Canadian Producers Resist Majors' Push Into Renewables

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Senior Canadian oil and natural gas producers say they have no plans to invest in renewable energy production as some European supermajors have pledged. Instead, companies like Imperial Oil, Cenovus Energy and Canadian Natural Resources are keen to leverage their existing expertise and push forward on strategies already under way to reduce their environmental footprints, executives from the firms told the Scotiabank CAPP Energy Symposium on Tuesday. The executives were responding to questions about whether they planned to emulate the strategic pivots of majors like BP, Royal Dutch Shell, Total and others, primarily in Europe, which say alternative energy production from wind and solar will comprise an increasingly significant proportion of their portfolios as the world transitions away from traditional energy sources (EIF Feb.3'21). Canadian operators -- particularly those with substantial oil sands assets -- are facing growing public and investor pressure over the high carbon content of their oil production. The issue has taken on even more financial salience in recent weeks following a Canadian Supreme Court ruling affirming the federal government’s right to tax carbon emissions. The tax will rise from C$30 (US$23.86) per ton currently to C$170/ton by 2030 (OD Mar.25'21). 'Not in Our Wheelhouse' But Canada’s largest oil and gas companies do not see that as incentive enough to revamp their business models. “Things like wind and solar … are not really in our wheelhouse. Others bring more expertise to that,” said Imperial Oil CFO Dan Lyons. He said investing in things like biofuels blending and carbon capture and storage (CCS) makes much more sense for a company like Imperial. On the CCS side, Lyons said Imperial has been involved in ongoing discussions with majority owner Exxon Mobil about leveraging some of the US giant’s expertise for potential application to Imperial’s assets, although he stressed that it’s still “early days” and no announcements on CCS are planned anytime soon. Canadian Natural CEO Tim McKay also highlighted CCS as a “huge opportunity” given the infrastructure and expertise already available in Canada. But, he said, “our preference is to stick with what we know and what we're good at.” Power Purchase Agreements Cenovus CEO Alex Pourbaix said that while his company will “likely” remain focused on oil and gas production, “we may have potential diversifications into complimentary business, particularly ones that could drive improved GHG [greenhouse gas] and ESG [environmental, social and corporate governance] performance.” That could include renewable power options, he said, likely through power purchase agreements with third parties, potentially those affiliated with local indigenous groups. “Don’t be surprised to see that, but don’t look for us to become a late-entrant renewable-power developer,” said Pourbaix. Executives touted the progress the Canadian industry has already made in reducing emissions and say they are confident they can reduce pollution further through the use of technologies like solvents and cogeneration (OD Sep.11'19). However, of the top Canadian oil producers, only Cenovus has made a firm pledge to reduce emissions to “net zero” by 2050. Other companies say they are committed to reductions, but none have provided a firm timeline (OD Jan.13'20). Helping the Bottom Line Michael Rose, CEO of Tourmaline Oil, Canada’s largest gas producer with no oil sands exposure, said his company’s efforts to reduce emissions have already benefited the bottom line. Tourmaline now uses field gas to power all 15 of its drilling rigs, an investment that cost the company about C$8 million up-front. But he estimates the company has saved itself roughly C$30 million worth of diesel since then and is now looking at ways to apply that strategy to its fracking and trucking operations. But he questioned the logic of moving into renewable energy production. “It’s a low [return on investment] business,” he said. “We’re not big enough to participate in that space, but we wouldn’t want to anyway.” Luke Johnson, Houston

Carbon Capture (CCS), Biofuels (incl. SAF), Corporate Strategy
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