Are oil and gas CEOs devious or oblivious?
“What happened over the last several years was I think there was a lot of ambition that we could really move the (energy) transition along very fast…And I think we’re finding out that this is a many, many decade transition and it’s probably going to look more like diversification than it is like transition.” – Alex Pourbaix, CEO, Cenovus Energy, JWN Energy, June 7, 2022.
The Canadian oil patch is making a $700 billion bet (the sector’s total market capitalization) that the Cenovus CEO is right. Unfortunately for investors, workers, and the Alberta government’s coffers, the evidence suggests that Alex Pourbaix is wrong.
It’s hard to know if Pourbaix is deliberately wrong or just clueless.
The case for deliberately wrong is pretty strong. Energy narrative management has always been a big part of the industry’s public relations game. From lobbying groups like the Canadian Association of Petroleum Producers to the CEOs to social media’s plethora of “petro-bros,” oil and gas public relations always plays offence, including sharp elbows in the corners and no hesitation to “chuck knuckles,” as the hockey saying goes, when necessary.
But don’t rule out clueless. Calgary corporate boardrooms are ruled by a groupthink that believes some amazing nonsense. The ethical oil argument, for starters (watch my interview with Max Fawcett about how ethical oil is dead). Prime Minister Justin Trudeau’s supposed crusade to “kill” the Alberta economy is another. There aren’t many deep thinkers in the Calgary Petroleum Club, which prefers facile pablum from industry shills like Dave Yager.
In any event, the end result is a slow-walking strategy for the energy transition that closely resembles the one used for climate change.
Dr. Sara Hastings-Simon, in the interview below, explains how the public relations firm Navigator created a “broader than Big Oil” campaign in 2018 based on “climate doomer-ism,” the idea that we really can’t do much to stop climate change so we may as well give up. Around that time, industry proxies and insiders were everywhere singing from the Navigator song sheet.
The strategy, combined with intense lobbying in Ottawa, managed to delay implementing the federal Clean Fuel Standard, the ostensible reason for the campaign, but failed miserably to convince Canadians or the national government to slow climate mitigation. In fact, earlier this year the Trudeau government introduced an emissions reduction plan that includes a hard cap on oil and gas greenhouse gases, with penalties. Industry and the Alberta government howled in protest.
A few months later, Pourbaix and the usual suspects are publicly slow-walking the energy transition. Coincidence? My guess is that another Navigator PowerPoint will eventually surface outlining the latest campaign.
The point I want readers to take away is that slow-walking is not in the industry’s best interest. Listen to my Energi Talks podcast (below) with economist Prof. Werner Antweiler. The global economy, not just the energy system, is being disrupted by a confluence of many, many new technologies.
Watch my interview (below) with Colin McKerracher, head of advanced transport analysis for BloombergNEF, about the EV Outlook 2022. International oil and gas is about to be seriously disrupted, firstly because of the electrification of ground transportation.
The evidence for this argument is overwhelming. I’ll describe it in a future column.
For now, Canadians need to see Pourbaix’s energy transition slow-walking for what it really is: part of the ongoing effort to torque Canada’s energy conversation in favour of preserving the status quo as long as possible. This is an industry that is desperately and aggressively resisting change, even in the face of massive structural change to its own markets.
Investors might want to take a closer look at the risks posed to the Canadian oil and gas sector by the energy transition. That $700 billion is a lot of capital in danger of being vapourized if CEOs like Pourbaix are wrong.