Oil majors, Canadian energy companies look good at current levels: Graham
Executives and senior leaders from Canada's oil and gas sector are heading to Dubai for the upcoming United Nations COP28 climate talks, eager to tell the world they are doing what they can to reduce greenhouse gas emissions.
The fossil fuel industry will have a position of prominence at this year's climate summit, which begins Thursday.
Hosted by the United Arab Emirates — which pumps about three million barrels of petroleum products each day — and chaired by Sultan al Jaber, an Emirati who is also CEO of the Abu Dhabi National Oil Company, the 2023 COP event will put oil companies in the spotlight even as it seeks to find ways to hold the line on global warming.
Among the Canadian oil and gas sector representatives headed to the summit are a contingent from the Canadian Association of Petroleum Producers (CAPP) industry group and a team from the Pathways Alliance consortium of oilsands companies.
CAPP president Lisa Baiton said in an email the group is going to "contribute to the dialogue" on global decarbonization efforts, while Pathways Alliance president Kendall Dilling said his organization wants to collaborate with other industries around the world who face similar challenges when it comes to emissions.
"We're going there in a very constructive way to say, ‘We’re here, we’re a big source of emissions and we’re going to be a big part of the solution,'" Dilling said in an interview.
“I think we have something to offer, frankly ... we're an entire sector that’s come together jointly to tackle this problem."
As the world's fourth largest oil producer and this country's heaviest-emitting sector, Canada's oil and gas industry is under increasing pressure to decarbonize to help this country meet its international climate commitments.
The federal government wants to see Canada's oilpatch reduce its emissions by 31 per cent below 2005 levels, or 42 per cent below 2019 levels, to 110 million tonnes by 2030.
The government has promised to impose an emissions cap on the sector, something environmentalists say is necessary but is widely reviled by industry and viewed as akin to a production cap.
But even in the absence of domestic pressures, Canadian oil and gas companies have a business incentive to cut emissions.
Many analysts believe Canadian oil and gas companies are facing a future scenario in which only the cheapest and lowest-emission producers will remain competitive long-term as the energy transition accelerates.
"Certainly, the world is seeking to lower emissions, full stop, and at the same time, we're seeing demand for fossil fuels continue. So decarbonization has become a metric of competitiveness," said Kevin Birn, vice-president and Canadian oil markets chief analyst with S&P Global.
"I think that's the reason you see increasing participation (at COP) as they attempt to understand these latest developments and adapt to the market signals that are coming," he said.
Within the last 18 months, the Canadian oil and gas sector has rolled out a flurry of announcements of proposed projects — from hydrogen plants to renewable diesel facilities to carbon capture and storage — aimed at lowering the industry’s emissions profile.
The Pathways Alliance, which says it has spent $1.8 billion since 2021 on decarbonization efforts, says it's eager to talk about some of its emissions reduction plans — including a proposal to spend $16.5 billion to build a massive carbon capture and storage network in northern Alberta.
"We know that it’s critical to the future of our business and to the sustainability of our sector," Dilling said, adding that international climate targets will never be met if heavy emitters aren't at the table for events like COP28.
"Whatever targets are ultimately landed on, it’s industry writ large who have to execute on those emission reduction targets."
Janetta McKenzie, a senior analyst with clean energy think-tank the Pembina Institute, said oil and gas participation in the UN climate summit is a positive thing.
"Their presence at COP does indicate that they see how things are changing," she said.
"They see that the energy transition is not coming, it is here — and it is gaining momentum every year."
But McKenzie also warned against the potential for "greenwashing," a term used to describe the use of misleading or deceptive environmental claims by corporations, to occur at COP28.
She said many oil and gas companies have so far made a lot of climate promises but have yet to invest the tens of billions of dollars needed to see those promises through.
"We've seen a lot of announcements, we've seen a lot of targets. Those are great first steps. But we haven't seen a lot of real absolute investment in technology that would reduce emissions from the sector," she said.
"We've seen a lot of talk. We're looking to see more action to back up that talk."
Canadian oil production is expected to hit an all-time high within the next two years, according to a recent Deloitte report.
The vast majority of the increase in Canadian oil production is expected to come from the oilsands, where companies are working on thermal expansion projects that will link new assets with existing facilities to speed up development at a lower cost.
However, oilsands bitumen also has a higher emissions profile than oil from many other parts of the world because of the large amounts of energy needed to produce and transport it.