Last Friday, two looks at building the long-term future of a profitable oil industry were showcased in Calgary.
In one, the Pembina Institute detailed the big profits being made by Canadian oil sands companies – and contrasted that with the absence of big investments in meeting their promises to slash greenhouse gas emissions. The second event had the Canada West Foundation looking at how Norway, with less acrimony and more ambition than Canada, is working to ensure its fossil fuel industry is both less dirty and more prosperous.
Canada and the Scandinavian country of about 5 million (slightly larger than Alberta) both have economies powered by the extraction of fossil fuels – which the world pays top dollar for today, but is likely to use far less of tomorrow. Norway has consistently shown wise forethought in managing earnings from non-renewable resources: Its oil savings and investments are worth $1.5-trillion – or 80 times more than Alberta’s $19-billion Heritage Fund.
Norway aims to cash in on oil and gas for years to come, including through exports to Europe to replace Russian gas. But Norway has a green reputation because it’s also committed to sharply reducing emissions across the economy, and in particular in the oil and gas sector. Norway treats it as an essential cost of continuing to do business.
That’s the first key difference between the two countries. In Norway, government sends clear signals – including a high carbon tax – and industry figures out solutions to work with government “instead of working against it,” as Norway’s ambassador to Canada, Jon Elvedal Fredriksen, told Canada West last week. In contrast, when Ottawa in April outlined $7.1-billion in subsidies for carbon capture, the oil industry’s reaction was: It’s not enough.
Norway isn’t being run by Greenpeace. The government, according to Mr. Fredriksen, rejects “abruptly ending” oil and gas. The country’s strategic goal is a “competitive advantage in a changing world.”
To get there, Norway pursues several strategies. One is carbon capture and storage. Another is powering offshore oil and gas operations with clean electricity from hydro and wind. The state oil company, Equinor, promises that more than half of its capital spending by 2030 will be on renewables and “low-carbon solutions.”
All that work takes years, so the specifics of a plan need to be on the table, right now, with money spent steadily, year after year, to turn it into a reality. As last week’s Pembina Institute report highlighted, that’s missing in Canada.
Last year, Canada’s oil sands companies promised to get to net zero emissions by 2050. They also said they’d get about one-third of the way there by 2030. Since those pledges, little in the way of new spending plans to achieve them have been offered. This despite the fact that the companies, according to Pembina, “have all the funds and technology at their disposal to get started now.”
With commodity prices high and income statements flush, now is an ideal time for companies to invest. They could even use the trampoline of high profits to gain long-term advantage by reaching net zero earlier than 2050, as this page has proposed. Canada’s six main oil sands companies have booked more than $20-billion in profits in the first half of 2022.
The bulk of that is going to back to shareholders. But does that show too much short-term thinking about the industry’s long-term future? Oil sands company Cenovus this year pledged $1-billion to cut some emissions over five years, which is not nothing. But last week, the Australian iron ore miner Fortescue said it would spend US$6.2-billion to get off fossil fuels completely by 2030. Fortescue said the spending would pay off in savings and higher profits.
To say Canadian oil companies aren’t being ambitious enough is a criticism, but that criticism is about ensuring the industry’s future, not undermining it. Shutting down Canada’s oil and gas industry, when the world wants and needs oil and gas, makes no sense. But ignoring the business case for cleaning up our fossil fuel production is equally nonsensical.
Canada has to find a judicious middle. That means crafting policies to allow this country to make us much money as possible from fossil fuels, for decades to come, by insisting that our industry be a world leader in cutting emissions in the oil patch, and the country as a whole be a world leader in emissions reduction. That is Norway’s plan. It should be Canada’s.