Progress for me, but not for thee

Why innovation cuts both ways for oil and gas enthusiasts, plus more so-called friends doing more harm than good and some fair questions for Vivian Krause

One of the more persistent hypocrisies in Canada’s oil and gas industry is the widely-shared belief that while technology will continue to drive down its per-barrel emissions, the technologies that underpin renewable energy are as advanced as they’ll ever get. Whether it’s the batteries in our current fleet of electric vehicles or the turbines, panels, and various early-stage storage technologies for wind and solar, we’re told that this is as good as it will get — despite recent history serving as a pretty obvious example to the contrary.

Witness the recent tweet from SAF Energy’s Tan Tsubouchi, which seems to suggest that the federal government won’t be able to achieve the zero-emission vehicle future on which it’s now aligned with the US government.

First of all, here’s the title of said blog.

Okay. Well, what about that footnote? It does, indeed, point out that the fuel efficiency of battery electric vehicles falls more than a traditional gas guzzler in the cold, “largely because BEVs use extra electricity to heat the BEV’s battery and passenger cabin while ICEVs can use heat that is normally wasted.”

But wait, there’s more!

“Still, even if a BEV’s fuel economy falls by 50%, it would still have better fuel economy than comparable ICEVs.”

And remember: this is with current-generation technology. You can be sure that the next wave of BEVs that’s coming our way from a wide variety of manufacturers will do better than the ones studied here. Anyone who’s still betting the under on electric vehicles is going to look sillier by the day.

So too will anyone betting the under on wind and solar growth. That’s according to no less than the International Energy Agency, which sees nothing but upside for solar over the next 20 years — and it generating 13 times what it did in 2019. Solar skeptics will point out, yet again, that the low-cost energy it creates is intermittent in nature, the development of storage technologies continues to progress rapidly. Witness the recent announcement out of the UK from two companies developing a solid-state battery that they think can be far cheaper than existing lithium-ion ones.

How much cheaper? According to a recent report from S&P Global Platts, they think it can come in at $50/kWh (versus $120/kWh for lithium-ion technology at gigafactory scale). And if the nickel is replaced with iron, which would result in slightly decreased performance, those costs drop even further to just $35/kWh. “At present, lithium-ion technology is the dominant chemistry for battery storage systems, but the LiNa Platform has potential to disrupt incumbent lithium-ion batteries in grid storage markets, and passenger and commercial electric vehicles (EVs),” the companies said.

Buckle up.

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Much ado about nothing

In fairness to Tsubouchi, his weekly newsletter is filled with actual data and information that corresponds to what’s happening in the real world. And it stands in stark contrast to the nonsense being peddled by “Suits and Boots”, a pro-industry advocacy group founded by Calgary financier Rick Peterson, who’s now the Conservative Party of Canada’s candidate for Edmonton-Strathcona. It’s now led by Priddis restaurateur and podcaster Cory Morgan, and it’s a perfect personification of the oil and gas industry’s current mindset — as well as the many blind spots that creates.

Never mind, for the moment, the fact that its board of directors is comprised entirely of six white men, or that it can’t even be bothered to spell one of their names correctly (it’s Grafton, not “Gafton”).

What’s more noteworthy is the online conference it’s planning to hold in a couple of weeks, one that is aimed, it says, at “saving Canada’s resource sector”. The roster of panelists is an interesting one. In addition to Mr. Grafton, it features Dan McTeague, the oil and gas industry’s favourite former federal Liberal, Kamikaze UCP candidate (and Jason Kenney lookalike) Jeff Callaway, MLA and Alberta separatism enthusiast Drew Barnes, and oil and gas CEO Michael Binnion.

For their $30, attendees will get….something. There will be plenty of blaming Ottawa and Justin Trudeau, although you can get those things for free on Twitter and Facebook. Grafton will talk about the challenges his industry has faced accessing capital, which probably means ignoring or avoiding the growing pressure being applied by large institutions and their concerns about climate change. Callaway will apparently be talking about the idea of shipping crude oil through Churchill, Manitoba. Binnion will talk about how to “act to save our industries”, which will almost certainly involve donating to and supporting conservative political candidates — or, perhaps, his “Modern Miracle Network”. And Barnes will do whatever it is that Barnes does.

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None of this will help attendees actually understand the real challenges facing their industry, or equip them to better manage them going forward. But as we just saw south of the border with CPAC, there’s a healthy market out there for those who want to trade in grievance, fear-mongering, and scapegoating. One thing should be clear: with friends like these, the industry hardly needs enemies. And if it wants to be saved, it needs to start by cleaning up its own house first.


Paging Vivian Krause

Speaking of cleaning up that house, there’s the mess that’s been created by Vivian Krause and her theory that Canada’s oil and gas industry is uniquely (and disproportionately) targeted by environmental activists. The United States, we’re told, is one big free-for-all when it comes to building energy projects, while Canada remains locked down — ultimately, it’s often suggested, to the benefit of the American oil and gas industry. That theory is at the heart of the increasingly disastrous Allan Inquiry, and it’s one that clearly finds a lot of support within Jason Kenney’s UCP.

The evidence, on the other hand, doesn’t really support it. Yes, Canadian oil and gas projects have been targeted by environmentalists — but so have American ones. And that’s been an expensive lesson for Pembina Pipelines, a Canadian company that wanted to build an LNG terminal in Oregon.

It’s hardly the only major oil and gas project that’s been scuppered south of the border. Last July, Duke Energy and Dominion announced that they were canceling the US$8 billion Atlantic Coast Pipeline Project, which would have carried natural gas from West Virginia to eastern North Carolina, due to “legal uncertainties.” Thomas Farrell, the chairman of Dominion, said that “this announcement reflects the increasing legal uncertainty that overhangs large-scale energy and industrial infrastructure development in the United States. Until these issues are resolved, the ability to satisfy the country’s energy needs will be significantly challenged."

Sound familiar? It should. And it’s not just gas projects that are running into resistance. In September, one of America’s biggest pipeline companies canceled a planned 450,000 barrel per day oil project in the heart of shale country. Phillips 66, meanwhile, postponed a trio of planned projects that would have expanded its network of crude pipelines across the country.

Red Oak Pipeline, a 50/50 joint venture of Phillips 66 and Plains All American Pipeline, would be a system comprised of multiple pipeline projects to transport crude oil from Cushing, Oklahoma, and the Permian Basin in West Texas to the Texas Gulf Coast. 

Liberty Pipeline, a joint venture of Phillips 66 Partners and Bridger Pipeline, would be a $1.6 billion, 700-mile pipeline of up to 24" diameter transporting light crude oil from Guernsey, Wyoming to Cushing, Oklahoma.

ACE Pipeline would transport crude oil from the market hub in St. James Parish, Louisiana, to downstream refining destinations in Belle Chasse, Meraux, and Chalmette, Louisiana. The project is a joint venture of Phillips 66 Partners, Harvest Midstream and PBF Logistics.

These projects may well get revived as demand recovers. But as Bloomberg’s Sheela Tobben noted, they may also become casualties of the rapidly shifting expectations that global investors have for oil companies. “Even before Covid-19, tight oil production growth had been declining with investors demanding higher dividends and spending discipline.”

One wonders when Vivian Krause will start asking her “fair” questions about any of this. My bet? Never.

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