Canada refinery-web.jpg

Challenges and opportunities for Canada’s oil and gas industry

Sep 03, 2020
7 min read
Print this page

By: Joseph Bryson

The COVID-19 pandemic and the reduction in global oil supply has taken its toll on the Canadian oil and gas Industry. These factors have led to certain unprecedented effects and resulted in lots of uncertainty around the country's oil and gas industry, especially in Alberta. 

The points discussed below are a vital consideration for the big players in the Canadian oil and gas Industry during this difficult period. These key points will focus on challenges and opportunities affecting the oil market in Alberta and its environs. 
The Government of Alberta aims to ease the effects of the pandemic on the industry through the provision of relief programs. These relief programs include the offering of a one-year extension on specified agreements and permits which were supposed to expire during the period affected by the pandemic (March 2020 - December 2020). The government of Canada and Alberta have also incorporated measures to ease employment and employee welfare as a result of COVID-19. 

Industry leaders have started to adopt force majeure clauses to mitigate the effects of the pandemic. The scope and availability of the clauses will vary based on the people involved and their language. However, the effects of the clauses are well-meaning, and a helpful part of creating a great work environment. 

Any events or hardships caused by the pandemic can be dealt with by relying on the force majeure. This clause will be effected on the commercial lease and help organisations handle their obligations. The scope and availability of the clauses will vary based on the people involved and their language. It may not eliminate the obligation to pay rent.

Force Majeure is designed to help parties involved avoid certain obligations as a result of a complication that is beyond the control of both parties involved. If the events of the pandemic trigger a force majeure clause, the event will be treated according to terms stated in the clause. 

Contracted parties are advised to carefully review the terms of any force majeures, attempt to resolve any conflicts or handle the complications, record the effects of the complication and strictly comply with the terms of the clause. 

If a contract does not contain the force majeure clause, concerned parties may consider seeking redress under Material Adverse Change clauses which are found in the doctrine of frustration. The doctrine of frustration is a complicated concept and affected parties are advised to seek legal counsel before going through with it.

The COVID-19 pandemic will cause the most stable gas engineering corporations to adopt more Internet facilities and force annual stakeholders to hold online meetings. Corporations should check any available documents governing corporate statutes before their virtual meetings. 

COVID-19 has caused unique safety issues for employers and employees of oil & gas firms, especially those that have already been specified in Alberta’s Occupational Health & Safety and Workers’ Compensation regimes. Directors and owners of gas engineering firms in the Canadian oil and gas sector may have begun to cross-check their responsibilities, duties, and insurance policies to compensate for the high level of uncertainty surrounding the industry. 

The pandemic has also led to the adoption of Alternative Dispute Resolution procedures which would be vital to help conflicting parties resolve conflicts quickly and without pressure from the legal system. 

The present-day uncertainty in the industry implies that industry leaders have to do their best to tackle insolvency and restructuring their procedures to eliminate liquidity issues affecting the entire sector. 

The raging pandemic may result in confusion about business interruption insurance policies. At the end of the day, there would be a need for specific policies targeted at mitigating the damage done to individual corporations in the industry. 

Challenges concerning employment and layoffs

The effects of the pandemic have shaken the finances of many big industry players. Due to these detrimental factors, many corporations and engineering firms had to reduce costs by laying off staff, and it's safe to say that the  Canadian oil industry wasn't left out. This has probably lengthened the list of employment-related problems for the industry. 

To cater to the welfare of people, the Candian government has put in place the Emergency Response Benefit Act which will be in charge of the new Canada Emergency Response Benefit (CERB). The CERB is a special benefit made available to workers who have suffered a reduction in their income as a result of the pandemic. According to the government, the CERB may offer as much as $2,000 to those eligible for a period of 16 weeks. 

The CERB began to compensate citizens in April. The Alberta government hasn't ignored employers and corporations. Instead, they have offered some guidance to employers on how to tackle problems caused by the COVID-19 pandemic. Many employers have found themselves caught up with some logistic or practical problems which they are unfamiliar with such as handling employee safety, temporary layoffs, and how to make staff work from home.

Some other employers are unaware of how to organise their work to comply with COVID-19 regulations. These stakeholders have to resort to intensive research and hiring of experts to provide solutions to their obvious problems. 

Government initiatives designed to aid the oil and gas industry

As mentioned earlier, the government of Alberta has taken different steps to ease the effects of the pandemic on the oil and gas Industry. There have been different opinions circulating about the role of the government in supporting gas engineering corporations and companies in the sector. The government has provided some opportunities for industry stakeholders to utilise. 

Let's take a look at some of the key points that were discussed.  

The government of Alberta has committed to the following:

- They will fund the Alberta Energy Regulator industry for a duration of 6 months. This will provide immense benefits for corporations and firms in the sector. 

- They will offer automatic one-year extensions for Oil sands agreements, Crown petroleum and natural gas agreements, and different types of permits. This extension holds for any agreements and permits which were supposed to expire between March 20, 2020, and December 31, 2020.

- Provision of a loan to the Orphan Well Association worth $100 million. 

The bottomline

While the Canadian oil and gas industry has been hit by the reduction in demand for petroleum products and the general fall in prices of these products, they keep on striving to be better. 

And in recent times, the industry seems to be waxing stronger and would definitely surmount these challenges. Thanks to the fact that the world is opening up again, we can safely assume that this industry would bounce back in no time.