A recent Deloitte & Touche (D&R) report on innovation in the oil sands sector says changes to the R&D tax credit in the last federal Budget are "a step in the wrong direction and will negatively affect R&D in the future". Entitled The Innovation Imperative - A Roadmap for oil sands development, the report argues that Canada should seriously explore the principle of a national energy strategy and take steps to encourage greater R&D in areas where production increases and environmental sustainability are achievable in the short-, medium- and long-term.

D&T also argues that the recent shift away from indirect support towards direct business support is behind the relatively low level of Canadian business R&D and recommends "further review" of federal R&D and innovation policies — a repudiation of the findings of the Jenkins Panel.

"The recent federal budget … sends mixed signals to industry (which spent billions on R&D in 2011) in this all-important area. On the one hand, cuts in R&D credits will provide only negligible savings to government over the long term and risk putting Canada out of favour with multinationals," states the report. "On the other hand, the announced $200 million of agency funding (Industrial Research Assistance Program) continues the very interventionist approach whereby government attempts to pick winners that many believe is a major reason why Canada lags the world in converting R&D investment into profit."

The D&T report and an earlier study on the oils sands — Gaining ground in the sands 2012 — outline areas where technology can benefit the industry's objectives of reducing environmental damage while ramping up production and exploiting geological formations that can't be exploited using existing extraction methods. It also opens up opportunities for value-add that are currently not being realized.

"Technology ... is also a burgeoning secondary industry in its own right and Canadian producers have an opportunity to more fully capitalize on its R&D contribution in this sector — in terms of both the intellectual property value involved and to enhance global public perception of the industry as setting the bar for innovation and leadership," states the Gaining ground report.

FMI: www.deloitte.com

R$