‘Accelerate by 10 years ... reduced demand?’

“The promise of Canada’s potential will not be realized until governments can reach agreement around how climate policy considerations will be addressed in the context of future responsible energy sector development,” he said in the letter released February.

But Teck has also been hurt badly by the recent downturn in prices and has already scaled back oil production. In April, activist hedge fund Tribeca Investment Partners launched a campaign to pressure the firm to divest its oil-sector assets, saying it could see greater gains if it focused on base metals such as copper.

Many Canadian oil and gas companies have recognized the need to invest in “greener” technologies that will lower the carbon intensity of their operations, ratings agency DBRS Morningstar noted on Thursday, calling it a response to industry divestment by key institutional investors, such as Norway’s US$1-trillion sovereign wealth fund.

The DBRS report, A Greener Shade of Oil: How Canadian Oil and Gas Issuers Address Climate Change Risk and the Potential for Clean Transition Bonds, noted some oil firms are already investing in carbon reduction.

For example, Canadian Natural Resources Ltd. reduced its greenhouse-gas emissions by 37 per cent between 2012 and 2018 through operational efficiencies, co-generation of power and new technologies.

Severson-Baker said he thinks many other oil and gas companies are starting to see Canada’s competitive advantage as tied to its ability to produce energy while mitigating carbon emissions, either through carbon capture, methane reduction or other emerging technologies being tested or used here already.

He said many oil companies even before the pandemic were figuring out how they would respond if oil demand declined though the next decade. Now that demand has dropped off because of social-distancing policies, it is an opportunity to test some of those planned strategies.

“A lot of the conversation I’m hearing is, ‘Did we just accelerate by 10 years, and now we’re in the reduced demand scenario?’” he said.

But many analysts say just as many oil companies view the current low levels of demand as a mere bump that will eventually pass, though there will be some shortterm pain.

John Hunt, an analyst at National Bank Financial, said his team lowered their price targets and downgraded many oil companies’ investment ratings as the downturn set in.

Before the pandemic, many producers were scaling back from larger projects, he said, and that is likely to continue. But growth in Canada is still possible, but perhaps it will be more tied to phased expansions of existing projects rather than big-ticket greenfield development.

“There still is demand, and global demand growth,” Hunt predicted. “And there’s a view that oil prices will recover.”