Cenovus CEO takes aim at critics, urges Ottawa to do more on carbon capture tax incentives

The chief executive officer of Cenovus Energy Inc. CVE-T has taken aim at critics of Canada’s oil and gas industry, pointing to the billions in taxes and royalties the sector will pay this year, as it comes under fire for handing record profits to shareholders rather than investing in projects to lower emissions.

And while Alex Pourbaix isn’t expecting anything “earth-shattering” out of Ottawa’s fall economic statement Thursday in terms of tax credits to help decarbonize the oil sands, he says more needs to be done to ensure Canada keeps pace with the U.S.

Like many oil companies, Calgary-based Cenovus has enjoyed windfall profits in 2022, fuelled by high energy prices – due, in part, to a shift in global markets after Russia invaded Ukraine. It reported Wednesday that its third-quarter profit almost tripled year-over-year to $1.61-billion. Revenues hit $17.5-billion for the quarter ended Sept. 30, up from $12.7-billion in the same period last year.

The company’s upstream production for the quarter was about 778,000 barrels of oil equivalent per day.

Although the financial bonanza comes after years of depressed prices and industry woes, federal Environment Minister Steven Guilbeault last week slammed oil companies for failing to put that money toward reducing the sector’s greenhouse gas emissions.

Mr. Pourbaix said on an investor call Wednesday that “any characterization that the Canadian industry is not contributing is just fundamentally inaccurate.” He cited a recent report by energy investment firm Peters & Co. Ltd. that said the fossil fuel sector will contribute about $50-billion to federal and provincial coffers this year in royalties and taxes.

“That’s money that pays for health care, education, arts and culture, and much more across this country,” he said. “When the oil and gas sector does well, Canada does well.”

Mr. Pourbaix said the sector has shown that it’s “very serious about decarbonization,” but hitting emission-reduction goals will require “a practical and realistic approach … in order to protect jobs and investment in Canada and help provide global energy security.”

The Pathways Alliance, a group that accounts for about 95 per cent of oil sands production, has pledged to reach net-zero emissions by 2050. A key part of its plan is carbon capture and storage, or CCS, in which emissions are stored deep underground to keep them out of the atmosphere.

Cenovus is a member of the alliance along with Canadian Natural Resources Ltd. CNQ-T, Imperial Oil Ltd. IMO-T, MEG Energy Corp. MEG-T, Suncor Energy Inc. SU-T and ConocoPhillips Canada COP-N.

Ottawa released details earlier this year of a tax credit to promote investment in CCS technology. But the industry has asked the government to revisit the program after Washington increased a similar tax credit under its Inflation Reduction Act.

“That’s something that Canada is going to have to look at in terms of having a program that is competitive with the U.S. program, but I’m not expecting anything earth-shattering coming out of the the fall [economic] statement here tomorrow,” Mr. Pourbaix said.

Still, he dismissed any suggestion that the oil sector and Ottawa are in a stalemate over the tax credit, saying the two are having “quite productive discussions.”

“We are moving down this path of decarbonization. We just require some certainty in terms of the various government programs,” he said.

Several other details have to be worked out before the industry can pursue CCS projects, he said, including the Alberta government’s allocation of pore space (the geological formations used to store captured carbon) and the federal-provincial split on environmental permits for the projects.

“If everybody is reasonable, I think there’s a path to a resolution that works both for governments and for the industry,” Mr. Pourbaix said.

He said the Pathways Alliance is ready to move forward with investment decisions for decarbonization projects “once governments provide assurance that the necessary policy mechanisms and supports are in place.”