For an industry that’s faced more than its share of challenges over the past decade, 2020 was especially tumultuous. But despite setbacks – some on a global scale – Canada’s natural gas and oil industry also recorded a number of achievements and advances to build upon for 2021 and beyond.
1. COVID-19 pandemic
The number one story everywhere due to its unprecedented health and economic impacts was the COVID-19 pandemic. Canada’s oil and natural gas industry also felt the pandemic’s bite.
Due to reduction in global demand for oil and natural gas in 2020, Canadian producers decreased output by some 740,000 barrels per day (b/d) and announced at least $8.7 billion in capital investment reductions. The impact on provincial gross domestic product (GDP) has been severe, especially in Newfoundland and Labrador (forecasted 7.7 per cent decline in 2020) and in Alberta (forecasted 8.4 per cent decline in 2020). In addition, an estimated 28,000 direct and 107,000 indirect jobs have been lost in the oil and natural gas sector in 2020. The downturn is estimated to cost the Canadian economy $15.2 billion annually in export revenue.
Despite many economic and other challenges during the pandemic crisis, Canadian energy companies stepped up in many ways. First and foremost, oil and natural gas companies continue to have the safety of employees and workers as the top priority, including workers offshore from Newfoundland and Labrador. The industry actively ensured access to critical products from fuel for transportation and home heating to N-95 masks. Also, Canadians generally found little disruption to the quantity and variety of groceries and other goods, thanks to transportation networks that depend on gasoline, diesel and aviation fuel.
2. Oil price collapse – and rebound
In April 2020, decreased demand due to the pandemic, plus an oil glut triggered by a price war between Russia and Saudi Arabia, combined with a lack of oil storage capacity, caused crude oil futures in both the U.S. and Canada to collapse into negative numbers. Prices have since recovered due to increasing global demand and an agreement by OPEC members to limit production.
3. Opportunities for Indigenous prosperity
In addition to contributing to Canada’s economic recovery, a strong oil and natural gas sector can help advance Indigenous reconciliation. The industry has a long-standing record of interaction with Indigenous communities, from training, employment and business opportunities to community investment and housing.
The past year saw many announcements and positive developments, including Indigenous participation in major pipeline and liquefied natural gas projects.
4. Trans Mountain Expansion Project construction underway
After overcoming a variety of legal challenges, the Trans Mountain Expansion (TMX) project moved into the construction phase in 2020. The project is critical infrastructure for Canada’s future exports, and is also supported by most First Nations along the pipeline’s route.
5. Coastal GasLink Pipeline Project overcomes challenges
Earlier in 2020, protests across Canada – even a misdirected comment from the United Nations – halted construction of the Coastal GasLInk pipeline in northern British Columbia, but many Indigenous communities in the region support the project. Upon resolution of the disputes, construction continued and the project has been safely putting people back to work, providing well-paying jobs that support families and communities across northern British Columbia.
The summer construction kicked off in July and work has been progressing steadily. About 1,700 people were employed on the construction project by the end of July, with additional hiring throughout the summer.
6. Environmental innovation – an ongoing commitment
Despite lockdowns, quarantines, travel suspensions and significant economic impacts of COVID-19, the energy industry continued to research, innovate and make technical advances in 2020. From ongoing strides to turn carbon dioxide into useful products, to testing new methane detection methods, Canada’s natural gas and oil industry continued its long tradition of proactive, innovative problem-solving.
7. Petrochemicals in the spotlight
Petrochemicals are derived from oil and natural gas — they are the building blocks of thousands of everyday products we use and depend on every day. Of particular note during COVID are items made mostly or entirely from petrochemicals, from personal protective equipment to devices that kept us connected – and entertained – during the lockdown, from smartphones, tablets and TVs to gaming devices to laptops and desktop computers that allowed many to work from home.
None of these devices would be possible without petrochemicals used in cases, circuit boards, components and screens.
8. Clean fuel standard
In late 2019, the federal government proposed a clean fuel standard (CFS), a regulatory approach to reduce Canada’s greenhouse gas (GHG) emissions by up to 30 million tonnes annually by 2030, through increased use of lower-carbon fuels, energy sources, and technologies.
The regulations will cover all fossil fuels used in Canada with separate requirements for liquid, gaseous, and solid fossil fuels. This covers a significant majority of all energy used in Canada, including gasoline for vehicles, natural gas for heating homes and coal used to generate electricity. As currently proposed the CFS will have broad implications across Canada, dramatically increasing costs throughout the economy and damaging Canada’s economic recovery without effectively addressing global climate change.
Update: In December, the federal government announced the CFS would not apply to gaseous and solid fuels in response to concerns raised by Canadians as well as the business community.
9. Canada’s green recovery
Most Canadians agree the road to recovery includes Canadian natural gas and oil. A 2020 survey by Ipsos indicates the majority of Canadians support the upstream energy industry, and understand how vital Canada’s oil and natural gas are to daily quality of life. Also in 2020, the Task Force for Real Jobs, Real Recovery was established to create a blueprint for Canada’s nation-wide post-pandemic recovery. And federal funding announced in April 2020 is helping support abandonment and reclamation of orphan wells in B.C., Alberta and Saskatchewan – putting thousands of people back to work.
While some of the largest exporters of oil paid little heed to environmental concerns even before the pandemic, Canadian producers remain committed to the industry’s environmental footprint. For example, Canada is the only top-10 oil exporting nation to have carbon pricing and a commitment to lower methane emissions by 45 per cent by 2025. And if Canadian liquefied natural gas were to displace coal in places like China and India, the world would see a significant drop in overall emissions.
10. Canada’s offshore
Canada’s offshore industry faced a number of challenges in 2020. Low oil prices and pandemic shutdowns created struggles including delays and cancellations of major projects, lost job opportunities and reduced exploration. However, the industry made strides to improve environmental and safety performance through a collaborative plan aiming to position Atlantic Canada as the safest and most environmentally responsible offshore operating region in the world.
The last word: looking beyond an unusual year
In its World Energy Outlook 2020, the International Energy Agency (IEA) noted the global pandemic has intensified uncertainties facing the oil and natural gas industry. However, the outlook suggests a rebound in energy demand to pre-COVID levels by early 2023 if COVID is brought under control in 2021.
Canada’s natural gas and oil industry is positioned to play a critical role in developing solutions and delivering results. This sector is one of Canada’s largest employers and economic growth generators, and can drive a robust, sustainable economic recovery to the benefit of the entire country while continuing to drive down emissions.
“IEA data shows the world reaching record levels of demand for natural gas and oil, and needing these sources of energy for decades to come,” says Tim McMillan, president and CEO, Canadian Association of Petroleum Producers (CAPP). “The 2020 report also projects record production in Canada’s upstream energy sector, which is an opportunity for our industry to provide responsibly produced natural gas and oil to world markets — but the industry must overcome challenges like market access and inefficient policies and regulations in order to attract investment and leverage the opportunity to be a global supplier of choice.”