Thank you, members of the committee and Mr. Chair, for having me here today. I sincerely hope that you and your families are safe and healthy these days.
I am the lead on fiscal and economic policy and oil sands at the Canadian Association of Petroleum Producers, representing the upstream oil and gas industry in Canada.
Circumstances beyond our control have created an unprecedented situation for Canadians. The COVID crisis and a global oil price war have combined to hurt our national economy, and Canadians from coast to coast watch as more jobs disappear and businesses close their doors. Canada's oil and natural gas sector has been particularly hard hit.
On behalf of CAPP and our member companies, we would like to thank the government for the bold actions it has taken to date during this crisis. However, there is an urgent need for additional measures for the oil and gas industry to provide liquidity and preserve jobs across the country, both during the crisis and as we forge a path ahead toward what could be a long and protracted recovery.
In January of this year, CAPP released its 2020 capital forecast, which showed an increase in spending in both oil sands and conventional areas, something the industry has not seen since 2014. However, as of April, Canadian producers have cut approximately $7.3 billion in capital expenditures, approximately a 30% reduction, and 550 million barrels per day have been shut in.
Our industry has lost approximately $150 billion in market value since March. Globally, demand has fallen by nearly 30 million barrels per day, and as much as 20% of the world's oil production needs to be shut in. Canadian storage could reach capacity in a matter of weeks.
As it currently stands, an additional 30,000 to 40,000 oil and gas jobs will likely be lost by the end of 2021 if we do nothing, which is equivalent to approximately a 15% to 25% reduction in our sector's workforce.
Ontario's manufacturing and services sector is a key contributor to western Canada's oil and gas supply chain. From 2015 to 2017 alone, we saw investment decrease in those businesses by about 45%, from $3.4 billion to $1.9 billion. The number of Ontario businesses supplying the sector fell from about 2,000 down to about 1,500 over that period. The current crisis has seen, and will continue to see, these Ontario suppliers feeling much of the downturn in our sector.
The federal government's recent announcement for the industry is a welcome start. Funds to support closure and reclamation of orphan and inactive wells will enable companies to continue to employ Canadians and preserve jobs while strengthening balance sheets, yet the liquidity crisis looms large as companies fight to stay afloat. Currently, federal liquidity support will assist some smaller companies, but many others are left wondering if additional help will come in time to maintain operations.
We estimate the aggregate liquidity needs of our industry to be approximately $27 billion to $30 billion, and we see an opportunity for the government to work collaboratively with our sector to help anchor the Canadian economy through the crisis and lead the economic recovery for the country.
To that end, CAPP recommends that the government provide additional credit to industry, with a specific focus on larger-cap firms. The measures announced to date fall short of the broader needs of the sector, notably the needs of the mid- and large-cap companies and those that do not utilize reserve-based borrowing.
Second, we recommend tax reforms to enhance industry cash flow and encourage investment. As an example, unprofitable oil and gas companies have accumulated a significant tax pool balance, and there is an opportunity to explore purchasing portions of these pools. Even at discounted valuations, this approach would inject immediate liquidity while simultaneously enhancing government revenue streams in the future.
As well, funds could be earmarked for reducing asset retirement obligations of companies to reduce environmental liabilities and strengthen balance sheets.
For taxable companies, the rapid amortization of capital is the best fiscal lever available to promote investment, growth and the commercialization of new technology. We recommend introducing 100% immediate deductibility of capital costs and eliminating the available-for-use rule to encourage counter-cyclical investment in long-cycle projects. This will notably have an impact in Atlantic Canada and the oil sands.
Finally, we recommend reforming the Canadian tax dispute resolution process to relax requirements to pre-fund amounts of tax in dispute. This is an inefficient use of capital, and it would free up liquidity for companies to invest and create jobs.
Amid all of this, Canada's oil and natural gas sector continues to provide an essential service across the country, maintaining critical infrastructure and safely and reliably providing the energy that we need.
Nearly 500,000 people work in this industry. We need support from the federal government to ensure the industry's survival so that we can continue to be there with Canadians in the future.
Thank you for this opportunity to present to you today. I look forward to your questions.