Thank you very much, Mr. Chair and the rest of the committee. Thank you for inviting me.
Canada's oil and gas industry is the envy of the world, and for good reason. We are innovators, early adopters, and natural conservationists. The women and men who work in our industry also raise the families who make up our urban and rural communities. From young biologists tasked with protecting the boreal forest to senior engineers with over 50 years of experience at home and abroad, these are the Canadians whose values and hard work have made our oil and gas industry the most responsible and ethical of its kind anywhere in the world.
CAODC members often operate in the most remote locations of the country—natural outdoorsmen, so to speak. Clayton Byrt, whose company is 99% first nations-owned and operated and a member of our service rig division, is fond of saying, "We recognize the need to develop our resources responsibly with consideration of future generations".
With this in mind, I am here to speak about some of the innovations found in the drilling and service rig industry, which has lowered emissions and placed them at the cutting edge of environmental performance. I will also make some suggestions about how government and industry can coordinate in order to ensure that Canada's oil and gas sector can continue to lead the world in environmental performance.
Our association's focus has always been on making the industry safer for people and the environment. For nearly 70 years, we have been finding efficiencies in reducing emissions, fuel usage, and land disturbance. From our modern walking rigs to horizontal drilling techniques, the industry is home to hundreds of innovations that have redefined how we drill, and we have improved our rig productivity and environmental performance over the years.
Superior rig productivity translates into being able to develop petroleum products faster, at lower prices, and with less impact on the environment. In fact, the amount of oil and associated gas that can be brought out of the ground from one rig has increased about six-fold since 2012 in Canada. This means that more petroleum products can be produced using less energy and resources. It means lower costs and more revenue for Canadian companies competing for global market share. It means less GHGs and more tax revenues for government.
Take, for example, the Cardium formation in west central Alberta. Light, low-carbon oils are being extracted with rising rig productivities, comparable to what's being recorded in plays south of the border. Back in 2012, a rig working in the region for one month could add 200 barrels of oil equivalent per day of average production. Four years later, the output from one drilling rig was over 1,200 BOE per day, or six times the production. On the natural gas side, the Montney play, which spans northwestern Alberta and northeastern British Columbia, is challenging leading American plays like the Marcellus and Utica with similar increases in productivity.
The reasons for the productivity improvements are as follows: drilling faster and more accurately; employing new-age alternating-current, or AC, electric rigs; migrating to multi-well pads and batch drilling techniques; using rigs that "walk" and move quickly from one location to the next; high-grading resource prospects to the best areas; and realizing learning-curve effects.
Simply put, a modern rig today can drill more wells in a month, and each well can produce more oil and gas than in the recent past. This is a good thing for business, and it's a good thing for the environment. While some industry innovations arise from the co-operative efforts of industry, the academic world, and government, most of these advancements are made by people who care about their environment and the safety of their workers.
One of my favourite technologies being deployed in the field today is the bi-fuel engine technology, where up to 70% of the diesel to operate our engines can be replaced with clean-burning natural gas, which can often be sourced directly from the wellhead. This means we can significantly reduce our carbon footprint, reduce trucking and transportation resources, and preserve the lifespan of our engines.
It's important to remember that GHGs are generated across the full life cycle of fossil fuel production and consumption. Only 10% is generated at the upstream production stage, while over 80% is generated by the end-user, such as when a car's ignition is turned on, when a jet engine fires up, or when a diesel locomotive pulls heavy freight down the track. Identifying where emissions are generated across the life cycle of fossil fuels is a useful framework for evaluating the effectiveness of proposed solutions in reducing GHG emissions.
While technology on the production side is essential, the world is unlikely to achieve meaningful reductions in CO2 unless the underappreciated issue of end-use consumption is acknowledged. The bottom line is that we all want to ensure that the country our kids and grandkids inherit is as ecologically healthy as the one we enjoy today. Most every Canadian can get behind that.
Many industries approach government seeking financial incentives to improve their operations. That is not so in the oil and gas industry in Canada. Why do we innovate without the promise of government subsidies? It's because efficiency runs both ways: what is good for business is usually good for the environment. Profits are the most significant drivers of innovation. Moreover, Canada must innovate to stay competitive with U.S. producers, especially in this price market.
I've tried to capture some of the things our members have been doing for years with respect to how you've defined your clean tech categories and the risks you've described.
The first category, clean technology, is described as “any product, process or service designed with the primary purpose of contributing to remediating or preventing any type of environmental damage.” The second category is any “product or service that is less polluting or more resource-efficient than equivalent normal products that furnish” a similar industry.
I think my examples have made it clear that both types of clean tech are not only inherent in our businesses but are providing meaningful competitive advantages within the context of today's marketplace.
Regarding the risks in your study, we believe that the free-market system in which our industry has traditionally operated addresses them in the following ways.
The first two risks, whether the technology will perform as expected and whether it is compatible with existing technologies and processes, we believe are borne by industry, because they must be overcome for our industry to be successful. Technologies not performing as advertised or unable to integrate cannot be sold for profit, so, as mentioned, the industry's best interest becomes the environment's best interest.
The last risk, a lack of capital and a stagnant industry, therefore becomes, arguably, the most important risk to the adoption of clean tech. We feel that this risk can be successfully mitigated in two ways.
The first is by facilitating a strong Canadian oil and gas industry. A successful industry can afford to invest. Over the years, billions of private equity dollars have been invested in clean technology. There are many examples within individual businesses, such as the ones I mentioned earlier, but there are also successful groups, such as the Canada's Oil Sands Innovation Alliance. For those of you unfamiliar with COSIA, it is a group of companies that combined forces and funding to improve environmental efficiencies, and it has shown fantastic results. COSIA's algae project, for example, is a project designed to process CO2 , waste heat, and waste water resulting from oil sands production with algae in a photobioreactor to produce biodiesel or bio jet fuel and other products, such as livestock feed and fertilizer.
This type of development, however, can only be done if there is enough money for research and development. While COSIA has mitigated some of the costs by combining efforts, if each individual COSIA member were struggling to survive, or worse, went out of business, neither the group nor the clean tech would exist.
Second, a lack of capital to invest in clean tech begins with lower profits due to higher operating costs. Where higher costs are due to government policy, they can be controlled by better understanding the far-reaching, cumulative, and sometimes hard-to-see relationship between the two.
Clearly, there is a role for government in ensuring that our world-class resource industries do their due diligence in terms of conservation, but on a macro level, it is important to remember that a robust oil and gas sector, and well-thought-out policies sensitive to the cumulative cost implications, is the best provider of the innovations that have allowed Canada to carve out a place among the world's top 10 countries in green technology investment.
In short, the greatest threat to innovation in Canada's oil and gas industry is an uncompetitive market environment. If governments at all levels keep this in mind, the industry will continue to be one Canadians can be proud of.
With that in mind, I'd be happy to address any of your questions with respect to clean technology in the drilling and service rig industry, and I look forward to the other panellists' comments.