Not enough R&D threatens future of oil sands

With the shift in research and development (R&D) policies – more grants and fewer tax breaks – announced in March by Finance Minister Jim Flaherty, the latest report from Deloitte & Touche LLP says Canada is putting the future of its oil sands industry at risk.

The innovation imperative: A roadmap for oil sands advancement,” published on Thursday, says the federal decisions “risk putting Canada out of favour with multinationals trying to attract and deploy investment capital in our industries.”

Placing innovation at the centre of oil sands development, the report argues, will help to make Canada a leader in efficient and sustainable energy technology.  It will produce benefits that extend far beyond not only the energy sector but also the country’s borders.

Canada’s oil sands industry generates some of the highest-cost crude in the world and has been criticized for its environmental effects, with supporters admitting companies must improve.

According to the report, ongoing collaboration within industry, between industry and universities in the area of water innovation and management is crucial to maintaining a high-quality water supply. The oil sands industry needs to put aside its traditionally autonomous and competitive approaches to R&D when it comes to water management, as these are increasingly out of step with the principle of sustainability. Instead, the emphasis should be on supporting research and public awareness efforts that focus on the overall importance of water as a world resource.

The report also notes that the sheer scale of oil sands development, and the broad range of skills and technological expertise required, provide a significant opportunity to help close Canada’s productivity gap. Whether it’s working with government to retool the immigration system, streamlining and speeding up the regulatory approval process or building consensus around the importance of R&D as a core innovation driver, the ultimate goal is to shift from trying to predict the future to creating it outright.

Geoff Hill, a partner in Deloitte’s Calgary office and national sector leader of its oil & gas practice, said in a statement that, while Canada already leads the world in heavy oil technology, achieving true progress requires “sound practices and a strategic approach.”

According to data by the Canadian Association of Petroleum Producers, the country will double its crude oil production by 2030, increasing output from three million barrels a day to 6.2 million barrels a day.

Oil sands is the main driver of this production. In 2011, Western Canadian oil sands contributed 1.6 million barrels of crude oil a day . Conventional production in the West added another 1.1 million b/d whereas Eastern Canada produced 300,000 b/d.

“Oil sands development is among the most important industrial activity in Canada to business, government and the general public,” says Hill, adding the report aims to contribute to the on-going debate around the sustainable development of this important resource.