Greater collaboration between industry players, government, and special interest groups is key to success and long-term growth
CALGARY, May 26, 2016 /CNW/ - Despite drastically reduced commodity prices, a changing political climate, and the inability to access new markets for Canadian oil products Canada's oil and energy sector remains positive about its global position as it adapts to new market realities that depend on collaboration between industry, government, special interest groups, and the general public. Adaptability in a shifting landscape are the focus of PwC's annual report; Energy Visions: Customers, Carbon, and Costs, A New Business Model Now?
"The price downturn that we continue to experience shows that there is a lot beyond Canada's control when it comes to global oil and natural gas prices. The downward trend in commodity pricing we have seen over the past year – and the global market forces that have contributed to this trend - suggests that there will be added market volatility in the industry," said Reynold Tetzlaff, Partner and PwC National Energy Leader. "The reality of today's market has called into question the effectiveness of existing business models and their ability to weather significant shifts. Now is the time to examine how the industry accommodates these shifts in favour of sustainable growth and resilience in a volatile market."
"What we need now, more than ever, is stability and certainty when it comes to carbon policies, procedures and price. Without stability, attracting foreign capital to our markets becomes increasingly difficult," adds Tetzlaff.
According to the report, the demand for oil in Asian markets, still highly dependent on Middle East oil exports, will increase by 2040 and Canada is well-positioned to meet their needs. Building the right infrastructure to reach those markets is a top priority for companies if they want to see growth. But the optimism is tempered with some uncertainty around market access, recent tax hikes and growing political uncertainty in the region.
The report highlights that operating costs fell in 2015 compared to 2014 due to increased focus on improving efficiencies and improving overall operations. Despite lower operating costs, Canada is still struggling to find investors in light of market volatility and a changing policy landscape which creates uncertainty. In some cases this is leading to capital moving out of Alberta in favour of markets like the United States.
Tetzlaff adds: "Although we have seen many shifts in the industry over the past years, Canadian producers are tackling change in innovative ways, creating a more resilient oil and gas sector. A greater collaboration between key stakeholders is a critical first step towards addressing challenges and building a sustainable industry."
To explore more insights from this year's report, please visit: www.pwc.com/ca/energyvisions.
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