Canadian oil owners are confident they’ll navigate the current storm of low oil prices and a pandemic, but they’re uncertain what’s waiting for them on the other side.
The Canadian Association of Petroleum Producers (CAPP) held a virtual conference on April 7 and 8 and gathered a panel of industry experts for “Case studies in energy sector crisis navigation – Canadian energy leadership perspectives.”
The panel featured Enerplus president and CEO Ian Dundas, MEG Energy Corp president and CEO Derek Evans, PrairieSky Royalty Ltd president and CEO Andrew Phillips and TORC Oil & Gas Ltd. president and CEO Brett Herman.
Evans, a veteran of the turbulent oil and gas industry of the 1980s said a series of crises from that time has prepared the current industry to face the both crashing oil prices and a worldwide pandemic.
“The National Energy Program (NEP) was the center point of the 1980s and we were drilling gas wells in the Arctic and offshore and things have changed since then. The NEP came in after the Iranian revolution when oil prices were high and it effectively provided a subsidy to Eastern Canada,” Evans said.
“The single biggest lesson from all these crises was to expect the unexpected,” he added. “There were big ups and downs created by outside forces that none of us could see coming but the thing we can take from all this is that we’re still here and we survived.”
Dundas pointed to the 2008 financial crisis as another inflection point for the industry with a divergence in American and Canadian energy policy.
“Coming through the financial crisis we started with a strong belief we were running out of resources and then an opportunity presented itself through technology.”
The United States formerly imported much of its oil supply from the Gulf states but with the introduction of hydraulic fracturing or “fracking” the U.S. has become one of the world’s leading energy exporters and is energy self-sufficient.
“The Americans really embraced it, but Canada took a more complicated approach. As American structure (around fracking) built up, Canada’s went lower and that’s taken us to where we are today,” Dundas said.
Herman said the industry has had to adjust to many headwinds including lowering their cost structures but that has prepared the industry to withstand current conditions.
Dundas agreed but cautioned there’s less room to maneuver in an already pared-down industry.
“On some levels we’re in a better position to do this (than other industries), but there’s less fat in the system than there was before,” he said.
“We don’t know how long we’ll be in this place and that has implications. The longer you stay in this, the longer you’ll have to reallocate work,” Dundas added. “One of our key strategies is to have operational readiness for when the recovery comes, because it will come.”
“We’re at the ‘maximum mystery and minimum history’ phase. Don’t lock yourself in when you need to be more nimble than you’ve ever been,” Evans added.
With that nimbleness comes a disruption of the status quo, he cautioned, which can lead to unsafe conditions on site.
“This is when accidents happen and we need to ensure we spend more time making sure the changes made are done in a safe manner as we change the day to day dynamic,” Evans said.
Phillips said while oil in an important part of the American economy it is preeminent in Canada and should be supported at all levels of government.
“The good news is this is all a little less political than it could be, but politics does play a role,” Phillips said.
Governments should provide a helping hand, Herman added, but should also differentiate between “companies and industries that had liquidity challenges before the current crisis or because of it.”
“It doesn’t make sense to prop up unhealthy business models. Help is welcome, but too much overreach from any level of government picking winners and losers is a long-term problem,” Herman said.
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