“Recovery of the oil and gas industry will continue to be a long-term process” was the main message business operators heard from the guest speaker at the monthly meeting of Ponoka and District Chamber of Commerce on Tuesday, June 21.
About 20 people came to the lunch-time session at the Ponoka Royal Canadian Legion to hear Chris Montgomery, manager of exploration and production communications for the Canadian Association of Petroleum Producers (CAPP) touch on the biggest issue facing the industry currently.
CAPP represents about 90 per cent of Canada’s producers and has been lobbying anyone that will listen about what they have been doing and need to have in order to bring the industry out of the present doldrums.
“For the past three years, we’ve been talking to municipalities about the direct impact they have on our membership and this economy is likely also affecting you and your businesses,” Montgomery said.
Since the latest downturn started in August of 2014, he explained that oil has been as low as $28 per barrel and that even though the price has rebounded to around the $50 mark, the industry continues to reel.
“In 2014, capital investment by the industry was about $81 billion with the projection for this year just $31 billion. That’s a 62 per cent decline - the most significant two-year drop since we began keeping track in 1947,” he stated.
“As well, the number of wells being drilled is down dramatically. Last year, there were 5,200 wells with only 3,200 projected for this year, which is a full one-third of the number drilled two years ago. Members have also seen the loss of 44,000 jobs with most of those occurring in Alberta. This is a real and prolonged downturn with the hurting and impact being felt throughout the economy and the entire country. And, we are not done yet.”
On the other side, Montgomery explained natural gas has been dealing with very low prices since 2008 and the hope is that an adjustment may come if liquid rich natural gas - better known as liquefied natural gas (LNG) - can come more on-stream, that it will provide better revenue as LNG has heavier hydrocarbons that can be extracted and are more valuable since those are tied to the price of oil.
He then detailed just what CAPP and their membership believe are necessary for them to recover - the price of oil to continue to rise to a level that makes economic sense and keeps the industry viable; continuing to keep costs heading in a downward fashion; governments to work with industry and to be cognizant of how much pressure these added regulations and expenses being looked at will place on industry; and, the biggest of them all, the need for new pipelines to get their products to new markets.
“We can no longer rely on selling to the United States. They have brought on much production in recent years that they can pretty much use their own domestic supply and not need Canada,” he stated.
The U.S. has increased their oil production by 3.2 million barrels per day, whereas Canada’s daily production is 9.3 million barrels and it looks worse on the natural gas side with Canada’s total daily production of 14.5 billion cubic feet now equal to the amount of new production being added annually by the U.S.
“It makes no sense for us to market there anymore. Without offshore LNG and pipelines east and west, the industry here is facing a fundamental challenge. Eastern Canada imports oil right now, so it’s important the Energy East pipeline be able to displace it with our own oil and the other pipelines need to come together so we can see this turn around,” he added.
Montgomery explained getting that message out there has been hard, despite the fact CAPP’s own polling shows Canadians support the industry.
“By a two-to-one margin, Canadians support us, but are also less likely to speak up, feeling they don’t have the information and with the bar so swayed to the other side that they aren’t confident in speaking up,” he said.
That’s why they have launched Canada’s Energy Citizens, an online and social media campaign designed show they aren’t alone and to arm people with information to fight for what he called a vital industry to the province and country.
Anyone wanting to learn more is urged to head to www.energycitizens.ca or visit them on Facebook at CanadasEnergyCitizens or on Twitter @Energy_Citizens.
Other business
There was a couple of updates on Chamber activities provided at the meeting.
Organizing for the Garage Sale on Chipman set for July 16 is proceeding well and will include a show and shine, while plans are in the initial stages for the 2016 Business Awards slated for October. Currently, they are still searching for theme ideas. A plan for the sign at the Ponoka Visitor Information Centre is also being worked on.
Anyone with ideas for the awards or looking to have a table for the garage sale are encouraged to call the office at 403-783-3888.