By: Elmien Wingert, CPA, CAVP Corporate Services, Canadian Association of Petroleum Producers (CAPP)
Canada has gained a reputation for prioritizing the safety and sustainability of its citizens’ lives, all of which are underpinned by the country’s energy security. Over the past two decades, Canada has experienced monumental shifts in areas such as inflation, labour markets, and climate change. These changes have posed significant challenges to the energy industry. However, they have also presented opportunities for growth and renewal within the sector.
Inflation rates have been relatively stable in Canada over the last two decades, hovering around the Bank of Canada’s 2% target. However, the unprecedented effects of the COVID-19 pandemic threw the global economy into disarray. In response, the Bank of Canada implemented one of the steepest and fastest tightening cycles to combat rising inflation by raising interest rates.
Energy costs are a major determinant of inflation, given that global oil and natural gas prices can exert upward pressure on costs throughout the economy. As a top oil and natural gas producer, Canada can shield itself from global commodity price swings by investing in infrastructure that facilitates the efficient transportation of its energy resources across the country. This approach would allow Canada to exercise greater control over its energy costs and security.
According to the Canadian Association of Petroleum Producers (CAPP), investment in upstream oil and natural gas production is projected to soar to $40.0 billion in 2023, surpassing pre-pandemic levels and growing over 80% since 2020’s low of $22.0 billion. To ensure sustainable, long-term investment in energy, it is essential to strike a balance between allocating funds for growth projects and implementing sensible capital management and cost controls.
The pandemic created a significant imbalance in the labour market, resulting in a record unemployment rate of 9.5% in 2020 – the highest in 20 years. The situation has since improved, and the labour market has tightened, with demand exceeding supply and unemployment rates hovering around 5%. Canada’s energy sector has always attracted talented individuals, both nationally and internationally. To sustain this trend, the industry must optimize its workforce and create meaningful opportunities for new immigrants, Indigenous peoples, women, and youth to flourish. Promoting diversity and inclusion is vital to the industry’s overall sustainability and social responsibility.
Canadians and visitors rightfully expect a clean environment, unpolluted air and water, and sustainable resource development practices. It is our generation’s duty to protect and steward our natural surroundings. Canadian oil and gas producers have stepped up to the challenge by becoming leading investors in clean technology. The energy industry must remain at the forefront of innovation to achieve sustainable, long-term development. In this regard, Canada’s energy sector is taking a leadership role in responsible oil and natural gas production and decarbonization initiatives by investing in carbon capture utilization and storage, solvent processes, waste heat recovery, and electrification to reduce emissions and enhance overall environmental performance.
Canada’s oil and natural gas industry has always been resilient and innovative, adapting to shifting paradigms and seismic forces. Sensible capital management and investments in future growth, diversity, and inclusion to manage the demands of the labour market and advancements in new technologies to address climate change meaningfully and sustainably are necessary for long-term success.
Originally published in Scovan’s IGNITE Vol. 6
