It’s an undisputable fact! Alberta is the powerhouse of Canada’s oil and gas industry, producing over 80 per cent of Canada’s crude oil and 65 per cent of Canada’s natural gas.
So, it was a very big deal this summer when Alberta set a political goal to boost provincial oil output from current levels (around four million barrels a day) to eight million barrels a day within a decade.
It instantly triggered reactions, good and cautious energy sector buzz, wondering if it’s an ambitious plan or wishful thinking.
Oil industry leaders, energy analysts and economists warn that while doubling Alberta’s oil production is undeniably an exciting and positive target – and despite this summer’s federal and provincial agreement, lifting proposed oil and gas production caps and suspending certain net-zero power regulations – the Alberta oil facts, figures and process realities are red flags about the massive logistical, financial and market headwinds and speedbumps it will take to make it happen.
There is industry consensus that a reality check is critical.
“To support meaningful production growth, governments and industry must work together from the outset to ensure infrastructure plans align with producer investment requirements,” explains Lisa Baiton, president and CEO of The Canadian Association of Petroleum Producers (CAPP). “Understanding that companies and their shareholders need to commit capital is a vital part of the equation.
“Producers must be able to attract long-term capital in a highly competitive global market. Investors need confidence that Canada offers regulatory certainty, fiscal stability, competitive returns and a clear path to project development. Fast-tracking commercially viable infrastructure projects, supported by a competitive policy and regulatory environment, is one of the most effective ways to unlock investment and production growth.”
There are also many complex but bottom-line questions to be dealt with.
“The eight million barrels-per-day is an exciting target, there will absolutely be considerable consultation and coordination required, involving many stakeholders,” according to the globally respected expertise of Dr. Bob Schulz, professor of Strategy, Petroleum Land Management, Business and the Environment at the University of Calgary’s Haskayne School of Business. “Including First Nations, Indigenous, cross (mostly B.C.) provincial governments, national Canadian government, international (U.S., China, Saudi Arabia and India) governments and sovereign funds, Canadian oil production companies, pipeline companies, financial bankers, climate change activists and others.
He cautions but about the complicating factor of all stakeholders agreeing to the eight million bpd production target and the 10-year timing.
The energy sector and politicians acknowledge that there will be speedbumps and headwinds. The maze of consultations, regulations, legal challenges and negotiations, pipelines, capital investments and more.
The cost and the labour are major obstacles. Early industry guesstimates suggest that Alberta’s plan would need about $100 billion in investments, and essential human resources split between building oil projects and complex carbon-capture networks.
And the recurring factor of global competition, because Alberta’s heavy crude always deals with from lower-cost global producers like Saudi Arabia, which can extract oil at a fraction of the cost.
On one critical point, there is already consensus. Pipelines will be a major hurdle! Alberta’s grand plan relies on building a new West Coast pipeline to carry over a million barrels of oil per day directly to Asian export markets.
“There’s no doubt about it. Pipelines remain an essential component of Canada’s energy future,” Baiton points out, “Additional export capacity, whether through optimization of existing systems or new infrastructure, helps Canadian oil reach new markets, improves market access, strengthens energy security and supports economic growth.
But Schulz explains, “Intermediate net increased pipeline capacity approvals are probably the most lumpy variable in the whole plan. While some planning progress can be made for additional target production phases, a 10-year journey likely starts with scrutinizing current Alberta oil production, current and approved pipeline capacity utilization, forward contracts, expected global oil prices and current environmental variables.”
Energy sector insiders also mention the reality – not negativity – based caution that Alberta’s plan may overlook vital economic factors, and suggest that despite Alberta’s gung-ho doubling production wishful thinking, walking-the-walk of refining infrastructure and final investment decisions are years away.
He cites professional but cautious positivity. “Some speedbumps that could cause significant progress barriers could involve legal challenges by First Nations and/or B.C.’s provincial government, Alberta politics and October’s sovereignty vote, global (mostly U.S.) politics, technological progress on various environmental issues and financing.”
CAPP’s Lisa Baiton is realistic and enthusiastic. “Countries around the world are searching for new supplies of secure and responsibly developed energy, provided by reliable and trusted trading partners.
“The oil and natural gas industry is ideally positioned to grow its role in helping to meet increasing global energy demand and rapidly diversify Canada’s export markets while driving investment back into our country, creating jobs and delivering long-term prosperity for Canadians. The ambition to grow Alberta’s oil production reflects the significant resource opportunity that exists in this province and Canada’s growing role as a reliable global energy supplier.”