High gas prices, labor shortages in oil fields, pipeline friction: the year ahead in energy
The past two years have sent energy markets into a wild ride, with oil prices plunging underground at the start of the pandemic and soaring to over US $ 85 a barrel last fall.
Alberta drillers and service companies have spoken of the risk of labor shortages, not layoffs. More activity in Canada’s oil field is expected in the coming year.
But energy discussions these days are rooted in two worlds – today’s demands and the transition ahead – as decarbonization efforts are even more focused with climate change.
These are some of the stories to watch out for in Energy in the coming months.
High gasoline prices
Motorists saw prices at the pump skyrocket last year. that of Statistics Canada latest inflation report found that gasoline prices rose 43 percent during the year through November.
Fuel prices have jumped as demand and economic activity began to return from the pandemic lows that had boosted decline in oil production around the globe.
The benchmark North American oil price soared well above US $ 75 per barrel last week. The average retail price of gasoline in Canada has climbed to over $ 1.48 per liter, according to Natural Resources Canada.
Motorists may not have much respite for several months.
Patrick De Haan, head of petroleum analysis at GasBuddy, expects gasoline prices to start rising again in March after seasonal declines in January and February. He said prices in 2022 could exceed figures from last year.
“I expect the high prices to lead to additional production,” he said. “But we’re going to have to wait until the final rounds of 2022 to really start to see significant relief.”
A busier oil field
Oil prices are expected to recover government revenue and drilling activity, although some industry officials have recently been find all workers they need.
The Canadian Association of Energy Contractors said in November that it plans to drill 6,457 oil and gas wells this year, an increase of more than 25% from 2021.
Natural gas should also continue to make the news as the impact of higher prices spills over to all savings, leading to higher heating and energy costs for consumers.
But these energy prices have, like ATB Financial rated, has been a “much needed balm” for the Alberta economy and has helped oil and gas producers rebuild their balance sheets, thanks to some strong cash flow.
“It is certain that new life has been given to the industry, both in terms of oil exploitation and [natural] gas, ”said Morgan Kwan, a Calgary-based senior vice president on the energy intelligence and analytics team of Enverus, a global energy data analytics company.
the Omicron variant of the coronavirus adds uncertainty to the outlook, but the OPEC oil cartel recently reported that he doesn’t expect the variant to hammer demand as hard as previously feared.
Last year started with the White House interrupting the completion of the Keystone XL pipeline, with Calgary-based company TC Energy now pursuit of a $ 15 billion commercial claim.
No more cross-border disputes is probably above line 5, which transports approximately 87 million liters of crude oil and natural gas liquids per day between Superior, Wisconsin, and Sarnia, Ont., passing through northern Wisconsin and the Upper Peninsula of Michigan.
Michigan Governor Gretchen Whitmer wants to see it closed, concerned about the risk of a leak. Last fall Ottawa invoked a dispute resolution process contained in a 1977 pipeline treaty with the United States in support of its operation, citing its “importance to Canada’s economic and energy security”.
National pipelines also continue to be a source of optimism and scrutiny for the oil industry.
The Coastal GasLink project, which would transport natural gas to the coast of British Columbia for export, continued to attract protesters after high profile arrests in Wet’suwet’land last fall.
Coastal GasLink signed agreements with 20 elected band councils along the pipeline route, including in Wet’suwet’en territory, but failed to gain approval from the majority of hereditary chiefs.
Work continues on the contentious Trans Mountain pipeline expansion project from Alberta to British Columbia. The federally-owned project is expected to be online by early 2023. Operation of the existing line was temporarily halted during unprecedented flooding in British Columbia last year.
Oil companies and politicians made big promises last year on how they intend to reduce carbon emissions in the face of intensification of climate change.
Now people are waiting for the rest. Investor scrutiny – and cession – are part of a market which increasingly weighs on climate change and climate risk.
Several oil sands producers pledged last year to achieve zero net emissions by 2050.
These plans are based on the promise to carbon capture, use and storage (CCUS). They also include a big request from the government – something strongly opposed by groups such as Environmental Defense Canada.
At the federal level, the Liberal government is expected to unveil details of its plans for the Canadian Net Emissions Liability Act, which was adopted in June.
Warren Mabee, director of the Queen’s Institute for Energy and Environmental Policy in Kingston, Ont., Expects the plan to show how a country dependent on fossil fuels will start to move towards net zero.
“Many of us have been thinking about it for years, but this is the first time that we will see the government start to develop this plan,” said Mabee, who awaits the news in March.
“How much renewable energy does the government plan to integrate?” What is the role of things like carbon capture and sequestration? What is the role of hydrogen? “
Mabee said he is also monitoring developments in technology to help with the energy transition, such as geothermal power and battery storage improvements.
“These are really interesting things that could totally change the landscape,” he said.
Energy transition and disruption
International climate talks in Glasgow last fall again stressed the need for a transition to renewable energy sources, and while there has been global progress in growing renewables in 2021, experts say it’s clear such goals will require more work – and soon.
The international energy agency reported last month that renewable energy capacity additions were set to set another annual record in 2021. But he also said the current pace is not enough to put the world on track to net zero emissions from by 2050.
Adding to the discussion is the idea that even with decarbonization pledges, as one analyst said, it’s pretty clear that the world isn’t content with energy scarcity either. Thermal coal, for example, recorded record prices in some markets in October amid supply and electricity shortages.
“There’s a little energy crisis, and we’ve seen it all skyrocket,” Nick Volkmer, vice president of Enverus, said in an interview last month.
People will also be watching developments in the United States, as some of President Joe Biden’s ambitious renewable energy plans facing an uncertain political future.
“President Biden met some headwinds on its Build Back Better spending program, which included a lot of… projects related to renewable energy, incentives for electric vehicles, things like that, ”Mabee said.