Unfortunately the decision by the Teck organization to end the Frontier oil sands project could not fail to become a political football.
 |
| https://i.cbc.ca/1.5474405.1582579247!/fileImage/httpImage/image.jpg_gen/derivatives/original_1180/fort-hills-suncor.jpg |
Perhaps we can benefit from analysis about the decision from professionals in investing, economics, climate science, and engineering. Kyle Bakx explains for CBC News what the unexpected Teck decision to pull the plug on Frontier oil sands project means for the federal government, investors, climate and Indigenous groups.
 |
| https://i.cbc.ca/1.4844680.1581444415!/fileImage/httpImage/image.jpg_gen/derivatives/original_1180/teck-frontier-infographic.jpg |
The reasons for shelving Frontier are a mix of low investor interest and environmental concerns, Teck CEO Don Lindsay said.
"Global capital markets are changing rapidly, and investors and customers are increasingly looking for jurisdictions to have a framework in place that reconciles resource development and climate change," Lindsay wrote. For environmental groups that want Canada's economy to transition away from fossil fuels, the shelving of the project was made all the more significant by the fact that the company's CEO cited the climate as one of the key reasons for the decision.The project was expected to produce about four million tonnes of greenhouse gas emissions per year over 40 years…The Liberals are on both the winning and losing sides of the Teck decision. In the loss column, another company has turfed a major project on their watch. The investment climate in Canada's energy sector was already bad; this won't help1.
Scott Gilmore writing in MacLeans comments that every major player and investor understands the days of oil are numbered. Politicians are the only ones too shameless to say it out loud. He notes the betrayal of lifer politicians who won’t tell them the truth.
Most of my friends and family back home either work in the oil patch or have jobs and businesses that directly depend on its health. So, I am especially sympathetic to the pain, worry and anger as their economy continues to sputter.
Who I am not sympathetic towards are cynical politicians like Kenney who continue to lie to Albertans in order to intentionally exacerbate this pain, worry and anger.
Kenney, Scheer, Teck, every major energy company that is not already in the oil sands, Bay Street, Wall Street, and the banking and insurance industries, all know that the days of oil are all but over. But the politicians are the only ones too frightened or too shameless to say it out loud.
There is no doubt that a concern about Canada’s regulatory process was the straw that broke the Teck camel’s back. But, in order for that to be the metaphorical last straw, the camel has to be already straining under several bales of hay.
The three heaviest bales in that load are the facts that the global price of oil is well below the point that would make the Frontier mine profitable, no one anywhere is predicting those prices will increase, and investors are fleeing the oil industry because the emerging global consensus is that if we don’t address climate change now the very existence of the human race is at stake.
That is not a claim being made by Greta Thurnberg, or a wild-eyed Extinction Rebellion activist. That comes directly from the multinational investment bank JPMorgan. In an internal report on the threat climate change poses to their investments, which was leaked last week, the bank’s economists noted, “We cannot rule out catastrophic outcomes where human life as we know it is threatened.”
Investors are not just avoiding Alberta’s oil sands, they don’t want to put money into oil anywhere, period. Furthermore, these investors, and even Teck itself, all publicly acknowledge that a carbon tax is the most effective way to combat climate change. And Kenney know this. But he not only won’t tell Albertans this difficult truth, he will spend millions of their own tax dollars on disinformation efforts to try and convince them it’s all just a conspiracy against them, that reality itself is betraying Albertans.2
Aaron Wherry, of CBC News, who has covered Parliament Hill since 2007 and has written for Maclean's, the National Post and the Globe and Mail and author of Promise & Peril, a book about Justin Trudeau's years in power writes that on its own merits, Teck Frontier probably didn't deserve to be framed as a litmus test of anything. On one hand, its economic viability was in serious doubt; on the other, its emissions weren't necessarily going to be decisive in Canada's pursuit of its international climate targets. But its loudest proponents and opponents framed it as a referendum on the future of either the oil sector or the climate.
 |
| https://i.cbc.ca/1.5445341.1582655444!/fileImage/httpImage/image.jpg_gen/derivatives/16x9_780/teck-protest-in-calgary-extinction-rebellion-and-canada-action.jpg |
Essentially, he has tried to argue for doing three things simultaneously: advancing reconciliation, buttressing the short-term situation and medium-term future of the Prairie-based oil and gas sector, and reducing Canada's emissions for the long-term.
That balancing act is very vulnerable to attack. For one thing, those goals will sometimes come into direct conflict — through Indigenous communities objecting to a pipeline, environmentalists condemning development of the oilsands or Alberta politicians condemning new environmental regulations.
On any issue, the loudest voices are the ones least likely to ever be satisfied. And Trudeau can be accused of not moving fast enough or far enough in any one direction.3
 |
| Moving on this too slowly |
Clifford Krauss reports in The New York Times that a major effort to expand development of Canada’s oil sands has collapsed shortly before a deadline for government approval, undone by investor concerns over oil’s future and the political fault lines between economic and environmental priorities.
 |
| Oil price and supply |
Kevin Birn, a vice president and oil-sands expert at the consultancy IHS Markit, estimated that for a project like Frontier to break even, the price of West Texas intermediate oil, the North American benchmark, would need to average $65 a barrel over a decade or more of operations. That is roughly $15 above the current price, and other analysts put the break-even figure at $80 to $85.
But until Sunday night, despite a regulatory review that cost it hundreds of millions of dollars, Teck Resources refused to give up. The company argued that its project, at a cost of 20.6 billion Canadian dollars ($15.5 billion), would create 7,000 construction and 2,500 operational jobs and eventually generate more than 70 billion Canadian dollars in local and national government revenue. Andrew Leach, a professor of energy economics at the University of Alberta, said some might read the project’s demise as a fatal blow to oil-sands development, but he interpreted Teck Resources’ decision as a pragmatic one.
“Teck was clear that it does not want a situation where one project has to answer for all of Canada’s climate policies and climate commitments,” he said. Moreover, he added, “global investors are not prepared to help a company the size of Teck to build a multibillion-dollar project. The global market was not prepared to be part of the political football.”
No new oil-sands mine has opened since 2018, but more than a dozen proposals are awaiting regulatory approval or investment decisions. Mr. Leach said some of those were economically and environmentally more viable than the Frontier project.
But resistance to new pipelines and high production costs have steadily reduced investments in oil-sands fields. There has been an exodus of international oil companies, including ConocoPhillips, Royal Dutch Shell and Equinor of Norway.
At the same time, there are questions about the market outlook. While world demand is roughly 100 million barrels a day, a figure that increases by 1 percent every year, the International Energy Agency projects that growth will begin to slow considerably in 2025. The agency says demand could fall to 67 million barrels a day in 2040, especially if governments increase regulation and electric cars become commonplace.
Reduced demand would focus production on places where it is cheapest, like Saudi Arabia.4
The professional analysis of this decision gives thinking people on all sides of these issues the opportunity to see some changes that may come to provide some more certainty for investment, indigenous reconciliation in the area of land use rights, government support for jobs more aligned with Canada’s international commitments to net zero emissions, and redefinition of market capitalism
 |
| Repairing capitalism for all stakeholders |
to include all stakeholders, investors, employees, and communities in their corporate responsibilities.
References
No comments:
Post a Comment