Complex, evolving and uncertain–a description of our energy industry's future?

In the ten years that PwC Canada has been inviting executives to its annual Energy Visions business forum, our oil and gas industry has faced several dramatic changes. Are more to be expected?

Once somewhat insulated from world energy markets, the Canadian industry had only two markets to supply–its own domestic demand and exports to the United States. Now, global strategies, policies and directions must be much more carefully considered as they have a significant effect on levels of investment, commodity prices and supply/demand. Continuing domestic circumstances such as increased regulatory complexity, heightened environmental advocacy and ongoing market access problems also prove challenging and must be confronted.

Whether it’s been Washington or Riyadh, or even Ottawa or Beijing, the fortunes of our industry have often been altered by external circumstances, above and beyond its control. Yet the industry has always responded through effort, innovation and resilience, contributing to GDP, manufacturing orders, and employment.

For the 2019 Energy Visions forum we tracked the influential events that have shaped our industry over the past ten years, examined lessons learned and searched for the silver bullets that might influence the next decade. Would we find ourselves in the same situation we had in the past with history repeating itself? Or have we reached the point where we need to fundamentally reimagine ourselves?

The industry estimates that by 2050 the primary energy mix will be composed by 75% fossil fuels and 25% non-fossil sources, but there are other estimates. Independent agencies, like Det Norske Veritas (DNV), suggest a 50/50 split. The International Renewable Energy Agency (IRENA) sees a 40% fossil and 60% non-fossil mix. Whichever estimate is ultimately correct, all clearly point to the fact that hydrocarbons are not going away any time soon.

A primary objective of the industry is to reconcile the need for more energy while lowering emissions. Part of this challenge will be answered by the growth of renewables and advances in technology. But provision of base load energy requirements, feedstock for petrochemicals and the continuing use by some forms of transportation will necessitate the use of hydrocarbons for several more decades.

The palette of problems that industry currently has to face is expanding: decreasing emissions; falling employment and skills availability; diminished investment; uncertain policy and regulations; convergence of energy and environment policy; more frequent geopolitical events; and rising use of technology. All these variables result in an overall lack of clarity and pathway for future progression. Complexity is now the norm in a capital intensive industry accustomed to making long-term decisions, but faced with many shorter term challenges.

“Complex, evolving and uncertain” well describes the situation our industry is facing, so far with controlled stoicism–but how can we ensure future success? That is the question we will attempt to solve at Energy Visions.

If not attending our annual Energy Visions business forum click here to register to receive our report or visit www.pwc.com/ca/energyvisions when it's released on May 27, 2019.