Amid sky-high oil prices and increasing sanctions on Russian energy around the globe, some in the Canadian oilpatch are noticing a change in attitude toward their industry.
The U.S. and U.K. are banning Russian oil and the European Union is moving to end its reliance on Russian natural gas, following the country’s invasion of Ukraine. The U.S. was importing about 500,000 barrels per day of oil and other petroleum products from Russia.
Canadian energy leaders say they could immediately replace between one-third to one-half of those volumes and move the oil south of the border by pipeline and rail. And that’s now a possibility with the U.S. looking for a steady supply of more oil to lower prices and replace Russian barrels.
Canada can move crude to U.S., energy exec says
“There is capacity for us to be able to move more crude into the U.S.,” said Suncor chief executive Mark Little, in an interview.
Little is in Houston, Texas, at CERAWeek, one of the largest energy conferences in the world, and an event he’s attended in the past.
“If you go back a couple of years, I would say the conversation about Canada’s role with the United States on energy was almost non-existent,” he said.
“And the engagement with the Canadian marketplace, I would say was very, very low. I think there’s more of a recognition of just how important Canada is.”
Oil from the Canadian oilsands is the “most demonized oil in the world,” said Daniel Yergin, an author and vice-chair of S&P Global, on Tuesday, because it has traditionally been a high-cost and high-emitting source of energy.
Overall emissions from the oilsands continue to rise, although the amount of greenhouse gases per barrel of oil has decreased over the years.
“I am seeing a big change,” said Cenovus CEO Alex Pourbaix, in an interview.
“The only thing that I’m gratified by out of this [conflict in Ukraine] is that I think, energy security is getting the level of scrutiny that I think it deserved for many years.”
Canada was one of the first countries to announce a ban on Russian crude, although it hadn’t imported any of the oil in a few years.
Sanctions deliver huge blow to energy market
Up until recently, Russia has produced about 10 per cent of the world’s oil supply. Economic sanctions, in addition to the direct sanctions on energy, are hampering the country’s oil and natural gas exports.
The impacts to Russian energy is potentially the biggest physical disruption to the energy market in history, said Aaron Brady, an executive director with S&P Global.
Many private companies such as oil traders, banks, shippers and energy companies are avoiding Russia oil because they don’t want to run afoul of sanctions. They also are avoiding Russian oil because of their values and possible reputational risk.
Shell was criticized for buying a shipment of Russian oil last week after the invasion of Ukraine had begun.
“I think there is a degree of vindication,” said Alberta Premier Jason Kenney, in an interview.
“I feel like what we have been saying for years is now understood to be true,” he said. “And that is, the world needs more liberal democratic energy and less conflict energy.”
Many European countries are far more cognizant of the need to source oil and natural gas from stable, democratic countries, according to federal Natural Resources Minister Jonathan Wilkinson.
“In the aftermath of the terrible things that are happening in Ukraine, I think that is something that is going to continue going forward. I think that that is one of the lessons that the Europeans are taking from this,” he said in an interview.
There has been a collective amnesia about energy security for decades, some experts say, but now the issue is a top priority.
“It’s back on the forefront. It should have never left,” said Ryan Lance, CEO of ConocoPhillips, while on stage at CERAWeek.
The oil and gas sector is the largest source of greenhouse gases in Canada, accounting for 26 per cent of total national emissions in 2019, according to Natural Resources Canada.