Opportunities and challenges in Canada’s oil sands sector—particularly those concerning access to markets, talent and capital—are creating a new environment for players, says Ernst & Young’s annual report called Exploring the top 10 opportunities and risks in Canada’s oil sands 2012-13.
“Rising supply and falling demand from the U.S., [along with] market access and infrastructure constraints, cost inflation, and labour availability are atop our annual risks list,” says Barry Munro, Ernst & Young’s Canadian oil and gas leader.
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“These are clear signals that companies urgently need to tie down new long-term customers, attract and retain talent, and seek new and creative capital sources.”
But accessing new markets requires significant investment in infrastructure, and joint ventures and strategic partnerships are becoming more attractive to companies looking to accelerate resource development. This is particularly since the introduction of Canada’s new oil sands foreign investment rules.
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“Accelerating growth without giving up competitive advantage is a balancing act,” says Lance Mortlock, partner in Ernst & Young’s oil and gas practice.
He adds, “Securing adequate returns on investment requires companies to have a complete understanding of their risk profile and risk appetite. Successful partnerships should protect your company’s competitive resources while furthering your position in the marketplace.”
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Collaboration enables companies to share costs and mitigate a number of this year’s top risks by sharing leading practices in areas such as technology, environmental reclamation, social and economic performance as well as creating a common labour pool to maximize resources.
“With so many complex issues at play for oil sands companies, 2013 will be a very dynamic year,” says Munro. “Winners and losers will emerge as company executives and boards grapple with their strategic choices.”
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Canada’s oil sands will continue to play a critical role in world supply and energy demand but success in the year ahead won’t come easily.
Top 10 risks of 2013:
- Rising supply and falling demand in the US
- Market access and infrastructure constraints
- Cost inflation
- Labour availability
- Environmental impact
- Reputation management
- Large upfront capital investment
- Changing policy and regulations
- High demand for water
10. First Nations relations
Top 10 opportunities of 2013:
- Global demand is growing
- Oil sands remain economically important to Canada
- Canada remains an attractive place to do business
- Technological innovation advances
- Environmental awareness is increasing
- Foreign interest is growing
- Project activity is increasing in a controlled way
- The business model is evolving
- Players are working together
U.S. remains a key customer