Canadian oilpatch foiled by internal divisions
Amid record low prices, firms can’t present united front
Amid the worst crude-price environment in its history, the Canadian oil industry is being hamstrung by internal divisions that are making it harder to rally around potential solutions.
That draws a stark contrast to the U.S., where a less divided industry wields more clout. Most notable is the split between Canada’s pure producers, who are being devastated by plummeting local prices, and the large, integrated energy companies that have been mostly unscathed. There’s also a rift between oilsands producers — a target of climatechange activists around the world — and the frackers and conventional drillers that have been suffering from the pipeline bottlenecks brought on by those environmental opponents.
Reflecting these divisions is the industry’s two main lobbying groups: Canadian Association of Petroleum Producers, the larger organization dominated by the giant oilsands producers; and Explorers & Producers Association of Canada, consisting mainly of smaller firms.
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That split is hampering the sector’s ability to lobby the government with a consistent message.
The Canadian divisions bubbled to a head late last month, when top executives from 15 of the nation’s top oil producers met with Alberta Premier Rachel Notley and, instead of presenting a unified front and a list of demands, they were said to have sparred with each other in front of her.
At issue was whether to press her government to mandate industry-wide production cuts that might help clear the province’s glut of oil.
Companies that focus mostly or solely on production, including Cenovus Energy Inc., Canadian Natural Resources Ltd. and Nexen Energy ULC, favour a mandated cut spread among the country’s producers that would bring supply down below pipeline shipping capacity.
They argue that could clear the glut within weeks and bring prices back into a more normal range, helping their income statements as well as government coffers.
But companies who have refineries that are benefiting from the cheaper crude prices — such as Suncor Energy Inc., Imperial Oil Ltd. and Husky Energy Inc. — opposed the push, saying the market is working to clear the glut and that companies have to live with the investment decisions they’ve made.
The internal industry split has allowed the government to remain noncommittal on solutions. Notley has yet to take a position on the idea, saying that both sides “raise very good points.” CAPP — which counts both integrated and nonintegrated producers among its largest members — hasn’t taken a posi- tion on the proposal, either.
CAPP lists about 60 members, including the nation’s largest producers like Suncor, Canadian Natural and Imperial. EPAC lists about 150, however many are smaller, often nonpublic entities.
There is a widening division even within the industry’s biggest organization.
The larger oilsands companies that dominate CAPP supported Notley’s implementation of a carbon tax as a way to improve the industry’s image after years of being portrayed as “dirty oil” and the worst contributor to global climate change.
Yet many smaller drillers opposed that policy, and some vented their frustration with CAPP’s support by defecting to the Explorers & Producers Association of Canada.