As discussed last week at the Calgary Energy Roundtable, as U.S. output soars to record levels, Canada risks losing its edge. However, David McLellan, Principal at Ridgeway at Strategic Consulting Ltd., who recently spoke with BOEReport.com, has a different take on Canada’s role and he is pragmatically optimistic.
“The application of HZ multi-stage fracturing to unconventional reservoirs has changed global energy dynamics. The USA has seen the greatest gains by increasing production from <6MM bopd to now 11 MM bopd. Despite this incredible turn around the USA is still importing ~10 MM bopd. The country consumes >20 MM bopd, so Canadian heavy oil and bitumen are still critical to American energy security. However, if Canada were to get a global price, American refineries would have to pay that price instead of the incredibly discounted price they get now”
McLellan is just as pragmatic when addressing the issue of Carbon Tax and the potential burden it may pose to Canadian producers. “ We must agree a certain level of taxation is necessary, but whether is it taxed by Income, Consumption or Carbon is the question. Now if this were a truly revenue neutral tax, and you tax Carbon and offset income tax or reduce consumption tax then it would have a Net Zero effect. The thing about a Carbon Tax though is that if you are investing in your business in areas that reduce your carbon emissions, you can lower your carbon tax. It’s semi voluntary. Now why is this important? I met with senior people at Energy majors in the US who surprised me. They said they are looking beyond Trump. In either 2020 or 2024, the pendulum will swing to the left. So, they are preparing to get to a zero-carbon footprint on their timeline without it being forced on them in a real onerous way. In Canada, we are out in front by introducing a carbon tax early. “
For further discussion David McLellan will be speaking on the topic of “Leveling the Playing Field – A Discussion of USMCA/NAFTA Resolutions and the Impact of US Tax and Regulatory Reform on Canadian Competitiveness” Thursday October 18, 2018 at the Calgary Petroleum Club
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