CALGARY — The clash between the world's thirst for energy and the need to reduce emissions to mitigate climate change is the single biggest issue facing Cenovus Energy Inc. right now, the chief executive of the Calgary-based company said Tuesday.
Alex Pourbaix told attendees at the Global Energy Show, a major North American energy industry conference, that there is an inherent conflict between the industry's push to improve its ESG (environmental, social and governance) performance and global demand for increased oil output against the backdrop of the war in Ukraine.
"This is an issue that takes up a lot of my time on a daily basis," Pourbaix said at the Calgary conference being held in person for the first time since the COVID-19 pandemic began, adding the reason global oil demand is growing is not because people are "bad" or "immoral," but because oil and gas are "incredibly important to human flourishing and prospering."
"What happened over the last several years was I think there was a lot of ambition that we could really move this (energy) transition along very fast," Pourbaix said. "And I think we're finding out that this is a many, many decade transition — and it's probably going to look more like diversification than it is like transition."
Russia's invasion of Ukraine has shaken up global energy markets in 2022, sending oil and natural gas prices skyrocketing and reversing the fortunes of Canadian companies like Cenovus and others that have been posting record profits this year after what had been nearly a decade of downturn.
Pourbaix said the current energy crisis has proven that oil and gas can't easily or quickly be replaced by wind and solar. He said instead of a phase-out of fossil fuels, the next three decades are likely to feature a diverse energy mix that includes oil and gas but also hydrogen, renewables and nuclear power.
"We’re now seeing that whatever is done on ESG has to be coordinated with energy security in order to avoid the challenges or worse that we’re seeing right now as a result of scarcity of oil and gas," he said.
But in spite of concerns about global energy supply, Canada's oil and gas industry remains under pressure from both governments and investors to meet not just Canada's climate targets, but its own emissions reduction goals.
As part of the Oil Sands Pathways to Net Zero consortium, Cenovus has pledged alongside five other major producers to achieve net-zero greenhouse gas emissions from oilsands operations by 2050. The group has proposed to work together on a project that would capture CO2 from oilsands facilities and transport it to a storage facility near Cold Lake, Alta, delivering about 10 million tonnes of emissions reductions per year from oilsands production.
The group has not yet pulled the trigger to go ahead with the project, though Pourbaix said the investment tax credit for carbon capture and storage projects unveiled by the federal government earlier this year is an important step.
Pourbaix has also previously stated that the tax credit — which would cover 50 per cent of the capital cost for most types of carbon capture projects — isn't enough, and that additional government support will be necessary to fund the "multi-billion dollar" technology.
On Tuesday, Alberta Energy Minister Sonya Savage said that under the province's oilsands royalty regime, anything companies spend on the deployment of carbon capture technology can be deducted in the form of a royalty credit. That could cover up to 30 per cent of the capital costs of a CCUS project, Savage told reporters.
But she said selling the Alberta public on the merits of any additional government support beyond that would be a challenge, given that companies are benefiting from $120 per barrel oil right now.
"It’s difficult for the province — and I imagine it’s difficult for the public — to understand, when they’re making that much money and they’re using some of their proceeds to pay out dividends, buy back shares and pay back debt and not reinvesting it into the province and CCUS," Savage said.
She added from the Alberta government's perspective, Cenovus and its oilsands partners should move ahead with their carbon capture plans "as soon as possible."
"We all want to get to net zero. They need to get to net zero," Savage said. "So the sooner the better."
This report by The Canadian Press was first published June 7, 2022.
Companies in this story: (TSX:CVE)
Amanda Stephenson, The Canadian Press