JOG Capital was a small but influential player in Calgary oil and gas circles for a decade and a half, making its mark investing in junior and mid-size producers.
Now, the private equity firm has been revamped, and its transformation into a carbon-capture and storage (CCS) play speaks volumes about how the city is starting to adapt to a massive transition it did not plan for.
JOG is now called Carbon Infrastructure Partners (CIP), reflecting its new focus on matching hydrocarbon production with technology for burying the carbon dioxide emitted. The change comes after a year of existential dread in the oil and gas industry – first owing to the collapse in demand and prices after the COVID-19 lockdowns, then worries that investors would avoid the sector like a virus to focus on green solutions.
Oil prices and the industry have staged recovery since the dark spring of 2020, but it has become clear that fossil-fuel production must be matched with technologies to reduce the impact on climate, said Craig Golinowski, president and managing partner of CIP. He held the same position at JOG, which managed more than $1.3-billion in investments in such companies as Surge Energy Inc. and InPlay Oil Corp. The other principals are Ryan Crawford, Kel Johnston and David Moyes.
From private equity to major banks, the financial community that has backed Canadian oil and gas for decades is adding cleantech and carbon-reduction technology to their mandates. In many cases, these efforts are led by the same people, a community who saw the writing on downtown Calgary’s walls as office buildings lost oil and gas tenants in droves and were driven to find ways to adapt.
“We’ve sponsored 65 startup companies over the years, so here’s us identifying carbon capture as an entrepreneurial opportunity. Others are identifying energy-transition opportunities,” Mr. Golinowski said.
“I think people are adapting and evolving because there’s more policy certainty and there are incentives. So like any technical or financial professionals, we’re in the business of trying to make money for our shareholders and investors, and I think people are just responding to those signals.”
Another signal has come from the very audience for whom the firm is seeking to make money – the investors themselves. Major pension funds, endowments and individual investors alike are demanding their capital be directed to companies dealing seriously with climate risk as well as other environmental, social and governance issues. In some cases, oil and gas had become an “off-limits asset class,” he said.
To be sure, many environmentalists are wary about carbon capture, saying that it will prolong use of fossil fuels, which they contend must end for the world to get to net-zero emissions. But CIP says the technology is necessary to solve problems of meeting rising global energy demand while reducing greenhouse gases in the atmosphere.
Part of CIP’s strategy includes working with portfolio companies to deal with their carbon emissions, through CCS as well as other options, such as offsets and nascent technology to remove carbon from the atmosphere. CIP will also invest in hydrogen production and electrical generation that includes carbon-capture facilities in Canada and the United States.
Mr. Golinowski said he consulted with academics at the Stanford Center for Carbon Storage in California while his wife attended the university, and was impressed by a coalition of green groups, scientists and bipartisan policy makers who had advanced use of the technology by industry in the U.S. There, a series of federal incentives known as the 45Q program has encouraged investment.
“Carbon capture and storage, and what the United States has done in particular, is a version 2.0 of climate and energy policy, and I think Canada has been behind the curve,” he said. “I think we’re catching up in terms of looking at climate and energy as a problem of emissions, rather than a goal of eliminating the oil and gas industry.”
He, along with long-time friend Grant Mitchell, a retired Alberta senator, teamed up with Calgary-based clean energy, policy and finance consultant Ed Whittingham to push for a similar program in Canada.
In last week’s federal budget, the Liberals included plans for an investment tax credit for carbon-capture projects. The government said it will conduct a three-month consultation period on how the credit will work, then announce details of the plans, including the incentive rate.
“It’s still early days, but where there are opportunities because of what’s in the federal budget, our guys are going to look at them,” Mr. Golinowski said.
Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. E-mail him at jeffjones@globeandmail.com.
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Jeffrey Jones