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Oil companies must innovate to prosper in low-carbon energy transition: minister

Jim Carr, Minister of Natural Resources, delivers a statement on TransCanada’s decision to cancel the Energy East Pipeline project on Parliament Hill in Ottawa on Thursday.

Sean Kilpatrick/THE CANADIAN PRESS

Canada's oil and gas sector should lead the transition to a lower-carbon-energy economy by making investments in innovative technologies that would reduce its environmental footprint, Natural Resources Minister Jim Carr said Wednesday.

Mr. Carr was hosting a two-day energy conference as part of the Liberal government's plan to adopt policies now that will position Canada to benefit as the world grapples with global warming and technological change.

Several speakers at the conference questioned the future of the oil and gas sector, with international consultant Jeremy Rifkin describing it as a "sunset industry" that only has a few decades of prosperity left.

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However, International Energy Agency executive director Fatih Birol said Canada will remain a crucial supplier of oil and gas for the global marketplace and praised the industry's efforts to improve its environmental performance.

The Liberal government is attempting to position Canada as a leader on climate change with carbon pricing and other regulations, while insisting it supports the Alberta oil industry's efforts to innovate and to diversify its export markets with new pipeline capacity.

"I agree we are in transition," Mr. Carr said when asked about Mr. Rifkin's "sunset" comment. He said energy companies need to tend the "legacy" side of their business while focusing on new opportunities that will come with the changing energy economy.

Despite setbacks with cancelled pipelines and projects, the minister said he remains confident the oil industry can not only survive but prosper.

"They're making investments now in finding innovative ways to extract the resources," he said. "People forget the oil sands were developed in the first place because of innovation. I believe it can lead the transition."

Mr. Birol said crude demand will likely peak and then decline significantly if the world is going to meet the commitment to limit the increase in average global temperatures to less than two degrees above preindustrial levels.

But with Canada expected to produce five million barrels a day of crude by 2020, the country remains an important supplier that helps offset the dominance of the Middle East producers, he said. The head of the Paris-based agency praised Canada's approach to climate-change regulations, saying it ranks as high as Norway among major crude exporters.

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Pointing to carbon pricing and other regulations, oil industry officials are increasingly seeking to "brand" Canada as an environmentally responsible producer of crude.

Still, the oil sands sector – which has attracted international opprobrium – remains one of the most energy-intensive, greenhouse-gas-emitting sources of crude that is produced.

As the Liberal government talks about "transition," many in the industry warn that Canada is losing investment because of the international perception that projects cannot win approval here.

TransCanada Corp.'s cancellation of the Energy East pipeline project has added to that view and heightened regional tensions between oil-producing provinces such as Alberta and Saskatchewan and those such as British Columbia and Quebec that oppose pipeline projects through their territories.

"People [in Calgary] are frustrated; they are concerned, and there is still a tremendous amount of uncertainty about how we get things done," Chris Bloomer, head of the Canadian Energy Pipeline Association, said on the sidelines of the conference.

He noted companies are now looking to develop liquids-rich natural gas and unconventional light oil plays in the Montney and Duvernay regions, but are uncertain of the regulatory environment.

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"Investors are backing off," Mr. Bloomer said. "They're very concerned and capital obviously has other places to go."

At the same time, Canadians give their federal and provincial governments poor marks for developing a long-term vision for the country's energy future and building confidence in decision making on major projects, a poll released on Wednesday suggested.

In a survey conducted for University of Ottawa's Positive Energy think tank, a plurality of respondents gave Canada "poor" or very poor" marks on building a shared vision, establishing public trust in decisions, and balancing concerns of local communities with broader interests regarding infrastructure such as pipelines and transmission lines.

The survey of 1,000 Canadians was conducted by Nanos Research and has a margin of error of 3.1 percentage points.

In the Positive Energy poll, half of respondents say Canada is doing a poor or very poor job in building public confidence in decision making, while 17 per cent say it is doing a good or very good job. Some 43 per cent of respondents to the Positive Energy survey say Canada is doing a poor or very poor job developing a shared, long-term vision for the country's energy future.

A strong plurality said Canada is doing a poor or very poor job balancing local interests with those of the broader community on infrastructure projects, or providing "clear, predictable and competitive" regulatory policy for energy investors.

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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