The price of oil has been on a steady climb all year, but the talk at Canada's biggest oil and gas conference is still focused on spending discipline. A rainbow appears to come down on pumpjacks drawing out oil and gas from wells near Calgary on Monday, Sept. 18, 2023. THE CANADIAN PRESS/Jeff McIntosh
TORONTO – The price of oil has been on a steady climb all year, but the talk at Canada’s biggest oil and gas conference is still focused on spending discipline.
Industry leaders at the Canadian Association of Petroleum Producers conference, held in Toronto this year, have been emphasizing their predictability and focus on returning money to shareholders, rather than talk of growth.
Suncor Energy Inc. chief executive Rich Kruger, who was named head of Canada’s largest oil and gas producer last year as it struggled with safety and operational issues, said his goal is to bring clarity and simplicity to the company.
“I want to become consistently and boringly excellent,” said Kruger. “I’m not a big one for surprise parties.”
Kruger has been working to standardize operations and create a steadier production plan, in contrast to some of the more rushed decisions when growth was the answer to all of the industry’s questions.
The early development of the Fort Hills oilsands site, for example, saw mine plans that had slope angles too steep, and not enough was done to check for water issues, in what were fairly short-sighted decisions made to feed the processing plant faster, he said.
“If you go back 10-plus years ago, we lived in a world we thought had resource scarcity, oil prices are going be $100 or better, where growth in production volumes was synonymous with growth in value, a different world than we live in today.”
Even with oil up about US$15 per barrel so far this year to US$85, industry leaders at the conference have been emphasizing that they no longer see production growth as so deeply tied to value, and that each added barrel has to be weighed against returning money to shareholders.
The shift is happening as investors worry about long-term demand prospects for fossil fuels as the push to reduce carbon emissions ramps up.
However, forecasts do show that oil demand is still growing, said BMO analyst Randy Ollenberger.
“We often hear the narrative that oil demand has peaked, that it’s not growing and how that’s negative for the space. That’s not true, oil demand is actually continuing to grow, and in fact, it’s continuing to grow at a pace that’s higher than the average over the last 13 years.”
Still, with investors looking for the industry to reliably pump out cash, as much, if not more than they’re looking for growth, company leaders are eager to assure they won’t be lost in exuberance as prices rise.
Cenovus Energy Inc. CEO Jon McKenzie said his company is planning restrained and strategic growth, focused on reducing bottlenecks and finishing shelved projects.
“Growth that we’ve kicked off in 2023 is very different than the kind of growth you would have seen 10, 15 years ago. We’re not talking about greenfield expansion, we’re not talking about phased expansions.”
Smaller producers were also keen to emphasize that they were no longer growing for growth’s sake, including Whitecap Resources Inc. chief executive Grant Fagerheim.
“Managing growth in a very disciplined manner, I think that’s a mantra that has been introduced to the energy sector, and I’m proud to be part of it.”
This report by The Canadian Press was first published April 9, 2024.
Companies in this story: (TSX:SU, TSX:CVE, TSX:WCP)
