Evidence of meeting #18 for Natural Resources in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was sands.
A recording is available from Parliament.
4:20 p.m.
Conservative
4:20 p.m.
Vice-President, Research, Canadian Energy Research Institute
SCO is synthetic crude oil—upgraded bitumen that's taken and turned into light crude oil.
4:20 p.m.
Conservative
4:20 p.m.
Vice-President, Research, Canadian Energy Research Institute
Next we have the results of our sensitivity analyses in terms of investment and production. Obviously, the higher the price of oil, the higher the value of production, and thus the higher the economic impacts in all the indicators we measure.
We see that in the central case, for example, total investment and value of production is $632 billion. When we look at $25 oil, the impact on investment and production is lower. In the $40 oil, it is higher.
The more bitumen that's upgraded in Alberta, the higher the economic impact. Imports are usually leakage in economic terms. They create economic impacts and stimulation in the economies outside of Canada. So the less of it that leaves Alberta and Canada, the higher the economic impacts will be.
With respect to the GDP impacts, for the same sensitivities that we've done, when the oil price goes down from $32 to $25, the GDP impacts are reduced by 17%. On the other hand, when we look at the $40 oil, compared with the base case of $32, the GDP would be 17% higher.
In the expected case, we did the same exercise. Looking at the potential case, the higher the price of oil, the higher the GDP impact. The impact we went over earlier could be as much as 55% higher, if the highest development scenario takes place, which is the potential case and a high price of oil of $40. Nowadays, $40 is not really that high. The upgrading of more bitumen into synthetic crude oil in Alberta, or in Canada, would increase the GDP impacts by 23%, or a trillion dollars.
In conclusion, the investment, under the scenarios we described, in the oil sands would be about $100 billion over 20 years, resulting in over $571 billion. It could be as high as 55% more, at the upper end. The GDP impact is $885 billion, and about 6.6 million person-years of employment would be created. Economic benefits extend well beyond Alberta into the rest of Canada and the rest of the world—in job creation, GDP, and tax revenues. The federal government receives the highest share of tax revenues generated from this development.
Mr. Chairman, this concludes my presentation. I would be happy to answer any questions.
4:20 p.m.
Conservative
The Chair Conservative Lee Richardson
Thank you very much, Mr. Masri.
That was a remarkable presentation, and I do appreciate it. I know that a lot of work went into it. For a committee that's not steeped in this knowledge, it's a lot to comprehend all in one sitting. At the same time, I'm sure you've generated a number of questions here for both you and the National Energy Board.
The clerk has started a list of questioners. I am prepared to accept more names on that list.
We'll begin with Mr. St. Amand.
4:20 p.m.
Liberal
Lloyd St. Amand Liberal Brant, ON
Thank you very much, Mr. Chairman.
I'd like to echo what was just said. That was a very comprehensive presentation, gentlemen, so thank you very much. It was comprehensive to the point of almost being overwhelming, frankly.
I'll begin with a few comments. I presume we can agree that the oil is not going anywhere. It's in the ground, and it's quite a chore to extract it from the ground, so it's not going anywhere. It's not as if, for some ecological purpose or reason, we need to get this stuff out of the ground within the next five years or lose the opportunity. In fact, the opportunity to extract it from the ground is with us for however many decades, I presume.
Is that fair to say?
I don't mean this disrespectfully, Mr. Masri. You've quite systematically explained the billions of dollars that will be yielded by various levels of government, with the federal government receiving arguably more than the Government of Alberta. I understand that. There would be $124 billion for Canada in the next 20 years. But I presume what's unspoken is that individuals and companies will be earning billions and billions of dollars as well over the next 20 years.
Fair?
4:25 p.m.
Vice-President, Research, Canadian Energy Research Institute
That is correct. That's the value of our output, $570 billion. That's the value of the oil produced.
4:25 p.m.
Liberal
4:25 p.m.
Liberal
Lloyd St. Amand Liberal Brant, ON
I suppose the question I come around to is what's the hurry? You are persons of experience and depth on this issue, so you will know that there's a cry in some quarters for a slowing down of this unprecedented process that's going on in Alberta. And I think it is unprecedented.
Mr. Donihee, this was already mentioned by the chair, but I'd like to go back to this sentence from your outlook:
On the other hand, natural gas costs, the high light/heavy oil price differential, management of air emissions and water usage, insufficient labour, infrastructure and services are concerns that could potentially inhibit the development of the resource.
From anything I've read or heard, we're already there in terms of the emissions, the concern about the environment, the concern about the infrastructure, too few people for too many jobs, no housing. I think we're there, quite frankly.
I would just like to ask you to comment on what would be so terribly dreadful--apart from the effect on the bottom line--for us as a country if this process were to be slowed down for a period of time.
4:25 p.m.
Vice-President, Research, Canadian Energy Research Institute
I would simply comment that slowing down the process would just shift the impacts into the future and spread them out over time. If that same development takes place over 30 years, then obviously all of the annual impacts would be spread further.
The oil will be in the ground until it's exploited. Depending on the rate at which it's exploited, we're able to estimate what it would do to the economy. With no judgment on what rate it should be exploited at, we take what we think really is happening and translate it into economic impacts.
4:25 p.m.
Liberal
Lloyd St. Amand Liberal Brant, ON
But that's presuming a continued reliance, globally, on oil, and the tardy, very slow development of wind, solar, etc. Am I correct that in fact this is the presumption you're working on in saying that this terrific demand for oil will be with us for the next 50 years ?
4:25 p.m.
Vice-President, Research, Canadian Energy Research Institute
We don't make an assumption on that. We actually say “if...then.” We are saying if that oil is produced at this rate, these are the impacts. Whether the demand will be there to absorb it or not is a whole different question.
4:25 p.m.
Vice-President, Research, Canadian Energy Research Institute
In other words, if there isn't sufficient demand to take that output, the output will not be produced. And to the extent that happens, the impacts would be less.
4:25 p.m.
Liberal
Lloyd St. Amand Liberal Brant, ON
Again, I don't mean this impolitely, but because the demand is seemingly there now, hence the rush to get this stuff out of the ground. That's got to be the conclusion.
4:25 p.m.
George Eynon Vice-President, Business Development & External Relations, Canadian Energy Research Institute
If I might, I think it's not just because the demand is there; it's also that the oil price, globally, had increased over the last number of years. And the economic incentive was there because the revenue from the projects exceeds the costs of doing that business.
So yes, you're right. There's an economic incentive for the owners of the leases to monetize their assets. And that's what we're reporting on, that level of planned activity. In essence, you're right. Those other influences that Jim Donihee enumerated will likely slow down the pace of activity beyond what we've even shown in our constrained cases. I think already since we did our piece, those constraints have increased, if anything else.
4:30 p.m.
Conservative
4:30 p.m.
Bloc
Claude DeBellefeuille Bloc Beauharnois—Salaberry, QC
Thank you very much for your presentations. That's a lot of material to absorb in a short period of time.
Mr. Masri, I'd like some clarification. At the start of your presentation, by way of introduction, you said you belonged to a research firm specializing in energy and the environment.
Do you do research in areas other than oil and gas? Do you have any other study areas or do you specialize solely in the oil and gas fields? I'd like a quick answer for my own information.
4:30 p.m.
Vice-President, Research, Canadian Energy Research Institute
Thank you.
The research we do is really the research that is funded. We are non-profit, but we cover our costs of the research. This research was done, sponsored by a cross-section of different agencies and entities. We are capable and ready to do research on other aspects of that sector, such as environment, if that funding is available.
4:30 p.m.
Bloc
Claude DeBellefeuille Bloc Beauharnois—Salaberry, QC
Pardon me for interrupting you, but the great majority of your current studies focus on the oil and gas sectors and it's businesses in those factors that fund you, don't they?
4:30 p.m.
Vice-President, Research, Canadian Energy Research Institute
It is funded by government and industry. We have the Alberta Department of Energy as one of the sponsors; Alberta Economic Development; the Alberta Energy Research Institute; Alberta Finance; Natural Resources Canada; Shell Canada Limited; Total Energy Services Ltd.; and the Canadian Association of Petroleum Producers. As I said, it's a cross-section really of both government and industry that have sponsored this study.