The Western Canadian exploration-and-production industry is well-positioned to weather the current environment of low oil and gas prices, providing that politicians do not impose onerous tax and regulatory burdens on the industry, the CEO of an independent Canadian producer said Thursday.
“I’m very positive on the Canadian oil and gas industry,” Andy Mah, president and CEO of Calgary-based Advantage Oil & Gas, said in an interview Thursday. “We can’t put road blocks and burdens,” in the way of the industry’s expansion, he said.
Mah pointed to his own province of Alberta, where the New Democratic Party was swept into power following elections last May, saying political leaders are focusing more on extracting taxes from the industry and not enough on extracting oil and gas and developing new markets for those commodities.
“Politicians want to levy higher carbon costs on gasoline or heating your house,” he said. “That all contributes a cost.
Mah called for the provincial leaders to follow a “balanced approach” to energy, rather than policies that favor the development of once energy source over others.
While most people favor a gradual transition to renewable sources of energy, policies that call for too abrupt a transition “are not going to make sense” and would only serve to create market inefficiencies, he said.
Mah has not seen any proposals coming out of Alberta aimed at creating new sources of revenue, he said.
“We haven’t seen any solid action that shows that they see the need for improvement in GDP and revenue,” he said. “You can’t just keep pushing on the taxes and not have revenue.”
‘DIFFICULT FOR EVERYONE’
Political trends on the national level seem to be moving in the same direction, Mah said.
“In Canada this is a continuing press on carbon taxes and that might get to a point where it may be a bit too onerous too quickly,” he said.
Such taxes do not make much sense, in that Canada is one of the lowest carbon emitters in the world, accounting for only about 1.5% of global greenhouse gas emissions, Mah said.
“To put unrealistic taxes or levies on emissions would put us in an uncompetitive position in global oil and gas resources,” he said. “People and politicians have to understand and not just get on the bandwagon; this is not a popularity contest.”
The push toward increasing taxes on the industry comes at a time when Canadian oil and gas producers already are by rocked by the continued low oil and gas price environment, Mah noted. “Low price are difficult for everyone,” he said.
“A lot of the small companies are trying to scrape by if they can. Many are debt-laden,” Mah said. “It will all sort itself out in the capital markets, whether companies are survivors or not. Adding a load on producers doesn’t help.”
Mah said he is hopeful that western Canadian producers can find new markets for their products through the development of an LNG exporting industry and increased crude oil exports.
“We need to see government put as much energy as possible into helping the industry seek those markets,” he said.
Mah rejected moves by the federal government to slow down the approval process for LNG terminals to give more time for environment review and called on federal regulators to ensure that proposed export projects “get approved quickly, instead of dragging the process out.”
Neighboring British Columbia is actively working to develop an LNG exporting industry along its Pacific Coast, Mah said.
“They realize the economic gain of doing something,” he said. BC officials are facing many challenges, from trying to confront environmental issues to addressing the concerns of First Nations groups, as they work to promote the creation of a new industry, he said.
“They need to determine what the next steps are,” he commented. Unfortunately, with projects to export LNG from the US Gulf Coast already well under way, it is likely already too late for Canadian energy producers to get in on the first wave of LNG exports from North America, Mah said.
Nonetheless, Mah said he foresees a bright future for the E&P industry in western Canada.
“On the natural gas side we’ve got large resource base,” he said. He pointed to highly prospective plays such as the Western Canada Deep Basin and the Montney and Duvernay shales. “They are world-class.”