Gaining Ground

September 15, 2013

Deloitte and Touche, an international accounting and consulting firm, has published a 32 page report on the 10 oil sands obstacles that are actually opportunities.

The report’s 10 points summarized are :

• 1. The national interest. “...our oil industry is exceptionally well positioned to diversify and expand. It’s also no secret that many of the skills most needed by the energy industry are in short supply in this country. ” (p.4). The oil sands represents $2.1 trillion in economic benefits, including $783 billion in taxes to be paid over the next 25 years. (p.5) 
• 2.Fair market value. At 1.7 million bpd, that’s about $27 million in lost revenue. Again, every day, due to lack of pipeline capacity. “To fetch global prices, in other words, we need to be playing on the global field.” (p.6)
• 3.Productivity. Canada is among the least productive of the OECD nations, and while our oil and gas sector outperforms other countries on this score.  The close to $100 billion invested in the oil sands over the past decade has driven both innovation and jobs growth.
• 4.The symbiosis of juniors and independents.  In Canada, “43% of new jobs come from the fastest growing 4.9% of all firms. (p.10). The larger firms need the innovation and flexibility the smaller firms can offer.
• 5.Consumer energy literacy and national unity. Deloitte states “: “industry really does have to continue to make the environmental gains it has promised to make and opponents really do have to inform themselves as best they can of the relevant facts.” (p.12)
• 6.Maximizing value. One way in which the oil sands can protect its social license to operate is to ensure more value is added to the product before it is shipped to consumers. (p.14)
• 7.Pipelines v railcars. In the final analysis, rail is at best an interim solution to oil sands transportation capacity constraints. To maximize the resource’s potential, we are simply going to need more pipelines.
• 8.Ethical oil. The argument is that it is frivolous to focus negative attention on the oil sands sector – a sector that is continuously trying to respond to its critics in good faith – when there are so many repressive oil-producing regimes in the world that goal most completely unchecked.
• 9.Collaboration. Deloitte sees the benefits of collaboration can most readily be had in cost reduction efforts, especially with regards to logistics, R&D and business processes.
• 10. National energy strategy.  The report notes the broad richness of Canada’s resource endowment and the regional concentrations of particular resources (e.g., natural gas in B.C., oil sands in Alberta, uranium in Saskatchewan, hydro-electric power in Quebec).

 

Commentary

The Deloitte report is an eloquently written defense of the oil sands. It stresses the size and importance of the oil sands to the broader Canadian economy, indeed to the overall national fabric.

Sources

• a)"Gaining Ground in the oil sands" Deloitte and Touche, see https://www.deloitte.com/assets/Dcom-Canada/Local%20Assets/Documents/EandR/ca_en_energy_oil_sands_2013_110612.pdf