Oil patch financier Murray Edwards sees no return to crude prices of $100 (U.S.) a barrel, and says only energy companies that can squeeze costs as environmental and regulatory requirements increase will survive.
Mr. Edwards, chairman of Canadian Natural Resources Ltd., predicted a year ago that crude would sink briefly under $40 a barrel before returning to a higher price. His call proved to be accurate, and since then, crude has largely hung below $50, battering the industry.
"I'm now starting to, with our staff, communicate that we're in a different world. Still, around town in Calgary, I get a lot of questions about when we're going to return to the way it was," Mr. Edwards said at the Bennett Jones Business forum in Lake Louise, Alta.
"I don't believe it's going to go back. We're in a period of change; we're in a period of – if you want to use the words – new normal. All of us are going to have to find ways to do things more efficiently, find ways to get our costs more in line, and do it in a time of higher regulatory and environmental standards."
He surprised many Albertans a week ago when he stood with NDP Premier Rachel Notley and environmental leaders to endorse a sweeping new carbon policy for the province that includes an economy-wide carbon tax and cap on emissions from the oil sands. CNRL is one of Canada's largest oil and gas companies, with extensive oil sands operations, and Mr. Edwards has been vocal about the need for governments to limit burdens on industry.
Last year, OPEC, led by Saudi Arabia, resisted calls from outside the group to reduce export quotas, signalling a change in policy from supporting prices to protecting market share against upstarts such as U.S. shale oil producers. Prices fell and have stayed well below $50 a barrel for much of the time since.
U.S. benchmark West Texas Intermediate oil settled at $41.71 on Friday.
The cartel meets again on Dec. 4, and its members are not expected to agree to supply cuts, despite the urging of some whose economies are being ravaged by dwindling revenues.
That puts the onus on Alberta to restructure its royalty system without disadvantaging the province's energy sector, whose returns are anything but stellar, Mr. Edwards said. The NDP appointed a panel, led by banker Dave Mowat, to come up with recommendations for a new fiscal regime. It is expected to deliver its report by the end of this year.
"We have the lowest price in the world. We have some of the highest, if not the highest, regulatory standards in the world. And we're captive to one market, the Americans. We have a lot of wind blowing in our face right now, a lot of challenge before us. So it's really going to cause all of us to rethink how we do business," Mr. Edwards said.
In terms of royalties, a member of the government-appointed panel said the new system will be designed to be responsive to market forces as well as changes in technology.
"I'm confident that segments of the industry will remain competitive. This is a very major period of disruption in the world of energy, and companies and institutions that are able to adapt will definitely be competitive," said Peter Tertzakian, who is chief energy economist at ARC Financial Corp. "But whenever you have change of this magnitude, there are always elements of the industry that cannot be competitive and we just have to move forward."