Natural Resources Committee on May 1st, 2018

[Shannon Stubbs, Conservative, Lakeland, AB]

Yes. Thanks, Chair.

Mr. Keating, thank you for joining us.

As a first-generation Albertan who has some experience in the oil sands and with heavy oil development and the Alberta government there, but also as a person who has a Newfoundland mother and still lots of family in Newfoundland, I just want to say that I'm always happy to hear from witnesses like you. I'm happy to hear about the great successes and incredible risk-taking and innovation of unlocking offshore oil and gas reserves in Canada. I want to thank you for being an ambassador on behalf of Canada and all of our world-leading expertise in the United States.

I should put on the table in this discussion that I think certainly, and on behalf of Conservatives, that we support responsible resource development of all types of energy in all sectors, across all provinces, to the benefit of all of Canada. I would suggest that things like the five-year offshore and gas drilling ban in the north, which clearly afterwards caught the premier of the Northwest Territories off guard, isn't the greatest signal for a government to send in terms of certainty and predictability and being a champion of offshore development and all kinds of energy development right across the country. Of course, I hope that isn't a measure that impacts your company directly, but certainly I think it does impact confidence and certainty in Canada, whether or not we're open for business. Our governments are really championing offshore oil and gas drilling in all of its potential, as you've outlined here.

I'd like to get into another aspect with you here. I of course completely and totally understand, as I think everybody does here at the table, the importance of the kind of data that you're talking about, and the availability of that information. Particularly in your field, where there is high risk and big costs and not necessarily certainty of success, the kind of information you're talking about being available is clearly required for investors and proponents to decide whether or not to go ahead. I think, though, that probably partially what the government's aim is here is to also get at data systems that reflect information about individual projects, about energy efficiency, maybe energy or cost inputs, about emissions, about the environmental footprint of their individual projects. Potentially, as we've seen, there's a growing push from the government about the social impacts of energy development in individual projects. As a promoter of Canadian energy, I'm not against this in principle, although I don't think it should be a determiner or a condition for the economics and the opportunities of individual projects.

I'm bearing in mind your comment about an energy data strategy being very different from a new stand-alone bureaucratic agency requiring additional costs of reporting and things like that from the private sector. Also, StatsCan has said that they do have single information hubs for different kinds of information that could be duplicated for energy and that the legislative framework already exists to gather that data, but obviously we have some work to do there.

Could you walk through what the requirements are for your company in terms of the existing provincial and federal regulatory process and information requirements and inputs, and whether or not there would be any proprietary or competitiveness issues in that regard?

[Jim Keating]

One of the more sensitive aspects of any discussion around data.... You mentioned operational data, CO2 emissions and so forth. I will address that briefly first.

The oil and gas industry realizes that it actually only uses 3% to 5% of all the operational data. As you produce oil or gas, there are all these sensors and recorders and transmitters and whatnot in all these offshore and onshore facilities, but we only really utilize a small percentage, so we're overloaded with data. There's a whole area of effort now in tapping into that and artificial intelligence and so on, as well as preventive maintenance strategies to reduce costs and make it more efficient and more safe. That's something that my company, like others, is keenly watching.

However, when we look at data in itself, we see that the oil and gas industry—like most industries, I guess, but probably particularly so here—is highly competitive around proprietary processes. Proprietary processes are largely driven through the collection, acquisition, and interpretation of data. My experience is that all companies realize that they will be able to maintain and keep their particular proprietary processes, but what they realize is that keeping the raw data secret is not helpful to most companies or anyone. It's the provision of the raw data, the raw digits, that allows multiple users—almost in a crowd-sharing way—to look at innovations, look at innovative ways to solve problems and enhance oil recovery or improve maintenance and decrease emissions and so on.

My sense is that the industry is changing its tone over the last several years. It'll protect its processes, but maybe it can make the data a little more freely available. Thematically, I've experienced that in the last several years.

[Shannon Stubbs, Conservative, Lakeland, AB]

As I'm sure you know, there's a background of that kind of collaboration happening even among competitive proponents and developers in the oil sands industry. Certainly unlocking in situ development in the oil sands in the early 2000s was being done actively between the private and public sector, academics, pioneering investors, and oil and gas developers. With their technical alliances and their innovation alliances, a lot of them are doing that kind of work collaboratively, where they can, already.

I would want to avoid duplication of information that a company like yours or other oil and gas developers are already providing and feeding into provincial and territorial regulatory systems. What I'm trying to get at is that if this is really just a function of the federal government—a mandate or instruction, as you pointed out, working collaboratively with these other levels of government just to say.... Obviously in the front end they've got to work with private sector companies to determine what would be proprietary and what wouldn't be. Then maybe is it just that the feds have to give the instruction that they are looking for this information, and when it is submitted through the provincial and territorial regulatory process, they should just shoot it over to the feds, to whatever hopefully existing department?

[Jim Keating]

In provincial governments, particularly in the offshore, because it's jointly managed, it's a facilitator. All the rules are in place to acquire any and all manner of data. That's one thing that I think Canada does well. It has provisions in the legislation and regulations to acquire all sorts of data. The question is this. The data comes in maybe in nonstandard formats that may be particular to companies. We could do better at standardizing. We could also do better at keeping it central and not replicating it in different departments and divisions and areas. Then you make the access level transparent and you have a fair playing field.

Again, you'll see in that context how Norway has evolved far more collaboratively. It has looked at this huge opportunity to acquire data. The authorities have realized that no one private sector company or group of companies is going to sit down and do what they need to do, which is provide the common platform. The authorities are the platform. They're the Google, if you will.

[The Chair, Liberal, James Maloney]

I'm going to have to stop you there. Thanks very much.

Mr. Johns, thanks for joining us today. The floor is yours.

[Gord Johns, Courtenay—Alberni, NDP]

Thanks for having me. I'll follow a bit more along the thread that Ms. Stubbs was on.

You talked about better standardization and becoming more transparent in terms of the common platform. Maybe you could elaborate a bit more about that. Certainly I think we're all interested in hearing how Norway does things. We're always opening our eyes around their trillion-dollar pension fund that we certainly don't have here in Canada. Maybe you could speak about that.

[Jim Keating]

I'll be brief.

Transparency on data is so important. In particular, if you have an industry that has pioneering companies that have been here for 20 and 30 years and have largely been the first movers, have invested a lot, have amassed their own data trove, then by all means they should be enabled and thanked for that level of investment. However, how do you lever, how do you grow, and how do you create a level playing field, such that a new company that has never done business in Canada can come in and compete on adjacent lands?

Well, one such way is to do what we've done. We've followed a multi-client data strategy. Multi-client means you shoot for the geoscience data once and you make it available at the same price, amount, and formats to all. That's a transparent way of creating the understanding that no company around the table has any better competitive opportunity than any other. That's totally reassuring.

By the way, the older, established pioneering companies appreciate it too, because they won't spend 100% of the dollar on data. They'll maybe only spend 20¢ of the dollar on data, and that is actually a reward of being a pioneer. They will benefit from new entrants to lower their costs as time goes forward. That's from the element of transparency.

Just to bridge to the $1-trillion growth fund, Norway has seen the opportunity in their prospectivity through geoscience some 20 or 30 years ahead of Canada. I know the world of offshore oil and gas, I know geoscience pretty well, and I know the scale of our offshore, at 1.8 million square kilometres, is twice the size of Norway. Geologically, it has the same play types. For me, it's highly unlikely that we will not have ultimately the same geologic success that Norway has had. We have only really drilled and produced from 0.5% of our offshore area. Norway is into about 12% to 14% of its offshore.

Our days are yet to come, then. We just don't know if we have the time to get there.

[Gord Johns]

I appreciate you sharing your vision of where we can go.

Can you explain what the barriers have been up to now for us to get to where you say we can go—the vision?

[Jim Keating]

On the good hand, it's a laissez-faire approach to encouraging private sector investments. You make the rules, you step back, and you let the best of the private sector find the right opportunities. That works well, but only if you have a significant cluster of participants with some common resource knowledge.

Canada's challenge has been twofold. One is that we have little knowledge about the offshore in particular. We have more knowledge about the Alberta foothills, the oil sands, and so on. There's a big cluster of hundreds of companies there. In the offshore context, we've had but five or six, and over 30 years most of those companies acquired exclusive data that they only use themselves. We need to unlock that and we need to demonstrate that prospectivity. With the demonstration of that prospectivity, you will attract the investment.

Our barriers have been that we didn't have a really good data repository, so we didn't encourage multi-client investment and we didn't have scheduled licensing rounds. Scheduled licence rounds are the key, because that gives you a predictable way in which to plan for your very specialized geoscience teams to work for six months, to prepare a bid for two months, and to make a bid in the following year. When you don't have that calendar of events, you won't get that investment and you won't get those people to work their area. We've changed that in 2013, so our trajectory is markedly up, but we've had 30 years of a pretty flat growth profile.

I'm happy. We're positioned well. However, there's still much more opportunity to follow some best practice.

[Gord Johns]

Has there been much push-back from the private sector to go down the path you're promoting?

[Jim Keating]

The push-back is usually from the pioneering companies, because as they see it, they're the first movers and they have the knowledge, so competition is probably not something they would appreciate.

However, I think invariably most of those first movers do appreciate competition, as they have embraced it now, over the last couple of years, mostly because it's a sharing of risk. Oil and gas is joint venture driven. Sharing of risk and sharing of ideas unlock new play types and new opportunities. Therefore, what might have been a little bit of resistance and wariness in the beginning is now wholly embraced.

As well, all companies are now actively participating and have licensed my data. When I say “my data”, this is the Nalcor-driven data set. We went from seven companies to 14 companies, but over 30 companies have actually licensed the data. There's another pool of some 15 companies that could potentially enter in Canada's future offshore licence rounds.

[Gord Johns]

Maybe you can speak a little more to how we can reduce those roadblocks and what can be done in the next steps.

[Jim Keating]

Just last year, studies ranked Newfoundland and Labrador's offshore as fourth-best in the world in terms of all oil and gas attractions. We're very happy about our position in terms of competitiveness. However, in recent months, we've gotten a pretty big setback, and this has been in an area that is topical now in Houston, where I go to meetings. It is in the formation of marine refuge areas and marine protected areas.

Right at the moment, we are putting licence rounds out in a methodical two- and four-year horizon, which is decided by ministers of NRCan and natural resources in the province, but they are under strategic environmental assessments. We now have pockets of marine refuge areas, which I think were formerly fisheries exclusion areas, that overlap existing licences where companies have made hundreds of millions of dollars of bids and sit on some of the most prospective acreage anywhere. That's a barrier.

The geoscience barriers are being addressed. It's the above-ground barriers now we need to address, and most of those are policy-related.

[Gord Johns]

Thank you.

[The Chair, Liberal, James Maloney]

Thank you.

Ms. Ng is next.

[Mary Ng, Liberal, Markham—Thornhill, ON]

Thank you so much, Mr. Keating, for coming in and joining us today.

I'm going to share a little bit of my time with Mr. Serré.

It's interesting in terms of the data set that you've created. Of course, the study is about looking at opportunities to have readily accessible data to enable good decision-making, not only on the part of policy-makers but also by those who want to invest in Canada and those who want to participate. The gathering of the data for your organization will help the private sector in making those decisions for investments.

Can you talk a little bit about the use of that data on the environmental protection side and how, as we move to a world where we are looking at resource development, no question, we can ensure that we are being responsive to climate change, etc.? How can this data set be leveraged and used in a way so that...? The example you shared earlier shows that through data, companies, investors, and government can also afford that kind of planning and that kind of consideration so that in the future it is in respect of both.

[Jim Keating]

Here are a couple of examples.

We've been working very closely now, in the last several weeks, with the Department of Fisheries and Oceans. As we understand it, they have a parallel process. They're drawing maps, and we are drawing maps. We are drawing maps of where the oil and gas should be, and they're drawing maps of where oceans need to be protected.

We just get together now, and we meet. We tell them that we know about where all the treasure is buried along our eastern coast. We know where all the highly prospective areas are, and we also know where maybe oil and gas opportunities don't exist.

They also have a sliding scale from the very sensitive areas all the way to the sort of benign areas, so we collaborate. We show them our maps, they show us their maps, and we just overlay the maps. We just work together to make sure that we protect as much of Canada's offshore as we can and also see to it that, on average, we make available some of the most prospective acreage. In this case, fisheries interests and oil and gas interests can cohabit, as they have been doing in Newfoundland and Labrador now for some 25 years or so.

That's an example of where our dataset can illuminate the Department of Fisheries and Oceans' initiatives. That wouldn't happen if the data were private. It's only because we're a subnational government, with the ability and the interests we have that are common to us and Canada, that we'll make our data set available to DFO and will try to avoid one another in terms of where licences go for offshore drilling and where marine protected areas are. That's number one.

Number two is that the method by which we collect our data is multi-client. Rather than have 14 companies out with their own seismic vessels shooting their own seismic packages, as they would have done in the past, we do it now for everyone. That eliminates a number of interactions.

Finally, we look at all sorts of data. We look at pore pressures, biostratigraphy, and all the below-ground risks that you need to be aware of if you're drilling a well so that you are prepared for a tricky well, a well that you need to be wary of and for which you will need extra equipment. We gladly and freely provide all this safety-related geoscience data—weather data, wave, wind, fog, visibility—to lower the risks to both people and the environment.

Again, though, it's because it's a national database. It's in our interests. We basically drop it from low-flying aircraft and have no issues with it. That's not necessarily going to be the case if it is only done and held by private sector interests.

[Mary Ng, Liberal, Markham—Thornhill, ON]

Okay.

I am sharing with Mr. Serré.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you. I have about two minutes left here.

Thank you, Mr. Keating, for your presentation and expertise.

I want to go back to your original statement. You mentioned that from an investment pool, there's about $100 billion available, and that over the last 20 years—not the last two years, but over the last 20 years—we haven't been able to access hardly any of that. You referenced about $100 million.

From a federal government perspective, linking back to the study here on data, what would be your one or two recommendations for the federal government in supporting the industry to acquire the type of data you would need in order to access those dollars?

[Jim Keating]

In short form, for a real market share, if you will, of that $100 billion for Canada, for our geography, for our frontier, a place along the curve, we should be targeting 4% or 5% of that market share, realistically. We're getting less than half of 1% today.

The bids in the last couple of years indicate that trajectory can be met if we continue to get companies interested and bidding at that level. We have five companies now planning to drill offshore. Plans are in various phases of CEAA as I speak today. In Nova Scotia, BP is actually drilling in one of their more interesting prospects.

This is good so far. Really, with the provision of geoscience and making it broadly available, Canada needs to look at this type of Norwegian Diskos system, whereby it basically provides a platform. It has the regulation to require the data; it just needs the apparatus—the shell, if you will, the front door where companies put the data in. Someone sits behind the front door and validates and verifies that it is received, which we do today in the different petroleum boards, but then it's to add that extra special layer, which costs not a lot at all, actually. It just takes some ingenuity, and you can get a lot of best practices from our Norwegian colleagues.

It's to find the system of access to that data and protection of the data that would work well for us and put it in as many hands as possible, so that I can download it here in Houston, Kuala Lumpur, London, or Oslo and see the same data set that my colleagues can see halfway around the world and do it electronically and quickly.

That does not exist. If there ever is a role for Canada.... It has joint jurisdiction over Nova Scotia, Newfoundland and Labrador, and all our offshore. It is the pre-eminent regulator. There is a great place for Canada to be that data repository, to be that Google of offshore data of all sorts. That's a modest investment, looking at the investment in total, and I think it'll be the most levered of any dollar that you can spend. We know it.

Nalcor Energy spends $20 million of Newfoundland and Labrador's taxpayer money per year for our geoscience program. We know that with the bid levels that have been received to date, if even no drilling is ever done and all these companies walk away from every dollar that they bid, 25% of that $2.5 billion is kept. It's defaulted to the government. We've more than paid for it. Canada has more than received, as Newfoundland and Labrador, its investment already.

It's very easy for me to argue, model, and articulate a strategy for a data repository similar to Norway's when you look at that level of investment.

[The Chair, Liberal, James Maloney]

Thanks, Mr. Keating.

Mr. Falk, we're over to you for a five-minute round.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chair.

Thank you, Mr. Keating, for attending committee today and for providing us with this very interesting and valuable information.

I have a couple of questions just to get started.

You made a comment that you didn't know if we had the time to get there. I'm wondering if that was in reference to some of the barriers to exploration you're experiencing, if it's in reference to the protection of resource access.

What did you mean by that comment, sir?

[Jim Keating]

Obviously we understand that we're in a transitioning economy. Oil and gas as we know it, depending on which analysts or what crystal ball view you take, may have decades of opportunity.

My interest is like, again, the Norwegian interest. Norway has found a great duality. It is a leader in climate change and climate change technology and innovation and renewable science and renewable energy. As an example, the highest penetration of electric vehicles is in Norway, yet it continues to open new areas for oil and gas exploration. It is a paradox.

Norway does it because it believes it will produce the most responsible barrel of oil or litre of gas of anyone in the world. They do it today. They have the lowest CO2 emissions per barrel in any jurisdiction because of their regulation and their technologies.

Canada's offshore, by the way, or Newfoundland and Labrador's offshore, is the second-lowest. We have small gaps to close, and it's mostly at an operational level.

I would like to see in the hydrocarbon era, whether it be measured in decades.... Remember that the offshore is long play. It takes two or three years to plan to drill. It takes five to six years to build the asset and 30 years to operate. There are not going to be many opportunities to get that trillion-dollar pension fund for Canada from the east coast, and I don't think that's going to really happen, quite frankly, but there is an opportunity in the hydrocarbon window for us to really stimulate our offshore in a responsible and balanced way and to make sure that, as Norway believes, if the last barrel of oil produced should be a Norwegian barrel, why can't it be a Canadian barrel?

[Ted Falk, Conservative, Provencher, MB]

Good. Thank you very much, Mr. Keating, for asking that question.

I'm going to just shift away from the discussion that we've been having so far.

To come back to you, Mr. Chair, I want to move the motion that I provided notice of motion for on Friday to this committee.

I do it as a matter of urgency. In light of the discussion we've been having with Mr. Keating this morning, I think it's very important that this be done now.

The crisis with which we are currently tasked and consumed is the Trans Mountain pipeline expansion—

[The Chair, Liberal, James Maloney]

Mr. Falk, can I just explain to Mr. Keating what's going on here?