Saudis Make a Splash at Oil Gathering in Canada’s Energy Capital

(Bloomberg) -- Oil ministers and fossil-fuel company executives descended on Canada’s energy capital this week for the World Petroleum Congress. And even as oil prices threatened to break the $100-per-barrel mark, it was the global transition to cleaner energy that was the focus of proceedings. Here are some of the main takeaways from the event in Calgary.

Saudi Show of Strength

After missing the previous congress in Houston in 2021 as Covid scrambled countless travel plans, the Saudis were back this year, and in a big way. Energy Minister Prince Abdulaziz bin Salman was the star of the opening session on Monday. He said OPEC is targeting market stability and not higher prices, and sounded a note of caution on Chinese demand. Crude futures duly slipped back on his comments, but that only underlined the strength of Saudi influence on the oil market right now. Saudi Aramco boss Amin Nasser followed with a withering assessment of the idea of peak oil consumption.

The country’s sizable delegation was unmissable in the exhibition halls. Monday ended with a lavish roundtable dinner hosted by the Saudis and with guests including Alberta Premier Danielle Smith, investors, analysts, and officials from BP Plc and other companies.

Oil Isn’t Going Anywhere

It was hard to escape the symbolism of the congress happening at the same time as Climate Week 2,000 miles away in New York. While bankers and government officials in the Big Apple discussed measures such as curtailing lending to fossil fuel companies, and as protesters marched the streets there, back in Calgary the view on oil’s future among the 4,000-plus delegates was — not surprisingly — quite different.

Simply put, producers are planning on sticking around for a lot longer than their opponents would like. Energy executives pointed to the relentless rise in global energy demand, especially in less developed countries, and the challenges in relying entirely on renewables.

That’s not to say emissions were ignored, as much of the event was taken up with discussion of carbon capture and storage. Smith, the Alberta premier, appeared to sum up the mood. “We are transitioning away from emissions,” she said. “We are not transitioning away from oil and natural gas.”

Carbon Capture Is Happening

From Exxon Mobil Corp. and Norway’s Equinor ASA to China’s Sinopec, there was apparent unanimity in Calgary that carbon capture and storage, or CCS, is central to the industry’s future — even if the technology has had a spotty track record up till now, and plenty of questions remain over costs. 

CCS’s elevation can be explained in large part because it promises to allow production of oil and gas at or close to current levels, along with significant cuts to carbon emissions. Then there’s the 45Q tax credit and the subsequent incentives in Inflation Reduction Act in the US. The credits “kind of pumped the tires on it, so we’ve got a lot of really good momentum now, almost to the point where we are victims of our own success,” said Corwyn Bruce, project director of Edmonton CCUS, which is working on a project for an Alberta cement factory. “There’s too much work to do.”

Transition Talk Isn’t Scary

If this week’s event was anything to go by, the oil and gas industry is more comfortable than ever with the concept of the energy transition. No doubt they’re emboldened by high energy prices over the past 18 months — as Peter Tertzakian, the chief energy economist at ARC Financial Corp., said on one conference panel, in the end energy security and affordability always trump the environment.

The comfort level is also tied to the potential of CCS, which offers the prospect of the industry being able to meet emissions targets more on its own terms. And there was a clear sense that the industry feels the dialog on the transition is no longer being dominated by its opponents. The debate is more “balanced” and “mature,” in the words of Mike Sommers, the chief executive officer of the American Petroleum Institute, which represents Big Oil in Washington’s corridors of power.

..But the Transition Will Be Chaotic

That’s not to say the transition will be linear, or without drama or setbacks. There were plenty of admissions in Calgary of the uncertainties that lie ahead.

“It’s almost impossible to predict what the future of energy will look like because it’s so heavily dictated by whether the catalyst for change is, for example, a very unstable world geopolitically,” Tertzakian said.

©2023 Bloomberg L.P.