Monday, July 15, 2024

[Analyse d’Éric Desrosiers] The world is not what it used to be for Canadian oil

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Maria Gill
Maria Gill
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Canada is a less and less oil producing country. At least in the eyes of foreign investors.

In the past, things would have happened differently. Ordinarily, a global economic recovery and higher oil prices, like those we’ve seen in recent months, would have triggered a rush of investment, especially foreign investment, in the Canadian oil sector. This must be the case especially after the invasion of Ukraine and the urgent need for many countries to manage their backs for Russian oil, exported from the most famous countries.

In addition to spurring Canadian economic growth, this massive influx of foreign capital into Canada has had the effect of inflating the value of the Canadian dollar, often referred to as the “petrodollar”. This appreciation for Canadian color would, of course, be bad news for Canadian exporters, who would see the prices of their goods and services automatically become less competitive in foreign markets. But on the contrary, whatever Canadians buy from abroad will also be cheaper, something that would be very welcome in this period of accelerating inflation.

This is what happened, for example, after the crisis of the early 1990s and after the crisis of 2008-2009. But, “The Canadian economy’s reaction to higher commodity prices appears to be calmer than usual,” Bank of Canada Deputy Governor Tony Gravel said last week., at the annual conference of the Association of Quebec Economists, held in Montreal. He continued, “In fact, the oil and gas sector is hampering overall investment growth. [au Canada] Since 2015. [Et l’on] You expect the increase in the level of investment due to the recent rise in commodity prices to be less than half of what our models would normally expect based on historical relationships. »

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As for the popular Canadian petrodollar, we can’t say exactly that it’s going overextended, which was at $0.82 12 months ago, $0.79 at the start of the year, and $0.78 on Thursday. We’re far from the parity she was flirting with just before the Great Recession of 2008, and also from the $0.90 she was still flirting with in 2014.

why ?

However, the current economic and strategic context does not miss anyone, and everything indicates that investments in the oil and gas sectors will increase sharply this year in the world, according to estimates last month, Specialized research company Rystad Energy. Of the total investment of $2,100 billion, oil should again take the lion’s share this year, at $658 billion (+16%), followed by natural gas, $401 billion (+15%), and fuels. other fossil, to 396 billion (no increase). Green energies will, in some cases, benefit from larger increases, such as solar (+64%), wind (+24%) and hydrogen (+37%), but together it will account for just under a third (31%) of the total investment. .

Then ? Why are all these investors less interested than they would in a country like Canada, which has one of the world’s largest underground fossil fuel reserves?

Alberta Prime Minister Jason Kenney argued before a US Senate committee on Tuesday, before he resigned, that the situation is incomprehensible because Canada is a safer and more accessible country than Russia or Saudi Arabia. He blamed this deviation on the Canadian and US federal governments, and in particular on Joe Biden for blocking the Keystone XL pipeline project between the two countries.

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Investors disappointed

The problem with this version of the story is that it obscures the fact that foreign investors started turning their backs on Alberta oil long before the Democratic president was elected. If today most of the major foreign oil companies and a growing number of large investors are withdrawing from it, or are going to do so, it is because shareholders are asking them to improve their carbon footprint and the Alberta oil sands are private. poor in this regard.

Also, in addition to the recent surge in global demand, “investors expect demand for fossil fuels to slow in the medium and long term,” Tony Gravel noted in his speech, as the world will move forward with a green transition. The last thing they want is to pump billions into what is at risk of becoming “stranded assets”.

Thus, investors face the short-term challenge of finding new fossil energy sources capable of replacing those in Russia, and the long-term goal of reaching the zero-emissions target by 2050, he explained last week. International Energy Agency Director General Fatih Birol. The best solutions in this context are those that can be deployed and generate profits quickly, such as gas and shale projects, extending the life of existing facilities and recovering gases flared or lost during refining.

However, new oil sands and pipeline projects are quite the opposite and require a lot of money and time.

Let’s see in the video

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