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CAPP Presentation: The next era for Canada’s oil and natural gas industry

June 28, 2022 – BMO Centre (Palomino Room), Calgary AB

CAPP president and CEO Lisa Baiton gave the keynote speech today at Alberta Relaunch 2022 presented by New West Public Affairs. Baiton discussed the path forward for Canada’s oil and natural gas industry, with a focus on how CAPP members can contribute to and help solve some of the biggest challenges facing the world today, including climate change, energy security and affordability. See the full speech below:

Remarks by Lisa A. Baiton, President & CEO
Canadian Association of Petroleum Producers
The next era for Canada’s oil and natural gas industry

Good morning and thank you for that introduction.

  • As Monte said, I’m Lisa Baiton, President & CEO of the Canadian Association of Petroleum Producers.
  • I’m pleased to join all of you today in this, my first public speaking engagement on behalf of CAPP.
  • I am also pleased to be speaking particularly at this “relaunch” event – because we are in a unique moment in time when people – at home and abroad — are willing to take another look at Canada’s oil and natural gas industry, and are willing and open to listen to our evolving story.

I have been in my role for just two months now,

  • And while I have been diligently working to meet with all of my industry, stakeholder and government colleagues, there is only one of me – and a LOT of you – so I am still working my way through those important introductions.
  • In the meantime, I thought I might start by telling you a little bit about myself.

First, I grew up in Swift Current, Saskatchewan. My parents owned and operated a small oilfield servicing company.

  • I tell you this because growing up in that environment I learned — in a very personal way — what the oil and gas industry means to communities, to workers and to the families that depend on our industry for their prosperity and in many ways, their survival.
  • And my move back west also feels like I am coming full circle.

Second, I have had a 30 plus year career:

  • I worked for three federal and provincial governments within Canada,
  • I have worked in business advisory and advocacy,
  • and most recently, I spent over a decade on the global leadership team of the Canada Pension Plan Investment Board — one of the top 10 retirement funds in the world — that leaned into the energy transition over a decade ago, while still very much supporting the oil and gas industry – both as a generator of prosperity for the 20 million Canadians who contribute to the CPP – but also as a critical piece of a transformation to a balanced energy mix.
  • So I hope to bring those collective experiences to bear on behalf of CAPP members in terms of their need for regulatory certainty, market access, and access to capital.

Third, while it may not be overtly obvious from looking at my biography, the golden thread in my career has always been choosing roles that somehow contributed to the greater good.

  • As a proud Canadian, I am invested in the success and progress of our oil and natural gas industry, so it is a great honour for me to come back to western Canada and take on the role – and the responsibility – of representing our innovative industry that spans natural gas to light oils to bitumen – across our resource rich provinces.
  • Particularly at a time when the world is grappling with the unprecedented challenges of ensuring the difficult task of simultaneously providing energy security, affordability, reliability AND achieving GHG emission targets in the face of consumer demand.

So now that you know a little bit about who I am, let me tell you a bit about my vision for CAPP’s “relaunch”.

  • In my meetings over the past couple of months, this is perhaps the question I get the most — which is: “what is your vision for CAPP?”

Broadly speaking, the vision for CAPP is to be a constructive and solution-oriented partner –

  • working with all governments and all parties — both here in Canada, but also with key governments globally,
  • to continue to engage our energy citizens,
  • but as part of this moment when people are open to taking another look at our industry, to engage in a dialogue with a broader set of stakeholders,
  • to “relaunch” the conversation about the next phase of over a century of industry innovation in exploration and development — and the value it can bring to the table — to address the collective, global challenges of energy and the environment,
  • and in that spirit of collaboration, avoid policy discord, and foster a better understanding of providing cheap, clean and secure energy.

Before I get too far into the future, I do think it is worth taking a moment to reflect back on where we have been over the past several years.

I know that I am not going to tell you anything that you don’t already know, but it is important to look back – particularly within the context of recent high commodity prices – to remember that our industry is just now emerging and rebuilding from one of the most challenging periods in its history.

  • Sustained low oil and natural gas prices put our industry under extreme pressure – the last several years were marked with staff layoffs, the slashing of capital budgets and a focus on survival.
  • Then COVID hit in March 2020.

You may recall, in the first few weeks of the pandemic-induced economic meltdown, Saudi Arabia and Russia saw the rapid demand destruction in oil as an opportunity to inflict as much economic damage as possible on the North American oil industry. In the process they planned to capture a larger share of the market.

  • They began pumping oil into an over supplied market – driving prices lower – right down to actually hitting on negative $40 dollars per barrel.

After years of sustained struggling commodity prices, Canadian producers were hit extremely hard, and our companies were faced with truly an existential threat.

  • Any policy, regulation, tax – that added cost to production forced leaders to look at their business to cut costs.
  • The real-world consequences were that supervisors had to look their co-workers in the eyes — people they had worked alongside for years — and tell them they no longer had a job.
  • And that near decade-long downturn also saw investment leave traditional energy.

So in this era, our industry fought.

  • It fought to survive, to save as many businesses and as many jobs as possible.
  • It was perhaps the right strategy for the time.

But we are entering a new era.

In just a matter of months global market fundamentals have significantly changed.

  • Through the second half of 2021 energy demand was rapidly recovering as countries began lifting pandemic restrictions, with the recovery happening faster than expected and with energy demand approaching pre-pandemic levels.
  • With this uptick in demand, commodity prices were rising.

Through nearly a decade of low prices, Canadian producers became leaner and more efficient.

  • A region that was once considered higher cost moved to one of the lower-cost sources of oil and natural gas in the world.
  • An industry known for outspending its cash flow was now focused on generating value.

At the start of the recovery, companies changed their focus from survival to rebuilding their businesses after those hard years — repairing their balance sheets and compensating shareholders for their patience, or working to attract them back.

  • In just one year, Canada’s oil and gas sector has gone from an industry facing its own crisis, to one positioned to help solve a global crisis as a provider of some of the world’s most responsibly-produced energy.

Which has resulted in a shift in attitude.

  • A shift from survival to hope:
  • The consensus among CAPP members today is a focus on how they can contribute to and help solve some of the biggest challenges facing the world today. 

I would like to take a few minutes to talk about our industry’s role in supporting Canada’s climate change goals.

  • To paraphrase our Prime Minister who recently said, “We are leading on climate change because we’re a big oil and natural gas producer.” [1]
  • Our industry would agree with the spirit of that assessment.
  • Our industry knows that the dual challenges of energy and environment have to be addressed together — or both will fail. 

Canada is a global leader in emissions-reducing innovations and technologies.

  • And Canadian producers are uniquely positioned – both as secure suppliers of sustainable energy AND as global leaders in GHG emission reduction through the advancement of those innovations and technologies.
  • Our industry is a national leader in clean technology investment, annually representing about three quarters of all spending on clean tech in the country.
  • We also make up about 40 percent of all investment in environmental protection – precisely because we understand the scale of this challenge. [2]

There are examples across the board of industry collaboration.

  • One is the Oil Sands Pathways Alliance where competing companies have joined together to pool their knowledge, technologies, and investment dollars to achieve the goal of net zero emissions from oil sands production by 2050.
  • Thanks to innovations already in place, oil sands mining emissions intensity decreased by 14 per cent from 2013 to 2019 even as production increased 59 per cent. [3]

This same spirit of innovation permeates the rest of our industry.

  • From 2010 to 2019, emissions intensity from producing natural gas, natural gas liquids and condensate decreased by 33 per cent even as production grew by over 30 per cent. [4]
  • Game-changing technologies and investments — including carbon capture utilization and storage, solvent processes, waste heat recovery and electrification — will enable Canada’s oil and natural gas producers to continue reducing emissions.

Let me provide you with a few illustrative examples of the terrific and innovative work that is happening:

  • Tourmaline achieved its target of reducing methane emissions by 25% a full three years ahead of their plan. Since 2013 they have reduced Scope 1 carbon intensity by 34% while growing their production by 315%. The company is targeting a further 25% reduction in corporate emissions intensity by 2027.
  • Crescent Point earlier this year achieved an emissions intensity reduction target of 50% ahead of their 2025 timeframe, with a goal of a 70% reduction absolute methane emissions by 2025, compared to their 2017 baseline.
  • ARC Resources from 2016 to 2020, reduced their absolute GHG emissions by 37%, while growing production by 36%, and has set a goal to reduce their Scope 1 and Scope 2 GHG emissions intensity by 20% and overall methane emissions intensity by 20% by 2025.
  • NuVista Energy achieved a 50% annual GHG intensity emission reduction between 2012-2020, and has set further goal of a 20% reduction in Scope 1+2 emissions intensity from 2020 to 2025.

But this is just looking at the challenge from within Canada.  We need to also consider the global impact.

  • Canada’s resources have the most stringent environmental regulations in the world.
  • Using Canadian oil and natural gas over the long-term will result in lowering global emissions – likely far greater in magnitude than whatever we can accomplish by just focusing solely on domestic emissions.
  • A Stanford study done in 2018 found — if the rest of the world adopted just our flaring practices – global emissions from oil and natural gas production could be reduced by up to 23%. [5]
  • By virtue of our extraction and production practices, Canadian LNG exported from British Columbia is projected to be the lowest emission in the world.
  • And we need to continue this rapid progress to enable growth in our sector – along with growth in the capacity of Canada’s oil and natural gas to export energy to the rest of the world.

Which brings me to the issue of Energy Security.

Now, on top of climate considerations, where your energy comes from and who is producing it are equally important.

  • With a relatively small population but with the third largest oil reserves on the planet — larger than Russia’s proven reserves – along with some of the most prolific and economic natural gas fields in the world – Canada has great potential to become a preferred global supplier of energy.

Today Canada is approaching record oil production, thanks to the additional export capacity brought on by Line Three, which started at the end of 2021 – moving record high exports to the United States. [6]

  • An important note is that any additional energy exports from Canada contributes to the global supply. Even though currently nearly all of our oil and natural gas exports go the U.S., that does allow more exports from the U.S. to reach global markets, like Europe.

But Energy Security is not a short-term challenge.

  • Russia’s invasion of Ukraine has raised awareness of the risk democratic nations are taking when they depend on autocratic and unfriendly regimes for critical energy needs.

According to the International Energy Agency (IEA), on the world’s current trajectory, 103 million barrels of oil per day will be needed to meet global demand by 2030, with natural gas consumption continuing to increase through to 2050.

  • Even in the IEA’s net zero scenario, oil and natural gas continue to be a part of the energy mix.
  • Also in that scenario, the IEA predicts OPEC and Russia combined will control the vast majority of the world’s oil and natural gas production.
  • The opportunity to help improve and stabilize global energy security is not just a tremendous opportunity for Canada’s oil and natural gas sector, it could also be considered an obligation to our G7 allies and trading partners around the world.

As we drive down our emissions profile and look to increase our export capacity for oil and natural gas, Canada can play a much bigger role on the world stage.

  • As capital leaves the energy market in Russia and potentially other authoritarian regimes, Canada can proudly offer a safe landing for that investment.

This will benefit Canadians and our G7 allies and trading partners.

  • We can drive down global GHG emissions, provide a safe and responsible source of energy to the world and enhance the geopolitical influence of Canada as well as our global allies in Europe, the UK and even the United States.
  • The price at the pump is directly impacted by the price of oil which has risen due to a global shortage of supply and made worse by Russia’s invasion of Ukraine.
  • The path to lower consumer costs is enabling growth in supply from democratic nations like Canada to help match growing demand.
  • In addition, as a producing and exporting nation, every barrel of oil and molecule of natural gas produced here benefits Canadians across the country. New investment means more jobs and more opportunities to start businesses as our industry’s supply chain reaches across every province.

With growing production also comes increasing revenues for governments – critically important as we work to recover from the COVID-19 pandemic.

  • The royalty frameworks and tax systems in place act as a windfall mechanism to governments at all levels.
  • For example, from 2018 to 2020 combined government revenues averaged about $9 billion annually. In 2021 as a slow recovery in our industry began to take hold, revenues to governments doubled to $18 billion. [7]
  • In 2022 – with higher commodity prices and growing production, that number is expected to be significantly higher. Peter Tertzakian from Arc Energy Research institute recently estimated that royalties in Alberta alone could top $24 billion this year.

This is why I say Canada, in this moment, has an opportunity to relaunch, to chart a new path for our oil and natural gas industry.

People are looking for solutions to ensure they have reliable access to safe and affordable energy. They want to be able to prosper today without jeopardizing the future for their children.

It will be important for stakeholders across the country — industry, governments, indigenous and all Canadians to come to the table with solutions.

  • My ask of you here today is to take a fresh look at your oil and natural gas industry.
  • Our industry is transforming for a new era: leaders in emissions reduction research and technology development and positioned to create opportunities for prosperity across Canada.
  • It is time to start not just a new conversation about our energy future, but to sit down together and chart the path forward where Canada takes its place as a global provider of safe, secure and responsibly produced oil and natural gas while lowering the world’s greenhouse gas emissions.

To conclude, let me leave you with a quote from the Director of the USA Bureau of Economic Geology and Chairman of the Switch Energy Alliance Dr. Scott Tinker — with whom – thanks to Arc Resources — I had the privilege of sitting down with this past week:

  • “The dual challenge of energy and environment is not easy– but it IS solvable. We will solve it if we act as one team to better our country and to better our world.”

Thank you.


Appendix – Footnotes

CAPP analysis – data compiled from Municipal, Provincial and Federal Government records