Even the most bullish U.S. shale production forecast—roughly five million bbls/d growth over the next five years—still leaves about 10 million bbls/d of additional production required by 2022 to meet expected demand, says Robert Johnston, chief executive officer of Eurasia Group.
That is the “heart of the opportunity” for Canada.
“Within these contexts there is a good news story for Canada, especially in the oilsands,” he told those attending the launch of PricewaterhouseCoopers LLP’s latest energy report.
Beyond U.S. shale, Johnston said investors look to three criteria when deciding where else to place upstream energy capital.
“Number one, and this probably reflects my bias as a political scientist, I think capital will go to politically-stable climates. We can talk about what countries those are, but I would argue Canada is very high on that list. Secondly, capital will go to oil plays where technology and innovation can go to work in a way that will find manufacturing oil in a lower-price environment.”
“Third, capital will go to markets where there are brownfield opportunities, which in general are going to be lower risk — you’re tying in a new well to an existing deepwater platform, or you’re adding extensions on an [existing] oilsands project.”
Countries that reflect these opportunities include Canada, Brazil and Mexico, in Johnston’s opinion. As for why super majors have exited Alberta’s energy sector in recent months, he suggests it has more to do with portfolio management than any condemnation of regional policy or industry. For companies still invested in the oilsands, the CEO believes their prospects are good.
“My view would be that the remaining Canadian operators are actually in the best position to replicate what has happened in the Permian—a deep focus on a single basin, trying to figure out how to innovate and use technology and produce in a low oil price environment. That is actually what investors want more so than companies that are only half committed to the resource.”
According to the newly-released PwC report, Energy Visions: Who’s in Charge, Canada’s energy sector is at a crossroads where it must balance well-managed cost containment, capital discipline, strong sustainability practice, operational excellence and an innovation culture if it wants to survive industry lows to excel in the energy future.
“The world needs oil and gas and that will not change in the near term,” said PwC Canada national energy leader Reynold Tetzlaff.
“I am confident that Canada, with our technological innovations and ingenuity, and strong environmental standards, is well positioned to build on its position as a global leader in the sector.”