High commodity prices have fuelled a burst of optimism in Canada’s oil and gas sector, and chief executives say the country must firmly grasp the opportunity to foster global energy security and again attract investment to the industry.
Two years ago, CEOs watched the market plunge, spiralling in the face of a pandemic-driven drop in demand and an oil-price battle between Russia and Saudi Arabia. That has all changed.
Now, West Texas Intermediate, the North American oil benchmark, is sitting at around US$100 per barrel – up from US$60 this time last year. COVID-19 loosened its hold on the global economy last year, driving up demand, and Russia’s war on Ukraine has sent fossil-fuel prices surging.
Those high prices have brought with them stronger balance sheets and returns to investors.
Outgoing president and CEO of the Canadian Association of Petroleum Producers, Tim McMillan, called the current global energy situation a “wake-up call” for Canada. The country is in a unique position to supply fossil fuels to allies in Europe who are trying to ween themselves off Russian oil and gas, he said, and play a larger role in global supplies more broadly.
“That’s the ambition I’d like to see for our industry and our country.”
Despite their enthusiasm, CEOs who gathered virtually for an energy symposium this week held by CAPP and Bank of Nova Scotia were clear that now is not the time to completely let go of the economic discipline they have exercised for the past two years.
Instead, the sector is also in something of a regroup phase. Various CEOs pointed to the industry’s push to pay down debt, but said there’s an opportunity to boost production where it makes economic and supply sense.
Take Canadian Natural Resources Ltd. Its president Tim McKay said he expects the company’s oil-sands production to increase this year, along with modest growth in light oil and natural gas.
It’s not about growing as much as it is about adding value, he said.
Thursday’s federal budget also factored into discussions at the two-day symposium – in particular, its details of a new tax credit for carbon-capture projects. Although sectors such as manufacturing and power generation can also use carbon capture (which traps and pushes carbon emissions deep underground), it’s an important tool for the oil and gas sector to reduce emissions as it keeps producing fossil fuels.
The energy sector has endured seven extremely tough years, said Jeff Tonken, president and CEO of Birchcliff Energy Ltd. Not only did prices languish, pressures about environmental, social and governance (ESG) concerns saw investment evaporate and had banks hesitant to provide credit.
“The result of that has been the current executive teams within our industry, our proven management teams, they built very strong companies,” he said “They worked their way through very difficult times and survived the downturn.”
That has brought a greater appreciation of just how long and deep the downturn can be, so he thinks it’s unlikely that companies will start spending big and dramatically boost production just because of a commodity price run. Instead, he said, industry players will focus on cleaning up and fortifying their balance sheets, and eliminating debt.
“The fact that these remaining companies are strong … will provide them with the ability to have dividends and share buybacks that they could continue on throughout another downturn,” he said.
With global crude inventories at a five-year low and Canadian base reserves the third largest in the world, the industry here has a unique opportunity to address both energy security and affordability, said Craig Bryksa, president and CEO of Crescent Point Energy Corp.
“I’m excited to ideally put a stamp on every incremental barrel that makes its way onto the market, to have a Canadian flag stamped on that,” he said.
“We see the opportunity, we’re here to help.”
Mr. Tonken added that Canada shouldn’t just “sit around and watch” while the industry in the U.S. ramps up production. “It’s time for Canada to reorganize itself,” he said, and develop workable regulations so it can sell responsibly produced natural gas around the world.
“The Montney is one of North America’s best natural-gas resource plays,” he said. “Canada has the ability to develop this resource responsibly, to liquefy that gas and send it off our West Coast” to meet growing global demand.
Meanwhile, the sector is also mulling over the implications of Ottawa’s new climate plan, which demands that emissions from the oil and gas sector be cut 42 per cent by 2030. The industry argues that it’s working on it, has already taken huge steps to reduce its carbon footprint and is investing millions in research for emissions-cutting technologies. It also points to the net-zero pledge that covers 95 per cent of oil-sands producers.
Mr. Bryksa said Natural Resources Minister Jonathan Wilkinson sat down with the industry before the federal government released the climate target, and has promised that Ottawa will continue to consult as it works through the details on exactly where and how to cut emissions.
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