Energy Visions Summary 2018: Decade of disruption

After a prolonged period of oversupply and low prices, the fundamentals of the global oil and gas market are changing.

Producers have had to shift strategies to deal with these evolving market dynamics. They’re expected to do more with less and with greater environmental consideration—all amid growing uncertainty about the outlook for fossil fuels demand.

Over the next decade, Canadian producers are looking to become stronger, more resilient players. In many cases, the keys to achieving this are technology and innovation. But technology itself is also causing disruption and raising many questions about the future of Canada’s oil and gas industry:

  • What types of technological advancements and innovations are Canadian oil and gas companies using to drive down costs and improve environmental performance?
  • Are these advancements and innovations enough to make them more competitive?
  • How does technology affect investment decisions?
  • Does the development of new technologies threaten the role of fossil fuels, and how does it all play into the “peak demand” theory?

Since oil and gas is an important engine of economic growth for Canada and a secure source of long-term energy for the world, we can’t afford to get technology and innovation in the industry wrong.

Innovating to create new value

Despite stronger oil prices, major uncertainties affect energy investment decisions and the outlook for Canadian production growth. Competition for global investment has increased steadily; Canada now receives less than 2% of overall investment in North America, down from the traditional 10%.

Canadian producers have shifted away from largescale investments to focus on cost reductions, operational excellence and profit margins.  Better use of technology, data analytics and automation is improving reliability, flexibility and competitiveness, while a digital transformation is under way to capture better results along the entire value chain. Widespread digitization in the oil and gas sector is expected to decrease production costs by 10% to 20% and boost global technically     recoverable resources by about 5%.

Although the oil sands industry has recently been overshadowed by shale plays, doubling down on technology will improve the industry’s ability to attract investment in the long term. This will hold especially true if the world is heading towards a supply crunch early in the next decade due to current underinvestment.

The pursuit of greener outcomes

The world is at an inflection point when it comes to carbon emissions. In this complex landscape, some governments are taking strong action to decarbonize their economies, while others—such as the United States, which recently withdrew from the Paris Agreement—are headed in the opposite direction.

In Canada, strict environmental regulations are driving technology investments into improving environmental and operational performance. The oil and gas industry is taking a collaborative approach to innovation and is working with universities, research establishments, entrepreneurs and governments. Industry groups, such as the Canadian Oil Sands Innovation Alliance, are also leveraging the capabilities of producers to reduce the environmental footprint of oil sands operations.

These efforts have helped Canada emerge as a world leader in environmental mitigation technologies for unconventional resource extraction.

Changing the game amid global uncertainty

Technology advancements are helping companies reduce costs, address environmental issues and weather geopolitical instability. But over the long term, technology has the power to disrupt in profound and unexpected ways.

Some of Europe’s largest oil and gas companies are forecasting that global oil demand will peak in the next several decades. The proliferation of electric vehicles and hybrids, evolving climate change policies, autonomous vehicles, ride sharing, fuel cell and hydrogen advancements, smart cities, advances in biofuels, battery technology improvements and other developments will play into future oil demand.

Despite a lot of evidence suggesting that oil will retain an important role in the global energy mix for the foreseeable future, the evolving landscape will create winners and losers. Canadian oil and gas companies need to become resilient in the coming decade of disruption by fostering innovation and embracing faster and more agile decision making that’s empowered by digital solutions.    

Final thoughts

Rather than succumbing to the disruptive impacts of technology, Canadian energy companies that pursue technology opportunities will thrive and become part of the disruption.

Innovation and improved recoveries go hand in hand. Innovation helps to reduce operating costs and environmental impact. As a result, technology enhancements strengthen Canada’s position in the global energy market.

Contact us

Reynold Tetzlaff

Calgary Managing Partner, PwC Canada

Tel: +1 403 509 7520

Adam Crutchfield

Partner, National Energy and Alberta Consulting Leader, PwC Canada

Tel: +1 403 509 7397

Jason Bergeron

Partner, Technology Advisory, Digital Energy Lead, PwC Canada

Tel: +1 403 509 7470

Clinton Roberts

Partner, Alberta Deals Leader, PwC Canada

Tel: +1 403 509 7307

Shawn Reain

National Tax Leader Energy, Utilities, Mining and Industrial Manufacturing, PwC Canada

Tel: +1 403 509 6373

Brendan Hobal

Partner, PwC Canada

Tel: +1 780 441 6836

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