Changing the channel on Canadian oil and gas

Content from this article originally appeared in CBC and Calgary Herald publications.

Despite a very real growing demand for energy around the world, Canada’s energy production still lacks a global presence, held back by a combination of infrastructure challenges and complacency when it comes to accessing global markets.

Energy security has been something studied by readers of Daniel Yergin’s Pulitzer Prize-winning book, The Prize, but not a lived experience. But the events in Ukraine have shot energy security to the top of global consciousness with Yergin, S&P Global's vice-chairman, declaring the world has not seen anything like this since the 1970s.

The combination of a lack of investment, rising demand and a major military conflict have lifted energy security off the pages of The Prize and landed them squarely into a stark reality.

While some might think this crisis would relegate the climate change and decarbonization agenda to the back seat, that's not been the case.

Quite the opposite, in fact.

At CERAWeek in Houston earlier this month, John Kerry, U.S. Special Presidential Envoy for Climate, began the conference by addressing the issues the world is facing, pointing to the need to continue efforts to decrease emissions while meeting global energy demand. Throughout the week, the three-legged stool of geopolitics, energy supply and climate change dominated virtually every panel and sidebar conversation.

But at this conference and in the discourse since the beginning of the crisis in Ukraine, Canada remains largely absent from the conversation.

And yet, given the challenges facing the world's energy supply, it should be clear Canada's oil and natural gas resources are critical to the world's energy security, not to mention filling the gap created by President Joe Biden's decision to ban Russian barrels from the United States.

The world doesn't see it that way. So why is that?

One answer could be that Canada, despite having the third-largest reserves on the planet, doesn't have a global energy presence. Our only customer remains the U.S. and we have not been able to build a presence beyond the continental borders, due in part to challenges building infrastructure and complacency of having such a good customer right next door. And we have let others tell a story that our energy doesn't belong. It's not good enough. Too expensive. Too far. Too much carbon.

Now is the time to change that channel. Because the world needs Canada's energy. Canada's energy sector, with current production of 4.7 million barrels per day of oil and 15.7 billion cubic feet per day of natural gas, is poised to play an important role in meeting the world's energy needs.

And our barrels should be chosen over others being produced in places where there is little in the way of environmental regulations, not to mention paid to human rights and governance concerns.

With rising energy prices, and the sector returning to profitability after facing serious challenges for the better part of the last seven years, there is a perception that companies will now increase capital expenditures to boost production. But no one should hold their breath on that. The capital discipline that saw oil and gas companies through these challenging times isn’t about to evaporate. The focus will remain on paying down debt, increasing dividends, buying back shares and — this is relatively new — investing to decrease emissions.

In fact, in recent years, a quantum shift has taken place in commitments to achieve net-zero targets. And while many energy companies are eager to speak of their goals, there is nothing resembling the Pathways consortium.

The Pathways to Net Zero Initiative involving six oilsands producers and representing 95 per cent of production is the first of its kind in any industry and should be held up as an example of what's possible when competitors decide collaboration is how this Gordian knot can be untangled. First on the list for Pathways is building a Carbon Capture and Storage network, linking 20 oilsands facilities and storing the carbon underground. It will be one of the biggest on the planet.

And that’s the story we need to tell – from coast to coast and internationally – as we change Canada’s energy narrative.

While the processes and techniques uncovered, discovered and applied will support the decarbonization of the energy sector, it will also translate into decarbonizing the global industrial complex. The results from Pathways will speak for themselves and that narrative of "not good enough" will evaporate.

And, as the world seeks to decarbonize, there should be no question around the potential of Canada to grow its LNG presence. We must resurrect projects — on the east and west coasts. It is a moral imperative: from decreasing emissions by supporting countries to decrease dependence on coal, to sending LNG to Europe and ensuring a permanent separation from dependence on Russian natural gas.

More than a decade ago, Canada was in the pole position on the LNG front, as the U.S. was deciding whether it wanted to go ahead and build export capacity, because there were still concerns over adequacy of supply.

The so-called "shale gale" changed that and, in 2016, the U.S. started exporting LNG. This year the U.S. is poised to be the world's largest exporter of LNG, with its LNG exports to Europe in January exceeding the natural gas delivered by pipe from Russia. Canada doesn't export any.

It's no secret that calls have been made to energy executives and bankers in Calgary, from Ottawa, asking what it would take to revive LNG projects that have been shelved. An expedited and certain regulatory process, with clear timelines, would be a good place to start. And it's not too late.

As Charif Souki, who co-founded the LNG exporter Cheniere Energy, said at CERAWeek: "The best time to have built an LNG terminal was five years ago. And the second-best time is today."

As demand grows, Canada has an opportunity to be part of the global LNG market and the time is now to up our game. The Saguenay Project, which was officially killed last month by the federal government, is a good place to start. And there is more to be done off the West Coast, such as tying the prolific Montney reserves to LNG export opportunities. If we really care about the social cost of climate change, LNG is one way to have impact.

In addition to energy security, the Russian conflict laid bare something else.

The world is watching as companies from every sector have made the decision to walk away from their Russian operations. This, after billions of dollars of investment and decades of operations. It is unprecedented and sends a very strong signal that when it comes to ESG performance, all the letters matter. It's not just the E for Environment. It's about the Social and the Governance too.

Canada scores high in each of those letters.

That is the story Canada’s energy sector needs to tell — along with all the innovation taking place — from coast to coast and around the world. The fact is, there were countries producing less oil and natural gas than what we produce, that seem to wield a bigger megaphone. If they see themselves as part of the global energy matrix, so must we.

And the reason they see themselves on the global energy stage is that they are exporters around the world — not dependent on one customer. Nor have they let others control their narrative, even though they rank further down the chain on ESG metrics.

So, let’s make a commitment. Let’s put in steps that see Canada as being actively in the global energy game, rather than on the sidelines. That means talking about Pathways, accelerating CCS and CCUS, and showcasing innovation happening in Canada’s energy sector that has the potential to be game-changing. The time to change to that channel is now.