Oil execs tout future growth in oilpatch
Executives at oil majors swat away negative investor sentiment about oilpatch as they look to growth
Executives at Canada’s five largest oil companies pushed back against suggestions Tuesday their industry was in the twilight of its industrial life, as each company detailed growth plans in the face of carbon taxes and pipeline constraints.
“I think we’ve come through a period, and I think we’re closer to the end of it, of people looking at the oil and gas industry almost as a twilight industry,” Husky Energy Inc. president and CEO Rob Peabody said told a Calgary investment conference, adding there was a “huge” demand for oil products for at least the next 50 years.
“It’s going to grow for a couple of decades and then it’ll probably plateau for another couple of decades after that,” Peabody said of future oil and gas demand, which he said was the envy of other industries.
The International Energy Agency, the U.S. Energy Information Administration and OPEC all project the worldwide demand for oil soon reaching 100 million bpd despite the rise of electric vehicles and the growth of renewable energy sources.
Peabody and his rivals at Suncor Energy Inc., Canadian Natural Resources Ltd., Cenovus Energy Inc. and Imperial Oil Ltd. have all seen their companies’ share prices hurt by negative investor sentiment toward the oilsands as a result of concerns about carbon intensity as well as regulatory, tax, pipeline and price problems.
Dressed in Calgary Stampede western wear at the TD Securities Calgary Energy Conference, each of the executives acknowledged investor attitudes have soured, which in many cases has involved shifting capital away from the oilsands.
But they insisted their industry still had room to grow.
“It wasn’t too many years ago, when I was at a conference like this, the question would be, ‘Why (invest in) Imperial?’ Now the conversation typically starts out with, ‘Why oil and gas? Why Canadian oil and gas?’ and then on the third question, ‘Why Imperial Oil?’” Imperial president and CEO Rich Kruger said.
Notably, Kruger and Peabody — who did not endorse Alberta’s climate change plan when it was introduced in 2015 — expressed their support for carbon taxes as long as they didn’t create a net disadvantage to the industry.
“From the fundamental economic principle, if you tax something more, you will get less of it. The concept around applying a tax on our cost of carbon, we support that, but we think it needs to be in the context of an overall economic equation,” Kruger said, adding that government needs to ensure affected industries remain competitive.
However, Kruger criticized the decision to implement an emissions limit in the oilsands, a move that was supported by Cenovus, Canadian Natural, Suncor and Royal Dutch Shell Plc, which has since sold out of the oilsands.
“In Alberta, we do not think an emissions limit is warranted. The world is a better place if this industry is allowed to grow here,” he said.
On that subject, Kruger said Imperial had concerns about taxes, regulatory changes and the availability of new pipelines and would consider all those factors before detailing further growth plans.
Cenovus, which is currently working on an expansion of an oilsands project that will be complete next year, is similarly hesitant to begin new projects.
“We will not be turning on another oilsands expansion until we get a better view of market access,” said Al Reid, Cenovus’s vice-president, stakeholder engagement, safety and general counsel, referring to the delays to the Trans Mountain, Enbridge Inc.’s Line 3 and Keystone XL export pipelines.
Overall, each executive was significantly more optimistic about new pipelines being built than they had been in previous speeches, following regulatory approvals for Line 3 in Minnesota and the federal government’s $4.5-billion purchase of Trans Mountain from Kinder Morgan Inc.
“Our view is that market access is not an issue, but the regulatory and fiscal environment has to be improved and we have to be more competitive,” said Steve Laut, Canadian Natural’s executive vicechairman. “I think those are the things you have to look at before you add a bunch more production.”
The Canadian Association of Petroleum Producers forecasts Canadian oil supply will grow by 1.4 million bpd and reach 5.6 million bpd by 2035. In the oilsands specifically, CAPP expects production to grow from 2.65 million bpd to 4.2 million bpd over the same time period.
Husky has a plan in place to grow its production by five per cent each year for at least the next five years. Canadian Natural can grow its production, which now exceeds one million bpd, by four per cent each year organically, Laut said.
Suncor is on pace to grow production by 10 per cent for the next few years before the pace of growth slows.
Suncor chief operating officer Mark Little said the company had identified 10 projects that would each produce 40,000 bpd, for a total of 400,000 bpd, and those projects would drive the company’s future growth.
The first of those “replication projects” would begin production in 2023.
Our view is that market access is not an issue, but the regulatory and fiscal environment has to be improved and we have to be more competitive.