New oil and gas narrative espoused by Kruger serves oil/gas industry’s interests, not Canadians’
Suncor CEO Rich Kruger testified before a House of Commons committee yesterday. His comments were labelled “greenwashing,” and “criminal” but critics are missing the bigger story: the global oil industry, led by the Saudis, is trying to redefine the energy transition, to slow it if possible, and Suncor is but one small cog in that much bigger narrative machine.
The industry’s new strategy was the focal point of the World Petroleum Congress in Calgary this September. It seemed like every one of the 5,000 delegates was parroting the “diversification not displacement” talking point.That included painting the venerable International Energy Agency as an ideological “radical” for its modelling that shows oil demand peaking in 2030.
Energy transition has always meant a new form of energy displacing older ones over time, often many decades. Animal power and steam, for example, giving way to the internal combustion engine and petroleum early in the 20th century. That transition took roughly 50 years.
The new narrative says that a rapidly expanding global population and more developing nations becoming middle class will grow energy demand. Clean energy technologies like wind and solar power will only be able to supply the growth and are unlikely to cut into the 80 per cent of primary energy that fossil fuels have commanded for decades. The strategy, then, should be for governments to focus on decarbonizing oil and gas production, placing less emphasis on eliminating combustion emissions.
This narrative was trumpeted by the likes of Saudi Aramco Amin Nassar and ExxonWoods CEO Darren Woods during the Congress. In her public comments, Alberta Premier Danielle Smith was an enthusiastic booster. And Kruger did his part testifying before the Members of Parliament.
“Yet all plausible global energy outlooks forecast oil and gas remaining among the world’s largest sources of energy for decades to come,” Kruger told the standing committee on natural resources Monday. “Therein lies the dilemma: effectively and affordably decarbonizing the oil and gas sector, not eliminating it…Canada has a major opportunity to lead and prosper by providing low-carbon oil and gas both home and abroad.”
A subtle slap at the IEA (“plausible” forecasts), the importance of lowering upstream oil and gas emissions, a clarion call for Canada to boost hydrocarbon production and exports – this is the core of the Canadian industry’s strategy to turn the energy transition into a marketing opportunity.
Other countries and companies at the Congress had their own spin. African producing countries, for example, touted that this time their abundant oil and gas resources would be used to benefit Africans, not rich Western corporations and consumers.
Canada’s oil sands producers are probably quite happy to let Suncor be the tall poppy in this debate because it’s the only company committing to reduce upstream emissions by 2030 (the oil sands is 81 Mt/yr, likely to rise to 85 Mt by 2025). In last year’s investor presentation, the company committed to reducing upstream emissions by 10 megatonnes per year (from 29 to 19).
This goal would be achieved in part by switching to a “value over volume” approach. That is, Suncor will hold its oil production steady at around 800,000 barrels per day (unlike its oil sands competitors, who are boosting supply) while spending capital on reducing production costs. Same volume, higher profits.
Suncor’s next investor day is due next month and it will be interesting to see if the strategy changes under Kruger’s leadership. Will he return to the industry standard of growing volume to please investors (who love a good growth story)? Will his controversial comments, which he toned down for the MPs, position him as the leading spokesperson in Canada for the “diversification not displacement” campaign?
Canadians should not be fooled, this is a campaign. One goal, perhaps the foremost, is to blunt what the industry sees as excessively aggressive federal climate policy. That policy cannot be stopped, the reasoning no doubt goes, but perhaps it can be channelled into more productive applications, like much higher financial support for oil sands carbon capture and storage (estimated cost: $50 billion).
However this plays out, Canadians can be assured that the oil and gas industry is serving its own interests. But are the interests of Canadians (not just Albertans) aligned with those of the industry?
They are not.