?National Oil Policy Will Require Production Level 700,000 Barrels Daily Within One Year

The following comments were made today by CARL O. NICKLE, publisher of the 'Daily Oil Bulletin' and 'Oil in Canada':

The announcement of an effective National Oil Policy by Trade & Commerce Minister Hees is, from the viewpoint of Canada as whole, the most important action taken by the government in many, many months, More than any other government action in this period, the national oil policy will increase the national income' reduce the commodity trade deficit and balance of payments deficit, and stimulate employment across Canada. The overall benefits will be very much greater than the mere dollar value of the increase in Canadian oil production.

The new policy is particularly gratifying to the Calgary Chamber of Commerce, which initiated a drive for just such a policy last June when it submitted a specific recommendation to Prime Minister Diefenbaker. The Calgary Chamber was successful two weeks ago in gaining unanimous approval for an effective National Oil Policy declaration from a Special Oil Policy Committee set up by the Canadian Chamber of Commerce, and subsequent unanimous approval of the Executive Council of the Canadian Chamber.

I am confident that the recent submission to the government from the Canadian Chamber of Commerce contributed to the timing and form of the announcement made by Mr. Hees. The C. C. C. stand marked the first support from a nation wide organization representing all businesses and industries for a National Oil Policy, and provided strong aid to the efforts formerly confined to Western Canadian oil producers and some business groups in the West. The new policy follows closely the plan specifically recommended by the Chamber.

The Independent Petroleum Association of Canada, organized last September, has played an important role in consolidating the support for a National Oil Policy from the host of Canadian independent oil firms, and its representations to the National Energy Board and to Mr. Hees certainly contributed to the making of a decision by the government.

The 1961 target of 640,000 barrels daily average represents an increase of about 105,000 barrels over the actual daily average of 1960, and would represent an increase to about sixty percent of Western Canada's productive potential (compared with under 50% in 1960, and present level of over 75% of potential for crude and gas liquids now applying to the United States oil industry). This year's projected increase in production will add some $250,000 daily to average oil revenue, and would thus result in about a $100 Millions increase in value of production this year as compared with 1960.

The success of production targets for 1962 and 1963 would mean further large increases in production revenue and would raise Canada's production to probably seventy percent or more of the potential of Canadian fields operating in 1963. This would move ratio between production and potential in Canada's domestic industry to a level almost as satisfactory as the current ratio in the United States, thus tending to equalize incentive and encouragement in the exploration and development of oil resources in the two neighbor nations a policy important to the economy and mutual defence of both.

In order to achieve a 640,000 barrels daily average in 1961, it will be necessary to progressively raise production during the year, to a level of about 700,000 barrels daily next winter. January 1961 production in Western Canada at a seasonal peak was about 601,000 barrels daily. At present February is forecast at 580,000 barrels daily and March at only 552,000 barrels daily, with even lower rates for the second quarter of 1961. These forecasts will naturally now go out the window, as the sharers of Canada's market for petroleum take steps to meet the N. O. P. targets, which include a call for production of 625,000 barrels daily by midyear. Additional nominations for Western Canadian oil may be made even this month but certainly in March, to raise the forecasts made prior to Ottawa's policy decision.

It would appear likely that the industry will strive to hold the next few months' production level at around 600,000 barrels daily, perhaps ranging in individual months from as little as 560,000 barrels daily to as much as 625,000. This would leave a target average of 680,000 barrels daily for the second half of the year which would likely mean a production range from as little as 625,000 barrels daily to in excess of 700,000 barrels daily in some months next winter.

Mr. Hee's did not announce the production target for 1962 but it would likely be around 720,000 barrels daily average. The official target for 1963 is an average of 800,000 barrels daily.

For Canada as the whole, the major benefit of the N. O. P. will stem from elimination of much of Canada's petroleum trade deficit, enough to eliminate the overall commodity trade deficit Canada suffered in 1960, and from the major improvement in balance of payments deficit.

With the increased production of oil will come increased capital investment in exploration and development, which will among other things substantially increase both the direct employment within the oil and gas industry in Western Canada and the indirect employment in construction, manufacturing of the complete range of consumer goods as well as oil industry tools, and the whole range of whosale and retail business which in all parts of the country are supported in varying degree by the income generated by oil. The overall gain in national income of Canada will actually be several times greater than the in" crease in value of Canadianproduced petroleum.

The Canadian government has selected one of the few resources in the country that is, petroleum that can be readily converted into a major stimulus to the entire nation, for Canada is capable of producing oil in volumes greater than national consumption. has the fourth largest consumption of petroleum among all nations. and can readily combine the two facts with a policy to ensure best possible use of the combination of productivity and market.

The voluntary plan which Mr. Hees has announced is combined with specific production targets and a clearcut statement of government intent to achieve its targets by compulsion, if that becomes necessary.

I am quite confident that all those who share the market for petroleum in Canada will, do their share to ensure that the national aims can be achieved without resort to the compulsory measures that have been adopted in certain other nations.