Energy Visions 2019
How understanding the past decade of turbulence can help Canada reimagine its energy future
Can Canada’s oil and gas industry learn from a turbulent past decade to take advantage of new opportunities? This year’s 10th Energy Visions looks at past reports, current events and gives important takeaways for the oil and gas sector during a global energy transition.
Ten years ago, Canada’s oil and gas industry was recovering from the 2008 global financial crisis. The immediate concerns then were managing variable and weakened commodity prices, high supply costs misaligned with current prices and disrupted capital markets. Increasing regulatory uncertainty, the need for new export pipelines and growing public scrutiny of environmental performance were also growing issues.
Over the next decade, market access challenges intensified while around CA$160 billion in expansion projects were delayed or cancelled. Global oil prices collapsed in late 2014, increasing cost pressures as concerns about geopolitical uncertainty were on the rise.
Yet energy companies continued to innovate and plan for the future. Technology investments helped to keep the industry globally competitive. Collaborative efforts to address environmental issues expanded. As a result, oil production grew from around 2.72 million barrels per day in 2009 to 4.19 million barrels per day in 2017. Exports almost doubled, to 3.4 million barrels per day during the same time period. Continued growth and investment made it even clearer how important the energy industry was to the overall Canadian economy.
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But today, Canada’s energy industry finds itself at an inflection point. The inability to reduce market-access constraints over the past decade has supplies backing up into Western Canada, resulting in low natural-gas prices, a period of historically wide differentials and lower-than-forecasted oil production. Regulatory uncertainty has slowed development and raised concerns for investors. Price and differential volatility challenges continue. The industry’s technological advantage could erode as investment falls.
At the same time, the global energy ecosystem has evolved. Demand is shifting to Asia while a growing supply is coming from North America, changing global energy flows. Energy consumption is increasing, but technology has added vast new supply, removing scarcity risk and boosting concerns about demand destruction due to innovation. Geopolitics continue to create risks for energy markets, whether it’s through supply disruptions or risks to demand from global economic growth trajectories. At the same time, climate change action is gaining global attention among policy makers, shareholders, investors and businesses.
Canada, with its vast resource base, can meet the demand for low-cost, lower-carbon energy. But in Canada, the right balance between environmental and economic policies is needed to encourage investment and make sure additional takeaway capacity can be built to meet growing supply.
Investment in new technologies to answer demand for clean, low-cost energy will continue while companies use digital technologies to transform their businesses. The past decade has shown this industry can progress under difficult circumstances. Despite the ebbs and flows of the past 10 years, our industry has been resilient. It has addressed and met challenges responsibly. And our industry continues to contribute to Canada’s GDP, create high-paying jobs and move billions of dollars to provincial and federal treasuries—all while maintaining a global reputation for technical excellence. In the face of constant opposition, this is a noteworthy achievement.
The questions now are: Will the current operating environment catalyze further innovative solutions—or will history repeat itself, with infrastructure and regulatory uncertainty slowing investment and expansion? Canada needs to take action now and access global markets. Our energy industry has been put at a disadvantage for far too long.
Vice-Chair and Managing Partner Alberta & Prairies Region, PwC Canada
Tel: +1 403 509 7520