World oil and gas production and consumption are set to spike significantly in the 2020s. Yet Canada under Justin Trudeau has consigned the energy sector of the economy to the trash-heap, just as the industry’s investments are booming elsewhere around the world.
According to a study by Rystad Energy, the last 18 months have seen a vast acceleration of approvals for investments in new oil and gas projects internationally. “New facilities worth more than $110 billion,” they write, “have been approved for development since the beginning of 2017, versus only $50 billion in 2016.”
The vast majority of these investments are in deepwater and onshore projects on which expenditure had been previously delayed. They are driven by higher oil prices, anticipations of increased demand for gas lower development costs for offshore fields.
By contrast, only one oil sands project and one LNG project have been approved since the beginning of 2017. The former is Christina Lake Phase G in Alberta, and the latter is the Coral Floating LNG (FLNG) project in Mozambique.
‘Oil sands projects have tended to be mammoth affairs, requiring huge time and capital inputs. The oil sands service industry is not as specialized as the deepwater project supply chain … [and] the oil sands supply chain shifted to other industries when the downturn started to bite in 2015[. This means] that oil sands projects have seen lower levels of cost compression …’
Demand for Alberta’s oil sands, which are exported to the U.S., has dropped as shale oil production in the U.S. itself has risen in recent years. The report expects that, of the nine oil sands projects intentionally delayed during 2014-2016, not one will make any progress until at least the next decade. “The oil sands price outlook has stagnated due to a variety of market access issues,” it says.
By contrast LNG prices, which usually lag oil prices by a few months, are expected to improve. And LNG is increasingly a favoured fuel in a world that is more and more concerned with carbon issues. Yet even there the current Government has failed Canada.