CALGARY – Ernst & Young has taken its annual look at the opportunities and challenges facing Canada's oil sands industry, noting that access to markets, talent and capital will weigh heavily in creating a new environment for the players. The report, Exploring the Top 10 Opportunities and Risks in Canada's Oil Sands 2012-13, lists both the top 10 risks and top ten rewards facing the sector.
The top 10 risks for oil sands companies in 2013 are
- Rising supply and falling demand in the United States
- Market access and infrastructure constraints
- Cost inflation
- Labour availability
- Environmental impact
- Reputation management
- Large upfront capital investment
- Changing policies and regulations
- High demand for water
- First Nations relations
The top 10 opportunities next year will be
- Growing global demand
- Oil sands play an important role in the Canadian economy
- Canada remains an attractive place to do business
- Technology and innovation are advancing
- 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
- The United States remains a key customer
"Rising supply and falling demand from the US, market access and infrastructure constraints, cost inflation, and labour availability are atop our annual risks list. 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," says Barry Munro, Ernst & Young's Canadian Oil and Gas Leader.
But accessing new markets requires significant investment in infrastructure — and fast. Joint ventures and strategic partnerships are becoming more attractive to companies looking to accelerate resource development, particularly in light of Canada's new oil sands foreign investment rules.
"Accelerating growth without giving up competitive advantage is a balancing act," says Lance Mortlock, Partner in Ernst & Young's Oil and Gas practice. "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."
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.
For more information, please visit EY.com/ca.