Thank you very much, and thank you for the opportunity to participate in this study.
The Petroleum Services Association of Canada is the national trade association representing 250 of Canada’s leading oil field service companies that have a cumulative employee base of over 75,000 people. The petroleum services sector in Canada is the second largest contributor to Canadian GDP in the natural resources sector, coming in at approximately $65 billion. This number is based on 2006 census numbers, and given the continued growth and success of the petroleum services sector over the last eight years, I am certain that the numbers will reveal an ongoing increase.
I make reference to the number of companies, the employees, and the revenue simply because I feel that a measure of the success realized in Canada can be realized in Ukraine. Ukraine holds significant untapped unconventional gas resources and to achieve increased production growth, it will require development of these more challenging resources, including the introduction of advanced methods of horizontal drilling and multi-stage hydraulic fracturing.
This is an area where the Canadian petroleum services sector has also successfully brought together two established technologies in conjunction with innovative information communication technologies linking related equipment, software, and near real-time data during drilling and completion operations. This provides us directional drilling accuracy within meters as we tap into unconventional resources far below the ground.
Ukraine has unconventional resources, Canada has the expertise and technology. The Ukrainian citizens have what it takes to create their own oil field services and the Canadian oil field services have a desire to help. The success as a country we enjoy here is in part because Canada would not be what it is today without the rich Ukrainian culture of hard-working, business savvy, independent-minded citizens that immigrated here and contributed significantly to helping Canada evolve as a strong democratic society with a sound economic system.
The Ukrainian culture is woven into the fabric that makes Canada what it is and stands for, and I am confident that given the support to establish a safe, democratic political environment, and a sound economic business environment in which to do business, Ukraine could find itself in time far less reliant on foreign sources of energy.
Here I have to be blunt in that our member’s single largest concern in doing business in Ukraine today—and a few have tried at the request of producers in country—is how to do business in a fair, open, and transparent economic system which currently does not exist fully in the country today.
Some of our member companies have travelled to Ukraine on an Alberta government trade mission in early 2013 with some setting up offices there while assessing opportunities. They were unwilling to continue to try to build viable business opportunities because of the depth of the shadow economy that would have to be dealt with in order to do business and get the job done.
In 2009, 36 Canadian owned and operated services companies contributed to a survey PSAC commissioned to help determine revenue from international sales and operations. It was determined that just under $13 billion in revenue was generated, on which tax was paid to Canadian provincial and federal coffers.
Another survey recently completed showed a continued desire for our members to seek out international business opportunities, looking to countries that mirror the Canadian regulatory and business regime as closely as possible; countries in South America; the U.S.; possibly Mexico, with its upcoming reforms; and China, where there is significant effort being undertaken to share Canadian oil field best practices with regard to safety, regulation, and operating practices.
The technology being developed, tested, and proven effective here in Canada with regard to the tapping into resources once believed to be diminishing and too economically onerous to go after, have helped considerably in the resurgence of natural gas reserves here at home and across the U.S.
These same unconventional resources can be found around the world, for example, in the U.K. and other parts of Europe. Delegations from Canada have travelled to Germany and Poland, for instance, meeting with officials and business leaders there to discuss the potential of tapping in to their tight gas deposits using Canadian technology and expertise.
The model defined here in Canada—Alberta in particular—for the development of a robust oil field services industry is being replicated in much the same way across the western provinces and can be as well for Ukraine. In the early days of the oil and natural gas industry in Canada, supporting services and supplies were brought in by the explorers from the U.S., and over time these business people immigrated to Canada, established businesses, hired locally, and producers sourced locally.
We realized a similar trend in northeastern B.C., and we are seeing it Saskatchewan and Manitoba. The same type of integration of services and the establishment of local service and supply can happen for Ukraine in the long-run. It would serve the best interests of Ukraine and Canadian oil field service companies wanting to expand their business opportunities.
A significant benefit to be realized through Canadian support of an oil field service and supply sector in Ukraine will be the influx of Canadian oil field best practices when it comes to safety and regulation. Canadian oil field expertise is world renowned, and there are very few, if any, oil fields around the world that Canadian oil field expertise has not been a part of in one fashion or another. From petroleum and reservoir engineering to drilling and completion technology expertise, Canada is a leader. It behooves us to share this knowledge and to support initiatives that can raise the quality of life, improve productivity, and support independent economic development in other jurisdictions looking to responsibly and sustainably develop their energy resources.
The main areas where Canada could play a role in Ukraine’s energy sector, either directly or indirectly, are more accessible coverage by Export Development Canada for drilling and exploration equipment and technologies, including work over, horizontal, spare parts, and pumps, etc.; technical expertise in oil and gas reservoirs management, including depleted fields; and unconventional resource projects and expertise.
Whatever we are able to do, it will still be a decade-long project at best. The business environment in Ukraine would need to stabilize before a large number of our member companies would want to risk their time, people, and equipment in such a risky environment. Stability means not just the absence of military risk and force majeure, it also means stable governance and legislation, and confidence in a rules and laws-based business environment.
For the rest of Europe, as per your mandate, conventional oil and gas is a very mature market and has been dominated by well-entrenched players for over a hundred years.
However, as stated above, when it comes to unconventional oil and gas, there are real opportunities for Canadian companies. It depends which countries open up their territory by legislation, permitting—or at least not forbidding—horizontal drilling and multi-stage hydraulic fracturing and the technologies that support the safe, efficient, and productive means of employing these services.
Thank you.