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Varco: Oilpatch declares that elections in Alberta must solve a "crisis"

A few hours after the leader of the United Conservative Party, Jason Kenney, called on the leaders of the oil companies to speak more strongly for their sector, the leaders of the five industry groups laid their electoral cards on the table on Wednesday.

And as soon as the leaders representing oil producers, pipeline operators and the oilfield services sector spoke in Calgary, Premier Rachel Notli said that Alberta would increase the level of oil production in February and March, which will ease the task of reducing production in the province.

I do not say that there is a direct connection between these events.

(Kenny spoke with the Calgary Realty Board, while Notley responded to data showing that Alberta’s oil reserves are falling faster than expected.)

I’m talking about the fact that in the next provincial elections — voters will head to the ballot box before the end of May — they expect the campaign’s main topics to be pipelines, reducing oil production, greenhouse gas emissions, carbon tax and industry competitiveness.

Energy will not be in the ballot box.

But this is Albert. This will not be far from the conversation, since all parties are looking for ways to stimulate investment and employment in the province’s largest and most influential sector.

“This is indeed a turning point,” said Chris Blumer, general director of the Canadian Energy Pipeline Association, in an interview.

"We are being pushed from all sections, the rollback does not subside, and we need our voices to be heard."

An unusual joint press conference of industry groups was designed to discuss the role of energy issues in the upcoming election campaign.

The sector faces a number of problems: difficulties in delivering oil and gas to the market, low prices for raw materials, moving drilling rigs to the United States, reducing capital programs, reducing drilling volumes and problems with attracting investment.

The most urgent problem is the construction of pipelines for the export of oil and natural gas from Alberta, although the government has limited ability to influence the federal approval of projects that cross provincial borders.

The deadlock currently facing Trans Mountain and Keystone XL pipeline construction projects, along with the death of Northern Gateway and Energy East, led the industry to get too much production — about 3.9 million barrels per day (barrels per day) per day. Alberta is not enough ways to send it.

Special attention is paid to regulatory and legal barriers related to the construction of energy infrastructure in Canada.

A bottleneck in transportation led to a sharp decline in Canadian oil prices last fall, which forced the Notley government to restrict oil production to 325,000 barrels per day starting this year in order to balance the market.

On Wednesday, the province announced it would increase production by 75,000 barrels per day to 3.63 million barrels per day in February and March. This is an encouraging sign, since the level of oil reserves in Alberta has declined by about 15% since December.

“What we found is the (oil) storage, which we extracted a little faster than expected,” said Energy Minister Marg McQueig-Boyd in an interview.

"But we have not yet come out of the forest."

Many manufacturers have called for reductions to support falling prices, although oilfield service companies have been affected by its impact on investment programs.

Earlier this week, the Canadian Petroleum Services Association lowered its drilling forecast by 15% to 5,600 wells a year.

“The idea of ​​finding a rational way to avoid cuts would be a good idea,” said PSEK President Gary Mar.

“This is not a hypothetical question, it is people who lose their jobs. "For people who are employees of energy services, the reduction was not a very good program."

The debate about the reduction and tax on emissions in the province – some large producers of oil and raw materials, such as Suncor Energy and Shell Canada, supported it, while the Canadian Association of Researchers and Producers (EPAC) opposes collecting – emphasize the fact that the industry not monolithic.

However, he has a lot in common, for example, concern about regulatory deadlines for moving large projects through government approval processes.

For example, Imperial Oil took almost five years since it first applied for its Aspenskoye oil and oil fields project worth $ 2.6 billion until it was approved by regulators last October.

Tim McMillan, president of the Canadian Association of Petroleum Producers, believes that improving efficiency can reduce regulatory costs in Alberta by $ 2 billion. The benefit is that the industry can double its investment in oil production in the province by 2020, if it receives the right conditions, he said.

For the drilling and services sector, financial pressure is very high. If manufacturers do not spend money, oilfield services firms do not work.

In 2014, the industry had about 850 drilling rigs in the country. The Canadian Oil Drilling Contractors Association expects it to fall to 500 by the end of the year.

“This is due to a bad economy, commodity prices have certainly fallen, but it also directly falls on government policy,” said CAODC President Mark Scholz.

The effect of these interrelated problems extends from oil fields to headquarters in the city center. About 140 people work directly or indirectly on each active drilling rig.

ATB Financial said Wednesday that employment at its head office in Calgary fell by almost eight percent between 2012 and 2017, and in Edmonton fell by five percent.

“It’s not only energy companies, it’s not just production,” added Tristan Goodman, president of the Canadian Association of Researchers and Manufacturers.

“This is where teachers get their dollars, this. provides good medical care. This is the actual economic engine that drives us forward – and now it is in crisis. ”

It is often said that a good crisis should not disappear.

The upcoming elections should test this theory, providing a great opportunity to explore the future of energy development in Alberta.

Chris Varco is a Calgary Herald columnist.

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