I had the pleasure of introducing @cenovus CEO Jon McKenzie at the...

I had the pleasure of introducing @cenovus CEO Jon McKenzie at the Global Energy Show today, and while the media has focused on his description of Pathways as "unfinanceable", his comments were more nuanced and the whole speech was a banger. My top 🔥 quotes from his speech: /1

"The vision of a bloodless, imminent, and seamless energy transition from fossil fuels to renewables and alternative energies has been laid bare as fallacious. Only the most ardent of idealogues still pedal this vision. In reality, we are entering into a period of energy diversification, not transition. We use more wood, coal, oil, and gas today to generate energy than at any point in history. The only fuel that we have truly transitioned away from over time is whale oil.
We have come to accept what we always knew from basic economics – “There are no solutions, only tradeoffs.” – There is no free lunch." /2

"At times we have treated our energy endowment with contempt as something that we tolerate, constrict, and manage down, versus recognizing it as our largest economic lever, our biggest and most important export, and the largest driver of Canada’s quality of life.
And the result has been predictable. Investment has left Canada for other jurisdictions. The jobs that come with investment, together with the taxes and royalties, were never realized. Foreign investors and producers have left and taken with them the benefits they bring.
Yet through this, the world has not demanded one less barrel of oil, not one less Mcf [thousand cubic feet] of natural gas. The world just gets it from different jurisdictions like the United States, Russia, and the Middle East." /3

"While it is true that Canadian oil and natural gas volumes have grown over the past ten years, they grew at a fraction of their potential. We have continued to grow by debottlenecking existing projects, improving efficiencies, and brownfield expansion. We continue to lever off the investments that were made prior to 2015.
In fact, only one greenfield oil sands project has been approved and built since 2013, while capital investment in oil sands peaked in 2014.
So as Canadians, we need to ask ourselves – what did we get for this? We forewent investment, jobs, royalties, and taxes, while the world continued to consume exactly the same amount of energy... it just didn’t come from Canada." /4

"We have seen the federal government and the provincial government come together over the past number of months to sign two memorandums of understanding in an effort to negotiate a “grand bargain”.
Oil sands has actively advocated for a three “P” approach – Pathways the world’s largest carbon capture and sequestration project, a pipeline, and production.
In reading the MOUs, it is clear that our federal government wants the oil sands companies to engineer, build, and operate the Pathways carbon capture project. It is also clear they want an industrial carbon tax. The Alberta government has been clear that it covets a one million barrel per day pipeline to the West Coast. What is missing and unclear in the MOU is the commitment to regulatory reform that would allow industry to grow production to offset the costs of the carbon capture project and fill the million barrel per day pipeline to the West Coast." /4

"I have heard some proponents of the carbon tax defend it by suggesting that the world will require decarbonized oil barrels going forward. To be honest, Cenovus places over one million barrels a day across three continents, and none of our customers have ever suggested or even asked about the carbon intensity of Canadian crudes.
If customers were willing to pay for decarbonized barrels, we would certainly see these price signals and not require government interference.
The carbon tax escalates through time, making our industry less resilient at lower commodity prices, and will require the premature shut-in and reclamation of oil producing projects that would otherwise be economic to produce.
Much of this is being orchestrated in the belief that we can build a functioning carbon market. The reality is that carbon markets are a political construct and there are no examples of functioning, enduring, or investible carbon markets to draw from." /5

"The oil sands companies can build and operate [Pathways] if there is an appropriate sharing of costs between industry, the federal government, and the provincial government. The question is really, how will Canada and Canadians benefit from this project?
The reality is that this is a project with no revenue. It is simply another cost burden that will be borne by industry and the two levels of government.
The current estimate of the cost of capturing and sequestering one megatonne of CO2 is between $1.5 and $2.0 billion.
A project of this size will require the expenditure of $20 to $30 billion dollars which will show up as an incremental cost for industry and a budget deficit and debt for our governments.
And Canadians should ask – what do we get for this level of expenditure? The answer is that we will reduce global emissions by 16 megatonnes. In a world that emits over 57,000 megatonnes annually, we will reduce our global emissions by 0.02 of one percent. For $20 to $30 billion dollars of spend, we will reduce global emissions by 0.02 of one percent." /6

"To date, it has been assumed that the Canadian oil and gas producers will invest the tens of billions of dollars necessary to grow production and make the one million barrel per day pipeline to the West Coast a reality. It is assumed that the Canadian oil sands producers will bear the costs of the Pathways carbon capture project to make it a reality. The reality is that, Canadian oil and gas producers are not investing much beyond sustaining capital today. Without a competitive investment regime coordinated by the federal government and the Province of Alberta, the investment required to make this a reality will be challenged.
The benefit and prize to Canada in getting this balance right, and unlocking the first meaningful capital investment cycle in the Canadian oil sands in over a decade, is immense. This is the prize in the MOU that should get Canadians excited." /7

I for one greatly appreciated McKenzie's clarity and forthrightness. Well over a hundred billion dollars are at stake for Canada. Our ability to deliver for the many Asian allies who came to the Global Energy Show to iterate their demand for Canada oil and gas is at stake. We deserve to have a frank conversation about it. /8x