Financing Oil, Gas And Coal Projects

THE GOOD NEWS is that recovery, albert slow, is underway in the Canadian petroleum industry. Earnings at last are starting to recover. Indeed, the percentage increases from the disastrous levels of the last few years are impressive. They are going to look big in the headlines-and that could be the bad news. It's a fact of life that Canadians are distrustful of profits-especially those made by oil companies. So our industry should be prepared. It won"t be easy to gel attention (at least until those headlines on profits appear) because Canadians are no longer interested in energy issues. They want attention focused on matters they consider far more critical-the worst unemployment levels since the Depression. When I make these statements about public attitudes, I am Quoting research reports by some of the best people in the survey business. They tell us Canadians now have little or no worry of Canada suffering future energy shortages. They tell us Canadians still see multi-national companies taking huge profits out of the country, with little or no benefit to Canadians in terms of investment and jobs. So we have our work cut out for us. We must show skeptical Canadians that they have a false sense of energy security. Despite the current glut at the gasoline pumps, the fact of the matter is that our country is running short or conventional reserves of oil: the present reserve life is about 12 years. Industry is only able La replace 15 per cent of the oil that's being withdrawn from conventional reserves each year. So where can we turn? Either we continue to increase imports of oil from unstable sources-whose own reserves are also depleting. Or else we turn to the Arctic and the Atlantic, those Canadian Frontiers which have been very stubborn about releasing their secrets, and to the Alberta oil sands. That's the energy side of its current sources of oil are depleting; we have to develop new ones. And that brings me to the profits. One encouraging aspect of the research on Canadian attitudes is finding that the people recognize the petroleum industry as a potential major contributor to national economic recovery. They also want Industry to be permitted to "get on with the job." What's needed to "get on with the job"? The answer is in just three words: restore investor confidence. Investors must see acceptable" returns on prior investment before they"ll seriously consider future investments. In recent years, earnings in our industry have provided a return as low as one per cent on capital assets. So much for those huge profits! You could do at least 15 Limes better by pulling money in Canada Savings Bonds. To finance the minimal expansion which it was undertaken, the industry has had to borrow heavily. But at last, things are improving. Governments have begun to realize that they had tried to share in too much, too fast, and they are easing off. Industry is also working very hard to increase efficiency and productivity.