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Page added on May 30, 2014

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Canada’s high-cost oil and gas needs a competitive game plan

Business

Canadian oil and gas companies will be competing head to head with lower-cost energy producers in the near future, and the country needs a better strategy to remain competitive in a post peak-oil world.

According to a PwC report released May 30, Canada has four options when it comes to the future of oil and gas: continue relying on exports to the United States; focus on building pipelines to either the west or east coasts to get oil and gas to offshore markets; or look to develop “unconventional resources” in Canada’s north.

“As Canada moves from a focus on the US market toward exporting our oil production to world markets, it will fight for market share with nations that have strategic interests and the regulatory will to capture demand, particularly in the high-growth Asian market,” says the report.

While Canada still has some of the largest oil reserves in the world, it faces competition from emerging players like Brazil. A recent drop in oil prices has also put pressure on the industry. Meanwhile, global demand for oil is slowing. That means “higher cost, less competitive producers risk getting priced out,” according to the report.

While there is strong potential for Canada to develop a liquefied natural gas industry, that effort is complicated by the fact that much of Canada’s natural gas is located in “unconventional” shale gas reserves that must be recovered by fracking. B.C.’s two-tier tax regime as well as competition from the United States are other “complicating factors.”

However, the complexity of projects like LNG and the next wave of oilsands development could also drive innovation in areas like partnerships between junior and senior companies, better systems for transporting oil by rail and more efficient supply chains.

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