Opinion: The Bright Future for Canadian Oil & Gas

Originally published in the CAOEC State of the Industry 2022 Report and 2023 Forecast

By David Yager, Calgary Oil Service Executive, Energy Policy Analyst, Writer and Author

A war in Europe and the rising cost of everything are causing great concerns globally. While Canada’s oil industry will not be immune, this is the place to be in 2023 and years thereafter.

That’s because more things have changed in our favor the past 12 months than many realize. For 10 years there has been a multi-pronged assault on the Canada’s oil industry and the people who work in it. It was a total eclipse of bad news resulting in events that tested the resolve and determination of this essential industry and everyone in it. But we made it. And nothing like this will happen again anytime soon, if ever.

It started in 2012 when oil export pipelines like Northern Gateway became political flashpoints. Soon it was dead, as was Energy East and Keystone XL. Twice. Policies denying landlocked resources access to global buyers that want to buy them is not only unique to Canada, but the world. These are serious decisions the whole world should be questioning today. At the same time, oil and gas prices collapsed.

The North American shale gas revolution which began in 2005 eventually clobbered Canadian gas prices and reduced production volumes. From 2001 to 2008, Alberta’s benchmark AECO spot price gas routinely approached or exceeded $10 per gigajoule (GJ). Prices fell when historic markets for Alberta gas switched to closer, and cheaper suppliers. One month in mid-2019, gas averaged only $0.55, a 95 per cent reduction. Volume also declined as former markets were lost to US producers. From 2000 to 2013, Alberta gas output fell by 30 per cent.

After OPEC abandoned supply management to support oil prices in late 2014, so began a sevenyear price slump that only ended in early 2022. WCS fetched US$85.56 in mid-2014. In November 2018 it fell as low as US$5.97 because of transportation challenges. The all-time low of US$3.50 was in April of 2020. In May, WCS hit US$101.17, the highest in 14 years. AECO traded at $6.53 GJ in June, the highest price since 2008. But for 2023 and beyond, western Canada is the place to be.

Because there has finally been a long overdue rethink about what really matters to billions of people. Which is fuel and food, not Netflix, Instagram, or ESG investing. Oil prices will remain steady due to geopolitical events including replacing Russian production. Seven years of underinvestment in new supplies has caused material shortages. To isolate Russia without sending oil prices through the roof will require more drilling. And that will happen.

The only countries clinging to their anti-fossil fuel policies are Canada and the US. That’s because North America still enjoys the lowest energy costs in the world. However, even in Canada the messaging from Ottawa is changing fast.

The world wants more Canadian oil and gas and even the federal government is recognizing how much voter priorities have changed. Denying Europe more fuel from a country so blessed with massive hydrocarbon resources at a time of acute shortages and economic distress is not a vote-getter.

Gas prices will firm up permanently when LNG Canada starts exporting 1.8 billion cubic feet of natural gas every day in 2025. This is 10 per cent of total Canadian output. Other LNG projects on the west and east coast are in the works. But the most significant change will be among younger voters in urban Canada who are now facing issues they have never seen before – energy shortages, war in Europe, inflation, and rising interest and mortgage rates. Attitudes are changing more than people realize. Nobody is trashing the oil sands any longer. Banks and institutional investors are reviewing their anti-oil investment policies now that fossil fuels make money and many other sectors don’t.

Around the world countries are rapidly changing their views about fossil fuels. Coal-fired electricity generation is growing. New sources of oil and gas not from Russia is now more important than landlocking western Canadian production.

Canada’s oilpatch is back. Big time. Enjoy it. We deserve it.

David Yager is the President and CEO of Winterhawk Casing Expansion which is commercializing a new methane emission reduction technology. His 2019 book From Miracle to Menace- Alberta, A Carbon Story is available at: www.miracletomenace.ca