As the world's largest oil and gas companies shrink from climate goals, Canada's fossil fuel industry continues to seek wiggle-room on its own fast-approaching emissions target.
European supermajors BP (BP) and Shell (SHEL) are top fossil fuel players in the energy transition. But recent actions have been dubbed a "green retreat" from the forceful plans they announced a few years ago to embrace renewables and slash emissions.
In February, BP backed off a pledge to cut emissions by 2030, lowering its target from a 35-to-40 per cent reduction, to between 20 and 30 per cent. At the same time, the company deepened its investments in oil and gas.
At Shell, the company's head of renewable generation recently left his role as CEO Wael Sawan pares back green spending. Last month, Shell scrapped its plan to cut oil output by 20 per cent by 2030, opting to keep production steady until the end of the decade, as the company defends its turf as the world's largest LNG firm.
"Oil demand is a really hard thing to make a dent in," said Kevin Krausert, CEO and co-founder of Calgary-based Avatar Innovations, in an interview. "Investors are not going to be happy with oil and gas companies that are basically giving up market share to other players."
Money talks and bullsh** walks. I think that’s what you’re seeing.Canadian public policy consultant Ed Whittingham
The International Energy Agency sees annual oil demand growing marginally over the next few years, before hitting a peak in 2030.
Krausert is an oil field services executive turned venture capitalist who pairs Canadian energy transition startups with some of the biggest firms in the oil and gas sector. He says Canadian producers will struggle to meet Ottawa's industry goal of cutting emissions from operations 42 per cent below 2019 levels by 2030, before hitting net-zero by 2050.
"I think you might see some recalibration. Is it 2030? Is it 2032? Is it 2035?" he said of the interim target. "If it takes us three years to get regulatory approval to build a major [carbon capture] project, and another three years to build it, and we still don't have the fiscal structure in Canada to get some of these projects across the line, you're starting to bump up against 2030."
Kendall Dilling, president of the Pathways Alliance, warns "impractical time frames" for emissions cuts could drive investment away from the industry, reducing production in Canada, while increasing output and emissions in other countries.
The Pathways Alliance, a partnership between Canadian Natural Resources (CNQ.TO)(CNQ), Cenovus (CVE.TO)(CVE), ConocoPhillips Canada, Imperial Oil (IMO.TO)(IMO), MEG Energy (MEG.TO), and Suncor Energy (SU.TO)(SU), is calling for more government financial support for its $16.5 billion carbon capture and storage network. The project, if completed, would be among the largest in the world.
"We can reduce our emissions by 42 per cent from 2019 levels. We have set a goal of net-zero by 2050 from operations. But reaching that as early as 2030 is simply not realistic given current technology, construction and regulatory requirements," he told Yahoo Finance Canada in a statement.
Alex Pourbaix, executive chair of Cenovus' board of directors, calls Shell's shift from green energy to producing more oil a "microcosm" of trends playing out across the industry. Meanwhile, BP is "throttling back their ambition to coincide with the actual ability to decarbonize," he said.
"It's going to be way more challenging, and take a much longer time than I think a lot of people had any idea," Pourbaix said on a July 5 promotional podcast from the right-leaning Canadian news and commentary website, The Hub. "I think a lot of companies and a lot of countries are starting to realize that."
In March, Pourbaix told Yahoo Finance Canada that Ottawa's aim for a 42 per cent drop in operational oil and gas emissions by 2030 is "not feasible by any stretch."
Canadian public policy consultant Ed Whittingham says oil and gas executives are stuck between a rock and a hard place, responding to continued demand for fossil fuels, as well as calls to pivot away from their profitable core business.
"I have a lot of sympathy for these oil and gas CEOs. Investors speak out of both sides of their mouths, saying we want good ESG performance and net-zero, but we want those high returns," he told Yahoo Finance Canada.
"Some of the adjustments you're seeing, especially with the European oil and gas supermajors, are because they made bold statements and promises around diversification from oil and gas, and getting into renewables. They're discovering that's really hard, and they're trying to walk some of that back. But we haven't seen that to the same degree with the Canadian players," Whittingham added.
"Money talks and bullsh** walks. I think that's what you're seeing."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.