Canada, the absence of a national strategy to adapt to market dynamics has put us at a disadvantage. The divide between internal and external influence, local and national policies, and continental and international developments has become increasingly difficult to manage. More than ever, industry needs government support and leadership from all levels to make sure we capitalize on our Canadian competitive advantage: our vast resource base.

More than ever, industry needs government support and leadership from all levels to make sure we capitalize on our Canadian competitive advantage: our vast resource base.

Restarting the energy conversation

Perspectives on energy development have become more and more polarized over the past decade. Robert Johnston, managing director for global energy and natural resources for the Eurasia Group, believes the first step in Canada creating a national energy strategy is to restart conversations around the future of energy. Industry and governments have often focused the narrative on what’s happening now or has happened in the past.

Johnston also says there’s a need to work on “vastly improved industry/government messaging around Canada’s role in, and commitment to, a world that is on a slow but steady path of increasing energy demand while also increasing degrees of decarbonization. There’s a positive story to tell, but it’s frequently lost in fighting between provinces or between industry and government.” Leaders should create an energy conversation that reflects Canada’s place in a transitioning market.

Looking ahead

What could a Canadian energy strategy look like?

The energy industry isn’t short of ideas for inclusion into a growth-focused energy strategy. In early 2019, the Canadian Association of Petroleum Producers released a list of policy priorities to position Alberta and Canada to grow investment and production around pillars like market access, regulatory competitiveness, climate policy and economic policy.

Infrastructure approval process

Industry leaders want a clear, stable process for the approval of infrastructure projects like pipelines. Once a regulator has passed judgment on a project, based on well-defined procedures, due process and community consultation, how should the government stay involved to help make sure the project moves ahead?

The process needs set time limits and should focus on the economic and environmental impacts of the project. A recent study from the C.D. Howe Institute shows it can take up to 11 years for pipeline approvals in Canada. Issues like climate change need to be addressed through broader public policy, not the project approval process.

Certain pipelines were approved through the regulatory process before being stalled by legal issues and opposition from environmental and some First Nations groups. Industry is asking this process be clear and laid out up front to avoid these legal issues.

View more

Relations with potential export partners

Three-quarters of Canadian chief executive officers (CEOs) are concerned about the effect geopolitical uncertainty will have on their organization’s growth prospects. As a result, a role exists for provincial and federal governments in developing relations with potential export partners, particularly with state-owned energy companies that can finance large-scale export and import facilities.

View more

Competitive taxation regimes

Provincial and federal governments need to keep fiscal and taxation regimes competitive with other energy-producing regions to attract investment. This includes federal taxes, provincial taxes and royalties, and municipal property and local taxes.

Jan Stuart, global energy economist at Cornerstone Macro, says there’s an opportunity for Canada to make sure it plays an important role in the long-term oil and gas market. “The short answer is: Stay toward the lower end of the cost curve and please don’t have royalty/tax surprises. Canada’s upstream business climate is hard to beat. That should win out over time.”

View more

Increased domestic use

A plan to increase domestic use of Canadian energy resources is needed. This includes using more Canadian oil in Canadian refineries and natural gas for power and heating, particularly on the East Coast.

View more

A carbon tax strategy

Industry supports a strategy to reduce greenhouse gases that doesn’t disadvantage Canadian exports. Carbon policies must be built around certainty and stability. Without these, large projects can’t proceed as planned.

View more

Innovation helping manage infrastructure risks

Infrastructure delays are pushing oil and gas companies to innovate. For example, growing investment exists in partial upgrading technologies, eliminating the need to add diluent to bitumen to make it pipeline-ready. If all bitumen produced in Alberta were partially upgraded, existing export pipelines could carry an additional 600,000 barrels per day, according to Alberta Innovates. It would also cut costs, as buying and transporting diluent adds an estimated US$8 to US$14 per barrel.

Technology used to cut the cost of transporting bitumen by rail by eliminating diluent is also being commercialized. Removing diluent would reduce freight rates by 40% and render the bitumen inert, significantly improving the economics and safety, according to one oil-sands leader. What’s more, a project to transform oil-sands bitumen into “pucks” and wrap it with recycled polymer plastic that can be shipped in rail cars or shipping containers is under way, with a 10,000-barrel-per-day pilot project at the planning stage.

Canada gets another shot at LNG exports

Does growing global demand for natural gas present new opportunities for Canada?

Read more


Explore Energy Visions

From technology to transformation

Continue reading

Navigating the energy transition

Continue reading

Energy Visions 2019: Crisis to catalyze change or history repeating?

Continue reading

Contact us

Adam Crutchfield

Adam Crutchfield

National Internal Firm Services Leader, PwC Canada

Tel: +1 403 509 7397

Jason Bergeron

Jason Bergeron

Partner, Technology Advisory, Digital Energy Lead, PwC Canada

Tel: +1 403 509 7470

Clinton Roberts

Clinton Roberts

Deals Calgary City Leader, Partner, PwC Canada

Tel: +1 403 509 7307

Reynold Tetzlaff

Reynold Tetzlaff

Vice-Chair and Managing Partner Alberta & Prairies Region, PwC Canada

Tel: +1 403 509 7520

Eugene Quo

Eugene Quo

Partner, PwC Canada

Tel: +1 403 509 6379

Brendan Hobal

Brendan Hobal

Partner, PwC Canada

Tel: +1 780 441 6836

Follow PwC Canada