Carrie Tait talks with Leo de Bever about the downturn in oil prices as he prepares to hand over the leadership of AIMCo to Kevin Uebelein
How should companies deal with low oil prices?
When the industry is in good times, it doesn't have any time for new technology, because it doesn't need it. When times are bad, they want to tighten their belt and they don't think they have the money to invest in new technology. Well, when is a good time to invest in technology if you take that view? I would argue that we have to take the long view and basically say: look, maybe in the short run it is going to be tough in the sense that it costs money that we think we don't have, but if the end game is to position yourself for lower oil prices, there are two possibilities. Either I'm wrong about [expecting prices to stay at about $70 a barrel] and the reduction in cost is going to increase margins, or I'm right about oil prices and [investing in technology] is going to allow you to survive.
How should the Alberta government deal with the downturn?
We need political courage to make use of this opportunity – to keep improving things. For instance, the German government has been criticized for not using the slow economy to improve the social infrastructure, so that when growth resumes, they are in a much better position. We're in exactly that spot. Never waste a good crisis to get that done. Industry [and government] never do things when times are good because they don't need to, and when they have to, they think they don't have the money.
What's the future for the oil sands?
I see oil and even natural gas as sort of a transition transport fuel. I think 20 or 30 years from now, we may be looking at our oil deposits in Alberta as a chemical base rather than a transportation fuel.
How does Alberta diversify its economy?
You have to diversify to something that is affiliated with your prime advantage, whether it is energy or agriculture or forestry. If oil is no longer a transportation fuel, I know we can turn it into a chemical base. And the advantage of that is it's much higher value-added. Now that we've got the [commodity price] situation we have, maybe it is time to really start laying out a plan that tries to make some dramatic changes [across Alberta]. If we're being disrupted by horizontal fracking and horizontal drilling, and somebody else did that to us, isn't it about time we do some disrupting of our own? We're as smart as anybody else on this planet. Why not do that? Why not work harder at that?
What's next for you if you believe increased productivity is the only way to increase standards of living?
You have to take new ideas and bring them to commercial conclusion, where you can actually make money off it. The problem I see is we've not done that very effectively. When I look at the difference between success and failure, it's not been so much about the capital as it's been around how you manage the capital around the infrastructure around a startup or a company that's about to come out of its precommercialization stage. Then when you get to committing capital to commercialization, as in building a pilot project, you're talking about some serious money. You better make sure you don't let the business plan slip. You need appropriate management. And it is not that I'm going to be that manager, I just know that whatever company has this new technology needs appropriate management for whatever technology it is deploying.
So my role is more of a middleman in terms of how do we get the real engineers rather than the financial engineers involved in making these companies a success.
This was edited and condensed from a roundtable with reporters and an interview with The Globe and Mail.