Jiya Hai is a 2022 HBA and Political Science dual degree candidate. She joined the Canadian Club Toronto, in partnership with the Ivey Energy Policy and Management Centre, for a panel discussion on the state of the oil and gas industry in Canada on May 14, 2020. Moderated by Guy Holburn, Professor of Business, Economics & Public Policy and Director of the Ivey Energy Policy and Management Centre, the expert panel included Martha Hall Findlay, Chief Sustainability Officer, Suncor; Gordon Lambert, former CEO, Alberta Energy Regulator; and, Samantha Stuart, Vice President of Corporate Strategy and Development, TC Energy. The discussion included key insights from expert panellists on challenges facing the industry, key reasons for optimism, and opportunities for Canada to strengthen its role in global energy markets.
There are numerous challenges facing Canada’s oil and gas industry, but, while the pandemic poses its own set of difficulties, it also presents certain opportunities.
After viewing the free virtual event called The State of the Canadian Oil and Gas Industry, one felt that, with continued collaboration between companies, and with government support, it will be possible for Canadians to benefit from a more innovative and diversified oil and gas sector, and for Canada to lead the way toward more resilient global supply chains.
COVID presents unique challenges
The oil and gas industry has a history of significant volatility, with dramatic cycles of boom and bust. However, expert panellists agreed the pandemic creates particularly challenging circumstances for Canada’s oil and gas sector. Findlay said the pandemic generates an unusually dramatic reduction in demand and a corresponding oversupply of oil. This has drastic effects on oil prices, which have since plunged. Lambert pointed to companies’ capital expenditure budgets being slashed, and employment rapidly declining as key examples of ways in which companies, despite their differences, collectively suffer.
The challenge COVID-19 creates for oil and gas will not end when the pandemic passes. Findlay noted that in addition to pre-existing concerns about the environment, the industry will be forced to navigate a changed world in people’s habits and energy use. Stuart said the eventual recovery will be affected by the speed at which demand can rebound.
Government has a difficult but important role to play
Given the Canadian people’s increasing focus on environmental health and other social determinants of well-being, there is some uncertainty regarding government’s role in the oil and gas industry. Generally, Findlay said the government is doing well in its efforts to balance support for the sector with its focus on environmental objectives. However, it is clear that it occupies a difficult position, with an obligation to maintain the sector’s global competitiveness, and ability to attract capital due to its contribution to Canada’s GDP.
Fortunately, there are ways in which the government can strike the appropriate balance. Firstly, Findlay suggested it focus on individual Canadians, protecting their interests in ways that are sector-agnostic. She emphasized that, whether from a small company or a large one, a job lost is a job lost. Secondly, she and Stuart emphasized the need for the government to employ both financial assistance and non-fiscal measures to protect individuals. For companies, Lambert said the government should help de-risk innovative technologies through partnership funding.
Optimism and opportunities lay ahead
The panellists agreed that one of the greatest reasons for optimism is the massive increase in collaboration between companies, and between business and government during the pandemic. Lambert pointed to examples of companies sharing IP and reducing their collective costs in the face of plummeting demand, noting that collaboration is helpful for innovation throughout the value chain. The panellists were also optimistic about the potential to have a less polarized conversation about oil and gas in Canada.
They suggested companies with strong balance sheets invest in innovative processes and technologies, particularly big data and artificial intelligence. Such companies should also work toward diversification, which will be important as the workplace and related energy use change after the pandemic. While demand for oil and gas has been historically tied to price, today’s investors and consumers attach increasing importance to other factors in line with society’s evolving priorities.
COVID-19 undoubtedly challenges the oil and gas industry in Canada and global energy markets. It is clearly important to build resilience into supply chains through innovation and diversification, and the panellists agreed that Canada will have a critical role to play in these changes as the world emerges from the pandemic.
