OPINION: The Shifting Sands of Energy Call for Some Creative Footwork

Alberta Oil editor Nick Wilson on our changing energy politics and economics

December 01, 2016

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The bad news in 2016 was oil prices. The good news was that OPEC wasn’t happy either. OPEC (read: Saudi Arabia) has been holding the heads of its archrival Iran and North American producers under the water while using its vast dollar reserves to dive deeper and hold its breath longer. But the kingdom’s rulers, the House of Saud, are coming up for air. They can hear their society’s and economy’s cracks creaking under the self-inflicted stress test: rioting unpaid workers in the Holy City of Mecca; civil servant salaries slashed; restless Shias in the Eastern oil provinces who look across the Persian Gulf to their co-religionists in Tehran for salvation instead of Riyadh; and millions pushed deep into poverty. Finally, “the world’s central bank of oil” looks set to close the spigots.

Closer to home is another self-inflicted stress test that strained the industry this year: carbon pricing. Depending on whom you listen to, it’s either a trade-off for pipeline permits—the price of doing business when you purchase a social license—or a giant tax grab that will drive investment overseas to jurisdictions that have lower-altitude playing fields. The oil giants and federal and Albertan governments think it’s the former. Saskatchewan and smaller companies tend to see it as the latter. Prime Minister Justin Trudeau ratcheted up the tension when he decided to drive through a national carbon price of $10 per ton, kicking in in 2018 and rising $10 each year to $50 by 2022—$10 higher than Alberta and British Columbia’s carbon taxes.

In the distance, barely noticed through the smoke of the ensuing political battle, was Canadian Oil Sands Innovation Alliance raising the flag of its 2040 target—a carbon neutral barrel of oil—literally taking carbon out of the barrel to turn it into commercially viable products. COSIA believes in Albertan oil sands producers’ ability to invent and adapt. This was the year of constant innovation—cutting costs and cutting emissions—as companies pivoted to survive.

Or thrive, in Suncor Energy’s case. This is a company that has grabbed the carbon bull by the horns and heads vigorous oil sands clean-up operations and production efficiency drives. Buying Murphy Oil’s five percent stake in the Syncrude oil sands project for $937 million, took Suncor’s stake to 54 percent. Three months earlier Suncor had bought out another Syncrude partner, Canadian Oil Sands for $6.6-billion, following a hostile takeover battle. When Suncor CEO Steve Williams confidently said, “We expect to be the last oil company standing,” his hyperbole wasn’t about the gloom and doom of early 2016—he was optimistically looking to the future. Canada’s future.

More posts by Nick Wilson

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