The Big Picture
There is a renewed urgency within the energy sector to make its business model more sustainable, whether through new royalty regulations, operational innovations or smarter financing practices
A wide array of social forces – environmental regulations, innovations and economics – are all tugging at the industry. And all are trying to pull it down the same path – to sustainability
THE WORD “SUSTAINABILITY” CAN SOUND LIKE
an oxymoron when used in relation to non-renewable resource development. After all, fossil fuel reserves are ultimately finite; so by its purest definition, the development of oil and gas is not a “sustainable” business. On a long enough timeline, fossil fuel reserves will theoretically run dry.
But people inside the energy sector typically don’t mean to suggest that oil and gas production is an everlasting opportunity. Rather, talk of sustainability tends to include the adjective “more” – that is, how can industry improve its processes to prolong its existence and become “more sustainable,” amid an increasingly competitive market. Currently that existential question is foremost in the minds of energy executives.
There are several examples of how industry is striving to become more stable and predictable. Steam-assisted gravity drainage (SAGD) operators are chipping away at technologies that could vastly cut back on the costs of steam generation to reduce both water consumption and carbon emissions. Companies are looking at ways to maintain low costs even in the event of high commodity prices in the future, which would mitigate against the volatile cycles of commodity prices. Part of the sustainability equation also falls upon government: Alberta has, since last summer, announced an economywide carbon tax, put a cap on carbon emissions from the oil sands and held a royalty review in the hopes of gaining trust from the public and curbing the province’s emissions profile.
Such changes are immaterial in isolation. But by combining innovations and smarter regulations in all aspects of the business – from improvements in operations to improvements in finance – industry is making its way to becoming more sustainable.