Negative perception of Canada's oil sands could slow its growth if the industry doesn't make a compelling case for continued development, a report by the U.S. consulting firm Deloitte says.
Negative perception of
Canada
's oil
sands could slow its growth if the industry doesn't make a compelling case for
continued development, a report by the
U.S.
consulting firm Deloitte says.
The report calls the oil sands "
Canada
's
primary economic development project," which will create C$1.7 trillion in
gross domestic product over the next 25 years. It says environmental objections
to oil sands development must be countered by demonstrations of its economic
benefits, technological improvements to its environmental performance, and its
advantages compared with oil produced by other countries with less stable
governments and less ethical regulation.
"Production could be at risk of stagnation if the industry is not granted
a social 'license to grow,'" according to the report.
Environmentalists are opposed to the oil sands industry, located in
northeastern
Alberta
, for
the large surface disruptions and carbon dioxide emissions it creates. The
potential for pollution to the surrounding watershed is also being studied.
Recent deaths of birds in large tailings ponds have highlighted the
environmental challenges of the industry in
Canada
. In
the
U.S.
, the
proposed expansion of a TransCanada Corp. (TRP) pipeline to carry more oil
sands crude to the
Gulf
Coast
has
drawn resistance from environmentalists and Democratic legislators.
The Deloitte report says oil sands producers must continue to make strides in
technology to limit their physical and carbon footprints, such as recent
improvements in technology to reclaim large waste ponds created by oil sands mining,
and improvements in the efficiency and energy use of underground oil sands
extraction.
The report also highlights the potential for rising labor and infrastructure
costs that could hamstring the industry's development, as it did during the
last boom in 2005 to 2008 when competition for talented labor and
infrastructure caused prices to skyrocket. It suggests companies coordinate a
strategy to retain a skilled work force to avoid a similar run-up in costs as
the industry grows.
Continued reliance solely on
U.S.
customers is also a risk for the oil sands industry, the report says, as nearly
all of the 1.3 million barrels a day it produced last year were shipped to the
U.S.
The
Northern Gateway pipeline proposed by Enbridge Inc. (ENB) to take oil sands
crude to western ports to ship to Asian market would reduce the risk of
regulation from the
U.S.
and
increase market competition for oil sands production, the report says. The
Northern Gateway project is currently under review by the Canadian government,
and opposed by environmental groups concerned about the potential for oil
spills.
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