When oil prices are low, it forces our teams at MEG to do what they do best: innovate and think of new ways to operate and grow the business more efficiently. MEG and our industry peers will always continue to innovate, but reduced cash flow caused by the continued low commodity price environment limits the amount of capital available for investment in innovation projects. Therefore, advancing both economic and environmental goals will require government support of and investment in technological innovation within the sector.
In light of the capital-intensive nature of the innovation process, industry often finds itself in the so-called valley of death, in that there is a significant gap between research and development and its revenue-generating commercialization. This is a key area that deserves further policy support. Governments can invest more patiently, with longer return horizons, than private investors. They have the ability to share the financial risk of new technology development through policy and regulatory intervention to achieve long-term benefits.
For small and medium-sized oil sands companies like MEG Energy that operate only in Canada, this is especially important, because we often raise capital to fund innovation projects from highly competitive financial markets, as opposed to internally generated cash flows sourced from international operations or other business units.
If innovation funding opportunities and the efficiency with which they are delivered are maximized, industry will be well positioned to continue to contribute to Canadian environmental leadership. To that end, we are encouraged by this government's emphasis on driving innovation, productivity, and competitiveness in the natural resource sector, recognizing that our sector is an area of Canadian strength and strategic priority.