Alberta Premier Danielle Smith’s goal of doubling oilsands output over the next decade is being met with optimism from industry executives alongside warnings about capital priorities and project discipline.
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Alberta Premier Danielle Smith has set a goal of doubling oilsands output in the next decade, and industry players say recent federal and provincial policy changes are making new projects easier to pursue.
R.J. Johnston of the University of Calgary’s School of Public Policy compared the situation to “the dog that got the car” during a panel discussion at an Alberta Securities Commission conference last month, saying the industry has received what it wanted while now facing “the pressure’s on to invest.”
Ottawa has made changes intended to boost output, including reversing environmental policies from the Trudeau era and making more investments eligible for immediate tax deductions on a permanent basis.
On Friday, Alberta announced a new royalty program intended to spur development.
Both governments are also backing the proposed Pacific Link pipeline to southern B.C., described as enabling greater exports to Asia.
Even with those shifts, analysts and executives said companies will still have to balance growth plans against shareholder returns and other competing priorities for capital.
Johnston said “expectations” that the industry would follow through with “massive investment” are “maybe a little unrealistic” and don’t fully account for how oil and gas firms are positioned with shareholders and capital providers.
Michael Berger, a senior analyst at Enverus, said producers have prioritized paying down debt and boosting shareholder returns, and he expects that approach to continue.
At the same time, Berger said the sector does have an appetite for growth and that balancing shareholder distributions with “prudent capital allocation decisions for growth barrels” will be key.
Chris Seasons, a partner at ARC Financial who previously led Devon Canada, said a “go go go” mindset in the oilsands from roughly 2000 to 2014 led to projects being rushed, capital costs rising, and economics declining after the 2014 global oil price collapse.
Seasons said that discipline in driving down costs “will stay in place” as the industry builds out again.
Imperial Oil’s chief executive John Whelan told analysts late last month that the company has the opportunity to double its gross operated upstream production using steam-driven oilsands developments at Aspen, Clarke Creek and Corner, and said it is considering whether to bring forward a decision on a 150,000-barrel-per-day Aspen project from the end of the decade.
Suncor Energy’s chief executive Rich Kruger said on the company’s quarterly call with analysts that it has been looking at completing a half-dozen in-situ projects over the next decade, and that it is also asking “what if” questions about pursuing more growth.
Cenovus Energy said its growth plans include seizing development opportunities through its proposed $5.7-billion acquisition of Athabasca Oil Corp., which it says could raise production from Athabasca’s oilsands assets to 115,000 barrels per day by 2032 from about 40,000 boe/d.
Cenovus said that, through the deal, it would gain an undeveloped prospect at Corner and see opportunity to expand an existing operating one called Leismer.
Cenovus CEO Jon McKenzie said “recent announcements around tax policy, royalties, new pipelines and regulatory efficiency are important steps in the right direction” and would affect the ability to advance growth projects at Leismer and Corner.
Companies are also working toward an arrangement involving the Pathways carbon storage project, first proposed in 2021, which has been scaled down from its original plan.
Under an energy accord Ottawa and Alberta signed last year, moving ahead with Pathways is described as a condition for the pipeline going ahead, and vice versa, and growth plans may depend on negotiations.
Scott Stauth, president of Canadian Natural Resources Ltd., said earlier this month that the outcome of those negotiations will affect growth opportunities.
Berger said oilsands growth could take multiple forms, including redeveloping existing projects, adding expansions, or building from scratch, and that what matters is “the cadence at which capital gets deployed.”
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