As vaccination rates rise everyday around the world and economic lockdown measures are gradually eased, leaders in the oil and gas industry aren't shy about their optimism for the rest of the year.
They are expecting a bounce back after a brutal 2020. Oil prices hit record lows last year, but are now back above where they were before the pandemic struck.
The industry can feel the recovery underway and are excited see demand pick up as economic activity rebounds. Some expect the world's demand for oil to surpass pre-COVID levels by the end of 2021.
Yet, that hopefulness is clouded by competing priorities for the sector as it picks itself off the ground and tries to position itself for a world increasingly focused on mitigating the impacts of climate change.
It's an ongoing theme at the CERAWeek by IHS Markit conference, one of the world's largest energy conferences, as industry leaders discuss the juggling act of appeasing investors, environmentalists, and customers, while trying to come up with the critical technologies they believe the world will need to have abundant energy without the heavy emissions.
The competing priorities are evident in what Calgary-based oilsands producer Suncor calls its purpose: "To provide trusted energy that enhances people's lives while caring for each other and the earth."
That's easier said than done.
Chief executive Mark Little said a company can't slash its shareholder returns to invest in cutting emissions, since the industry needs the support of investors. Suncor is allocating about 10 per cent of its capital spending on reducing its emissions and providing cleaner energy.
Little said he is trying to figure out the timing of the energy transition and when the world will be ready to rely on low-carbon sources of energy.
"We can actually create quite a challenge to the globe in not providing enough energy, driving prices up and countering this economic drive," he said, during the CERAWeek event.
"But … we don't want to be the other way and have all these excess emissions and not do the transition."
Pre-COVID, many energy companies were spending a lot of money to grow production, but now they're pulling back on that strategy.
Little doesn't seem to have the answer on the perfect strategy. That's why the Suncor CEO said he, along with many others, will be watching how the industry balances the business amidst so many often competing forces on the sector.
Pressure for profits
The forecasts for this year are remarkably better compared to 2020, when companies like BP cut 10,000 jobs and the industry accumulated debt.
"Our economists at IHS Markit keep raising their forecast for economic activity in 2021, and certainly that will be reflected in demand in the second half of the year," said Dan Yergin, IHS Markit vice chairman, during the event.
Some even predict significant growth for the sector.
"We don't think peak oil is around the corner — we see oil demand growing for the next 10 years," said John Hess, the chief executive of Hess Corp., a New York-based oil company.
"We're not investing enough to grow oil and gas in the future."
The financial outlook will be welcomed by investors, who have put increased pressure on the oilpatch in recent years to produce profits and return that money to shareholders. Previously, investors were content with companies growing operations, but the focus is now on producing cash.
"That's what you've got to deliver as a business, first and foremost," said Ryan Lance, chief executive of ConocoPhillips.
"Then you have to do it sustainably."
Lance describes how investors are demanding more of the industry. Besides profits, companies need to have a credible plan to deal with greenhouse gas emissions, or else "you don't deserve investors interested in your business."
Of course, it's not just investors concerned about carbon emissions. There's mounting pressure from governments, regulators and environmentalists who want to address climate change.
ExxonMobil, for instance, has changed its position to support a carbon tax in the U.S. and also embraced carbon capture and storage as a way to reduce emissions.
This week, the company added two new board members amidst pressure from some of its largest investors to disclose more about its carbon emissions and to publicize a long-term energy transition plan.
Like many in the industry, chief executive Darren Woods said there is a "dual challenge" in providing more energy, with less emissions. At the same time, there's pressure to innovate. That includes finding ways to reduce the cost of carbon capture and storage, hydrogen production, biofuel production, and other low carbon technologies.
Exxon says it has spent about $10 billion US on emission reductions research and will invest a further $3 billion by 2025.
One area of focus is on reducing methane emissions from its operations.
Plenty of work is needed toward developing better technologies in surveillance and mitigation of fugitive methane, he said.
"I think the industry, with time, will close [those emission leaks] down and that will be much less of a concern, going forward."
Global energy-related greenhouse gas emissions were two per cent higher in December 2020 than in the same month a year earlier, the International Energy Agency (IEA) said on Wednesday, pointing to the economic recovery and a lack of clean energy policies.
"Our numbers show we are returning to carbon-intensive business-as-usual. This year is pivotal for international climate action — and it began with high hopes — but these latest numbers are a sharp reminder of the immense challenge we face in rapidly transforming the global energy system," said IEA executive director Fatih Birol, in a statement.
Recent electricity outages in Texas and California are being held up as examples of the value of dependable energy and how much the world still relies on fossil fuels.
Some environmentalists may want the world to rapidly reduce the production of oil and gas, but those in the industry warn the energy transition can't happen too quickly.
"We need to be sure that we've got reliable grid management and reliable power supply to that grid and natural gas should play a very, very important role," said Chevron chief executive Michael Wirth.
Society's reliance on oil and gas has been evident during the pandemic. Even with government lockdown measures, travel restrictions and an increased level of people working from home, the global demand for oil and gas only dropped about nine per cent in the last year, Wirth said.
"I think it actually, in a way, demonstrates how important our industry is to the world economy," he said.
Chevron learned first hand that the sector can't move too quickly. About 15 years ago, the company built a series of hydrogen fuelling stations in California, but found little success, even with the support of the state's government.
It serves as a cautionary tale about moving at the right pace during the energy transition.
"As an industry, we can't give the market what it doesn't want," said Wirth.
About the Author
Kyle Bakx is a Calgary-based journalist with CBC's network business unit. He's covered stories across the country and internationally.
Credit belongs to : www.cbc.ca