At what point do global investors say “no thank you” to Alberta voodoo politics? Have they already?
Saturday’s Value of Alberta conference in Calgary represents everything wrong with the province’s conservative leadership, which stands revealed as completely out of step with global energy trends, not to mention the corporate strategies of the huge oil and gas companies that drive the very hydrocarbon sector the big thinkers claim to be defending.
In fact, there is an argument to be made that bitter Liberal-loathing, climate science-contradicting, energy transition-evading Alberta conservatives have fostered a feverish political groupthink so unmoored from reality that it properly belongs on a post-midnight AM talk radio show with Bigfoot and 9/11 conspiracy theories.
The foundation of this Shibboleth? A fanatical conviction that the rest of Canada – but especially the “Laurentian elites” represented by Justin Trudeau, Catherine McKenna, and Gerry Butts – hate fossils fuels in general and Alberta’s crude oil, natural gas, and pipelines specifically. Oh, and climate science denial.
“The circumstances under which [Alberta secession] could happen, if it were a continued attempt, either deliberately or inadvertently, to strangle the chief energy…I mean, the chief occupation and industry of the province, the economic basis of Alberta,” convicted felon and former Canadian Conrad Black told CBC during an interview at the conference. During his keynote address, Black “railed against Canada’s climate policy,” according to reporter Joel Dryden.
The means of Alberta’s economic throttling? Canadian climate policy and related – in the minds of the fevered, at any rate – legislation like Bills C69 (the so-called “pipeline killer”) and C48 (banning of oil tankers off the northern BC coast).
This idea, that Canada intends to “phase-out” hydrocarbon production for Alberta oil and gas, does not bear scrutiny for two reasons.
Pipelines delayed are not pipelines denied
Three pipelines stand approved by the Canadian government: Trans Mountain Expansion (525,000 barrels per day, under construction), Line 3 replacement (370,000 barrels per day, under construction on the Canadian side, awaiting permits in Minnesota), and Keystone XL (830,000 barrels per day, bogged down by American environment groups’ legal challenges).
When combined with 500,000 barrels per day of additional pipeline capacity being added by means of de-bottlenecking and optimization, market access could increase by almost 2 million barrels per day. The Western Canadian Sedimentary Basin is currently short about 300,000 barrels per day and the Canadian Association of Petroleum Producers forecasts crude oil supply growth of about 1.4 million barrels per day by 2030, according to Canada’s Energy Future by the Canadian Energy Regulator.
My calculator suggests Alberta will soon have enough pipeline capacity to accommodate growth for at least the next decade.
At that point, global peak oil demand looms thanks to the accelerating energy transition. Peak oil could arrive as early as 2025 under McKinsey’s technology case, 2036 according to respected energy consultancy Wood Mackenzie, around 2040 think Suncor and the International Energy Agency.
“Will Canada ever need another new pipeline?” is an entirely fair question. A fair answer is that in the face of growing uncertainty and volatility created by a rapidly transforming global energy system, we simply don’t know for certain. A fair observation is that the potential need (or not) for another pipeline (or two) a decade in the future hardly seems worth breaking up one of the world’s most successful democracies.
Oil sands corps prepare for low-carbon future
The actions of Alberta oil sands producers stand diametrically opposed to the climate-denying bloviating of Black and company. This matters. A lot.
The oil sands comprise about 80 per cent of Alberta’s crude oil production. The Big 5 (Suncor, Cenovus, CNRL, Husky, Imperial Oil) account for two-thirds of provincial oil output. And the oil sands are forecast to account for the majority of new output.
These companies accept the conclusions of climate science, acknowledge the world is transitioning away from fossil fuels to a low-carbon future, and they are decarbonizing their high-emissions bitumen and heavy oil production in order to gain a competitive advantage in foreign markets.
Last year, CNRL and small oil sands producer MEG Energy promised net-zero emissions by 2050. Cenovus Energy joined that group on January 9.
“Governments around the world are supporting the transition to a lower-carbon future by introducing increasingly stringent climate-related policies and creating incentives for emissions-reduction solutions,” the company said in a press release announcing bold sustainability targets. “Companies that fail to adapt will face growing carbon-related risks, while those that act now will position themselves for long-term business resilience.”
“A global transition to a lower-carbon future is underway and Cenovus intends to be a part of that future,” said CEO Alex Pourbaix.
Energi Media has interviewed executives and experts from the oil sands companies and we can say with confidence that other management teams agree with Pourbaix.
What must global investors think?
Alberta’s biggest oil and gas producers behave responsibly – following strict securities commission regulations to manage climate risk while preparing their businesses for major structural change in their markets – while Alberta’s conservative leaders gather at the TELUS Convention Centre to sort sheep’s entrails and dance around the campfire waving severed chicken heads. Metaphorically, of course.
Wall St. has been peering nervously over the 49th Parallel for a few years now, wondering how the Alberta oil patch plans to protect its capital from climate and carbon risk.
They appear reassured by the responses of the mature, forward-thinking executives that run the bigger oil, gas, and pipeline corporations.
They cannot be reassured by the blue-suited shamans who set Alberta’s political tone and influence the policies of the United Conservative government. Not judging by the Value of Alberta conference, at any rate.
At what point do they say “no thank you” to voodoo politics? Have they already?