The second largest producer of oil and gas in Canada today, Cenovus Energy’s story traces back to the dawn of Alberta’s energy industry over a hundred years ago. Its evolution includes exploration, innovation, mergers, acquisitions and splits. Private and government-created corporations, multiple commodity cycles, and changing cultural and political trends have all played a part.
And while its name, people and operations have changed many times over the years, the company has remained true to its original purpose: providing energy to the world to make life better.
It’s a purpose CEO Alex Pourbaix – who joined Cenovus five years ago after 27 years with TC Energy – believes is as vital in 2022 as ever before. “It’s becoming increasingly clear to everybody that there’s no switch to turn off our reliance on hydrocarbons,” he says, “not if we intend to keep people safe, fed, heated, cooled and transported. I’ve not seen any credible forecast that doesn’t show oil and gas remaining an extraordinarily important part of the global energy mix for many, many decades in the future.”
In fact, fossil fuels – oil, gas and coal – account for 84 per cent of global energy consumption today. Renewables and other low carbon sources of energy (i.e., nuclear) account for just over 15 per cent.
The key going forward, Pourbaix believes, is to make the production of oil and gas as clean as possible. For Cenovus, this means immediate and meaningful action to address GHG emissions from the production of oil. “We look at it from the perspective that if we were able to decouple the carbon emissions from the production of oil, we could create the most desired and the most ESG-friendly barrel of oil in the world,” he explains. “We really do believe that we can have both increased production and get to net zero emissions over the long term.”
Pourbaix notes that while Canada’s heavy oil industry has somewhat higher emissions than the average global barrel produced, great strides have already been taken to reduce emissions. Over the past 15 years, the company has reduced its per barrel GHG emissions by around 22 per cent. “And if you look at our flagship oil sands facilities, Christina Lake is one of the lowest GHG intensity facilities in Alberta, it’s comparable to the average global barrel,” he says. “And Foster Creek is only slightly higher than Christina Lake.”
Cenovus has also set targets to reduce absolute scope 1 and 2 GHG emissions by 35 per cent by year-end 2035, and, as part of the Pathways Alliance (comprised of six oil sands producers responsible for about 95 per cent of Canada’s oil sands production), has the ambition for net zero emissions by 2050. “There is no single pathway,” Pourbaix notes of the Alliance’s strategy. “The Alliance is pursuing multiple technologies, starting with proven technologies we can scale up now, progressing to emerging technologies.”
The largest initiative proposed is the foundational carbon capture network, which would be one of the largest in the world. The plan would include a carbon transportation line to gather CO2 from more than 20 oil sands facilities and move it to a proposed hub in the Cold Lake area of Alberta, for safe, underground storage.
“Carbon capture and storage is a proven process,” Pourbaix points out. “We know it works and once operating it can quickly make a difference. Alberta has some of the best geology in the world for safe, permanent storage of captured CO2.”
It’s an important step to help preserve the more than $3 trillion in estimated oil sands contribution to Canada’s GDP over the next 30 years, including roughly $500 billion to various governments.
Cenovus’ contribution to this economic fortune is significant and promises to continue to be. Its acquisition of Husky last year has resulted in a much more integrated company. Now with both upstream and downstream operations, the combined company is able to both pay down its debt and reduce its exposure to the heavy oil differential.
“We created a company with a stronger balance sheet,” Pourbaix reflects. “Right now we’re on track to produce about 800,000 barrels of oil or oil equivalents per day. And this is after divesting about 40,000 barrels per day of production” in the past year. Cost synergies, in the region of $1.4 to $1.5 billion per year, have also been realized.
With operations in the field (primarily oil production in Alberta and Saskatchewan, with some offshore operations in Asia and Canada’s east coast) all the way to consumers, thanks to refining and upgrading capacity (Cenovus owns two refineries in the U.S., with the acquisition of a third pending, as well as a refinery and upgrader in Lloydminster), the company can actually process its own molecules, and in particular, Canadian heavy oil molecules.
A focus on ESG metrics permeates the business. The entire leadership team and Board of Directors believe that strong ESG performance is tied to strong business results and long-term financial resilience. “Environmental and social considerations are shaping everything we do now,” he says. “They’re embedded in our strategy, business plans and capital allocation processes. This creates a realistic path to achieve our ESG targets and supports buy-in across the organization at all levels.”
The company also has a strong focus on giving back and supporting the communities in which it operates, many of which are Indigenous communities in northern Alberta
“A lot of it is making sure those communities benefit as our shareholders do from developing those resources,” he explains. “We’ve been able to do great things like bringing Indigenous contractors to work with us, which has brought opportunities for those communities. We’re continuing to grow those opportunities and we’ve actually set a target to add more Indigenous-owned business opportunities to our operations.”
One initiative is the Indigenous Housing Initiative, launched in 2020, which commits $50 million over five years to build homes in the six First Nation and Metis communities closest to the Foster Creek and Christina Lake operations. The program was conceived after Pourbaix visited a number of the company’s Indigenous community neighbours and partners where he saw and heard first-hand of the challenges they faced in providing housing.
“I was really taken aback by the living conditions in a lot of these communities,” he recalls. “And that’s not at all intended to be critical of leadership. They have extraordinarily limited funding and resources, and do a great job with what they have, but there just wasn’t enough money. I saw an opportunity to give back.”
To date, close to 50 homes have been completed, with a target for 200 by the end of 2025. Pourbaix is thrilled with the success of the initiative, which will likely be extended.
“We’re not just gifting homes to these communities,” he notes. “We’re actually giving them the money and the resources to build them. We’ve partnered with regional colleges where young people in these communities are getting experience in carpentry, plumbing, electrical, you name it. They can be involved in the construction of these homes and actually pick up trades, which will help them in their later lives.”
On a broader, global scale, Pourbaix is optimistic about Canada’s ability to continue to provide the world with the secure energy – the importance of which has been underscored by the Russian invasion of Ukraine – it needs. “As we head into winter, I fear it’s going to be incredibly tough for everybody,” he cautions. “Particularly in Western Europe and poorer countries. I think we’re all getting a real-time education in the importance of cheap, reliable energy, not just for our economies, but for the health and safety of our citizens.”
This reality check has fostered more nuanced conversations with investors when it comes to ESG: “Investors still want to see companies make strides on ESG, particularly with respect to carbon emissions, but there is a much more balanced view now that energy security is probably one of the most important global challenges we have to deal with now.”
It’s a challenge ripe for Canada’s taking. “We’re sitting on the third-largest reserves of oil in the world,” Pourbaix points out. “We are a democracy where rule of law prevails. We have extraordinarily tough and transparent rules on how we do this business. We are honest about how we report emissions. The world needs Canadian oil and gas, and we see that opportunity to supply it, while also, through initiatives like Pathways, decarbonize the product.”
In existence since the birth of Alberta’s energy industry, Cenovus is now leading it – each step cleaner than the last – into the future.
