With the political and legal battle over the Trans Mountain Expansion battle raging in BC and Alberta, the oil and gas industry has released the second economic study that will form part of its vision for the future of the Canadian energy sector.

Canada’s Role in the World’s Future Energy Mix from the Canadian Association of Petroleum Producers (CAPP) focuses on growing global demand to 2040—most of it in Asia, markets the Kinder Morgan pipeline is intended to tap—the opportunities, and the impediments that could prevent Canadian producers from taking full advantage. From CAPP’s point of view, overregulation and a new pipeline approval process are the primary culprits, but at least one industry insider thinks the business has created some of its own problems.

The CAPP report uses data from the International Energy Agency’s forecasts contained in the World Energy Outlook 2017, which shows global population rising to 9.2 billion, with most of the growth coming in Asia, where rising incomes and a hunger for Western-style middle class lifestyles boosts spending on consumer goods like automobiles.

Total energy demand is expected to grow 3% over the new few decades. Oil consumption will rise from 94 million barrels per day (MMbbl/d) in 2016 to 105 MMbbl/d (or as high as 115 MMbbl/d in the most aggressive scenario) and natural gas demand will grow from 129 trillion cubic feet (Tcf) to 199 Tcf.

“It’s time to be realistic about Canada’s future. We have an opportunity to be a global supplier but we are limiting our opportunity to meet global demand with policies that constrict future growth,” CAPP CEO Tim McMillan said in an interview.

Last year, CAPP commissioned a survey of 22,000 people in 32 countries about their views on energy in general and on Canada as an energy supplier. The feedback was generally positive. For instance, while most would prefer to consume domestically-produced energy, “31% ranked Canada first among 11 producing nations as the preferred supplier of oil and natural gas, based largely on perception that Canada’s industry is inventing and using leading-edge technologies to minimize environmental impacts,” according to the report. Israel, the U.S., Algeria, India, and South Africa were the top five countries with the most interest in importing Canadian oil and natural gas.

Growing global demand for the foreseeable future and positive brand recognition in key emerging markets should make the Canadian industry enthusiastic for short to medium-term prospects, but McMillan says governments at both the national and provincial level are throwing up roadblocks. The list of concerns is a long one, said McMillan, and includes, stricter fuel standards, carbon pricing policies, fugitive methane emissions regulations, and restricted market access because of delays building new pipelines. Any one or two of those new policies might be manageable, but introducing them all within a year or two is a big challenge for industry.

“How many burdens can a sector take that others don't have?” asks McMillan. “The answer is, ‘Less is always better, but a level playing field is probably what we're truly looking for.’"

Government is compounding the problem by not doing a good job during implementation of new regulations, CAPP said. Dave Collyer agrees. “I think the implementation of some of those policies has not been as tight or as consistent as it could've been,” the veteran Shell Canada executive and former CAPP CEO said in an interview. “If you take on too much and execute poorly, then you lose the advantage that comes from a well thought out strategy and policy.”

McMillan said national and international investors have taken notice of the Canadian industry’s policy problems. “There have been some very ambitious regulatory change agendas with the changes of government [in Alberta and federally] that has truly stressed our industry and I think has contributed to investment challenges,” he said. “We need to change the narrative with the global investment community and I think to do that we need to really thoughtful about the policy changes we're making.”

CAPP is calling upon the Canadian government to partner with industry in developing a new “vision” for the energy sector. Demands from the industry biggest trade association include an effective policy and regulatory environment that encourages investment and access to world markets; cultivating support among Canadians for the responsible development of natural resources; adopting environmental policies that compete favorably with other jurisdictions.

“As the Canadian policy environment has been shifting, we have been very insistent that we need to look at the energy-intensive, trade-exposed industries and what the outcomes we're looking to achieve, and then build a policy that recognizes that,” McMillan said.

Collyer, who has advised both the Canadian government and several provinces on policy issues, argues that the rapidly changing market and technology environment for oil and gas producers is a big issue for policy development. “It's a challenge for both industry and policymakers to frame policy in a world where there is much less certainty about how the industry is going to unfold and the nature of the pressures that are going to be on that industry, not to mention the nature of the opportunities,” he said. “The policy development and implementation process is not the quickest process in the world.”

He also cautions that industry has been the author of some of its own problems and shouldn’t always look to government for solutions. “I think it's important that industry present itself in a more solutions-oriented manner. These issues aren't all government's problem.”

McMillan said governments have acknowledged some of the inconsistencies with regulatory change, but have been reluctant to make changes. “They have pushed that out for a period of time, but we would make the point that we're looking for investment today. If you're implementing a new policy, the effects could be long-term if you don't get it right.”