Varcoe: As COP28 agrees to transition off fossil fuels, oilsands majors unveil $10B spending plans

Article content material

In the future after nations on the COP28 local weather summit agreed to transition away from fossil fuels, two of Canada’s largest oil producers unveiled capital plans to spend greater than $10 billion subsequent yr.

It comes because the world consumes report quantities of oil this yr — greater than 100 million barrels per day — and Canadian producers put together to satisfy the continued name for extra vitality.

Article content material

Article content material

“There’s a place for fossil fuels and that’s simply actuality,” stated Gurpreet Lail, CEO of Enserva, an trade group that represents the vitality providers, provide and manufacturing sector.

“You’ll be able to spin it any which approach you need to make your self really feel higher or placate public opinion proper now. However the truth of the matter is, we’d like funding coming again into this trade,” stated Lail, who attended the COP28 summit.

“Persons are consuming extra oil and fuel merchandise, and oil and fuel, than they ever have earlier than.”

On Thursday, a brand new forecast for Enserva projected capital spending within the Canadian oil and fuel sector rising by 10.5 per cent in 2024, with 6,300 wells forecast to be drilled, up about eight per cent.

In flip, the variety of oilfield service jobs within the nation is projected to develop by a further 5,500 positions.

Final month, the Canadian Affiliation of Vitality Contractors forecast 6,229 wells shall be drilled in Western Canada subsequent yr, reflecting the same improve, as new pipeline capability is coming to the market.

The capital applications of a number of main trade gamers have been unveiled over the previous week, and analysts count on modest spending progress, regardless of the latest drop in oil and pure fuel costs.

Article content material

Article content material

On Thursday, Canadian Pure Sources introduced its funds subsequent yr will attain about $5.4 billion, up from a comparable funds of $5 billion in 2023.

The nation’s largest petroleum producer forecasts complete output will common about 1.36 million barrels of oil equal (boe) per day subsequent yr.

Nevertheless, it’s concentrating on shorter-cycle improvement exercise within the second half, and says manufacturing by the top of subsequent yr will attain 1.46 million boe per day — a rise of about 40,000 boe per day from the identical interval in 2023.

In the meantime, built-in producer Cenovus Vitality launched plans to spend about $4.75 billion in 2024, together with about $2.6 billion of capital expenditures within the oilsands.

The Calgary-based firm’s complete funds is up about $500 million, or 12 per cent, from 2023. It’s anticipating complete manufacturing of about 790,000 boe per day.

Cenovus and Canadian Pure, together with 4 different main oilsands operators, are a part of the Pathways Alliance, a gaggle that’s working collectively to realize net-zero emissions by 2050.

Article content material

Analyst Phil Skolnick of Eight Capital stated Canadian producers are taking a look at “slight progress” subsequent yr, because the Trans Mountain pipeline growth is predicted to be accomplished, nearly tripling the capability of the prevailing line from Alberta to the B.C. Coast.

Even with risky oil costs — benchmark U.S. crude costs closed Thursday up $2.11 to US$71.58 a barrel — and the COP28 framework settlement calling for transitioning off fossil fuels, Canadian corporations proceed to speculate.

“They’re not reducing again,” Skolnick stated.

“They don’t appear fearful of it.”

Pathways Alliance has proposed constructing a $16.5-billion carbon seize community within the province connecting a number of oilsands amenities to a storage hub close to Chilly Lake, however has not but made a ultimate funding choice.

In the meantime, oilsands big Suncor Vitality introduced final week it’s boosting its capital expenditures to about $6.4 billion, a 14 per cent hike over this yr’s program.

In Alberta, complete oil and fuel trade spending is predicted to hit $29.6 billion this yr and climb to $32.6 billion in ’24, in keeping with provincial forecasts.

Article content material

Nevertheless, longer-term forecasts for the worldwide trade are a matter of intense debate.

There are predictions world oil demand will plateau later as the usage of electrical automobiles expands and as decarbonization efforts achieve velocity.

The Paris-based Worldwide Vitality Company says world oil consumption will improve to 101.7 million barrels per day this yr, but it surely has additionally forecast that international oil and fuel demand will peak someday this decade.

In Dubai at COP28, nations agreed to “transitioning away from fossil fuels in vitality techniques, in a simply, orderly and equitable method,” as they attempt to restrict international warming to 1.5 levels Celsius.

Federal Setting Minister Steven Guilbeault identified the deal requires the tripling of renewable vitality, doubling vitality effectivity and “a historic consensus to maneuver away from fossil fuels in vitality techniques.” It led to sharp criticism from Premier Danielle Smith.

The COP settlement sends a transparent sign of the place the world is headed, stated Greenpeace Canada’s senior vitality strategist Keith Stewart, even when oil corporations comparable to Cenovus and Canadian Pure plan to spend extra.

Article content material

“The (capital) selections have been made months in the past as a result of it takes a very long time for these processes to occur. It’ll be fascinating to see whether or not that development continues within the subsequent few years,” Stewart stated Thursday.

However Ben Brunnen, writer of the Enserva report and a companion with Garrison Technique, confused the COP28 settlement offers nations the power to chart their very own path ahead.

It “permits nations the flexibleness to set their objectives,” stated Brunnen, a former vice-president of the Canadian Affiliation of Petroleum Producers.

Nevertheless, there are a lot of lingering questions on how shortly the transition can happen and the way the world will scale back emissions whereas additionally tackling safety of provide issues and assembly the rising vitality urge for food of nations.

“Oil and fuel is just not going away anytime quickly,” Rob Roach, deputy chief economist with ATB Monetary, stated after the Enserva occasion.

“Being lifelike, it’s a long-term transition and Alberta goes to be a part of that.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

Article content material