Texas and Oklahoma in the United States are more attractive for oil investors than Alberta, the Fraser Institute, a Canadian think-tank, has reported based on a survey of oil industry executives.
The reasons for the unfavorable comparison are the same that the industry has been complaining about even before the pandemic started and include an uncertain regulatory environment and a pipeline capacity shortage.
"Canada's onerous and uncertain regulatory environment, along with our lack of pipeline capacity has created a significant competitiveness gap between Canadian and American jurisdictions," said Fraser Institute Associate Director of the Centre for Natural Resource Studies Elmira Aliakbari.
The gap has been widening, too. When oil prices recovered after the last crisis in 2014-2016, U.S. producers benefited a lot more because for the most part, they were free of the export offtake capacity shortage that their Canadian counterparts had to deal with. As a result, even some Canadian drilling companies upped and moved south, where there was more business.
The pandemic did not make matters better, to say the least, so Alberta's provincial government came to the rescue, offering the industry a reduction of the general business tax rate from 10 percent to eight percent effective July 1, 2020, instead of January 1, 2022, when the tax cut was originally scheduled to go into effect. The government also said it will invest some $7.3 billion in infrastructure projects that will create jobs.
"Global oil and gas prices are estimated to return to a WTI benchmark of $60 per barrel within 12 to 18 months," the Alberta government said in its recovery plan in June last year.
"In that environment, Alberta's oil and gas sector is set to thrive, as long as we can build new pipelines to get our product to market. This is why we invested $1.5 billion to ensure Keystone XL broke ground this spring - creating 7,400 high-paying jobs in Canada this year alone."
The future of Keystone XL, however, remains highly uncertain under the new Democratic administration in Washington.
By Charles Kennedy for Oilprice.com
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