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November 5, 2020 | Institutional Partnerships and Perspectives on Oil Sands Innovation

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WATCH: On Thursday, October 28th, we were joined by University of Calgary Chancellor Deborah Yedlin and RBC Senior Vice-President John Stackhouse for a discussion with moderator Stewart Muir on how institutional partnerships can advance innovation in Canada’s oil sands.

“Science” and “math” were recurring themes in our first online Resource Innovation Forum, supported by Cenovus Energy, that discussed ESG challenges and opportunities for our oil sands.

First, a thought from our opening speaker, Deborah Yedlin, Chancellor of the University of Calgary and a long-time journalist, on Apollo 13 and the Canadian energy industry: “If we could put a man on the moon, if we could save three astronauts from being lost in space and potentially perishing, surely we can figure out how to address the challenges (a) of climate change, (b) of the challenges facing the energy sector and particularly the oil sands in terms of emissions and water use. . . .

“We’re finally starting to see more recognition from the energy sector itself, broadly speaking, that this is something they all have to address. There have been some very interesting bifurcations in terms of who said ‘We need to address climate change; yes, we’re part of it.’

“And that was primarily the larger producers, who are more aligned, it seems, with the way the conversation is going in Europe. But we haven’t seen that sort of collective understanding in the same way, for example, in Alberta.”

More from Yedlin:

  • “We can do this. We’ve done far more challenging things with far less computing power than we have today. . . . Science is going to provide the solution and the answers to what we face as a global community when it comes to energy use and production.”
  • “While finding and harvesting alternative sources of energy are gathering momentum and enjoying successes, it’s still hard to think of a world functioning without energy provided by a hydrocarbon molecule or generated by something related to hydrocarbons that produces an electron. But that doesn’t mean that we ignore the impact our energy’s having on the planet. The path to minimizing that impact lies in science, and partnership.”
  • “The oil sands have been singled out by governments and investors around the world as being the worst form of energy. Missing from the arguments, statements, and misinformation is the progress that has been made in decreasing the emissions-intensity per barrel of oil, as well as the cost and water use.”
  • “Oil sands producers such as Suncor, Cenovus, Imperial; Oil and Canadian Natural Resources have all made ESG a top priority. And they account for 75 per cent of oil sands [production. . . . When you talk to the CEOs of any of these companies, they have two goals in mind, the cost and carbon competitiveness, because today’s world demands it.”
  • “Fighting back with facts, as many think is the right approach, doesn’t work. What works is science; science and collaboration with academic institutions, government and the private sector. That’s how the oil sands came to be developed in the first place, partnership between the Alberta government, industry, and the University of Alberta . . . and it resulted in development of the Steam-Assisted Gravity Draining process which is the basis of what underlies thermal extraction (of oil) in the oil sands today.”

Yedlin also outlined university and university-industry research programs on energy issues, and said this of her University of Calgary:

“Our research activities and teaching curriculum are about supporting the ‘and’ conversation. . . (so) we can credibly talk about energy and the environment, rather than energy or the environment.”

From our second speaker, John Stackhouse, Senior VP, Office of the CEO, at the Royal Bank of Canada (an author and another long-time journalist):

  • “A reminder of the dangers of ideology: When we talk about climate change, and the passionate views, and logical views, it’s important to remember: This isn’t religion. It’s math. It’s a real math problem, and it’s a math problem that we can solve.
  • “I was just on a call with the Queen’s (University) Institute for Sustainable Finance . . . and their math says that Canada needs $128 billion over 10 years to be carbon-competitive. $128 billion; big numbers to most people. Ironically, it’s about 20 per cent more than the market cap of the entire energy sector in this country . . . but it’s only about 0.6 per cent of our GDP, so it is math that is manageable, and, critically, this is the kind of math and transition financing that we can use to help recapitalize the sector, and position it for greater, more sustainable, growth in the ’20s and ’30s.”
  • “I was struck by the Institute for Sustainable Finance’s argument that oil and gas is one of the most cost-efficient investments we can make; probably the best carbon ROI for us to hit our emissions targets. . . . In total, (investment of) about $26 billion over a decade, $2.6 billion a year, in new technology in the oil and gas sector, can get us to where we need to be.”

Stackhouse went on to note that since 2014 the number of companies in the Canadian energy index has shrunk from 52 to 14. And half the index’s value comes from just two pipeline companies. “So we’ve got a real math challenge there.”

Part of that challenge, he said, is due to ESG investment issues (environmental, social and governance.)

“That’s particularly true for European investors. We can talk about all the successes of Canada, but there was a New York banker on this call that I just came off who said, ‘The rest of the world has a view of Canadian oil and gas, and it’s not necessarily positive.’

And, Stackhouse said: “In the context of Canadian energy there’s a greater focus on the E than the S or G, rightly or wrongly, but right now E is a capital E, and it towers over the S and the G. ESG is drawing more attention among investors and institutional investment funds,” said Stackhouse. A Royal Bank survey of 800 world investment professionals found 75 per cent of investors used ESG in their investment approach this year, up from 70% in 2019.

“Additionally, 85 per cent of investors believe ESG-integrated portfolios perform as well as, or better than, non-ESG-integrated portfolios, so there’s a strongly felt view among institution investors — the so-called ‘smart money’ — that ESG is actually good for returns.

“So how do we ensure that ESG is good for Canadian returns, particularly for oil sands investment? We see it as an opportunity. . . . ESG can  contribute to the intangible value of Canadian oil and gas companies, if we think long-term and strategically about it, and develop the arguments that we think the world may be willing, and wanting, to hear. . . .

“When you look across all investments in the world today, the intangible portion of an investment is growing enormously. Eighty-five per cent of the TSX’s value now is intangible. And ESG in some ways can be part of that. That can contribute to the intangible value of Canadian oil and gas companies. . . .

“There’s a whole new frontier of so-called green investment, well into the 2020s, that Canada can help pioneer.”

“We need to understand that the technology investments of oil and gas companies are more significant perhaps than any other clean-tech spending going on today. Seventy-five per cent of Canada’s clean-tech spending, roughly, in research and development, as well as commercialization, comes from the energy industry.

“So how do we ensure investors, institutional investors, are able to recognize that in their portfolios, and say to their own members and stakeholders, ‘Look, this is where your money is going, and it is leading to material decline in carbon emissions.’”

  • Our second Cenovus-sponsored forum comes up Thursday Nov. 5, with Wes Jickling, chief executive of the Canadian Oil Sands Innovation Alliance, on how our oil sands industry is collaborating to address ESG challenges. You can register until 11am PST Nov. 5 at http://ow.ly/7Q4D50C6DAV

 

 

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November 5th, 2020

Posted In: Resource Works

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