Jim Stott
Special Correspondent
CALGARY, Apr. 5 -- Paying attention to the needs of all stakeholder interests is essential to successful petroleum industry operations, speakers emphasized at a Canadian Energy Research Institute (CERI) environmental conference.
Keynote speaker Susan Ruth, director of global environmental strategy for Cambridge Energy Research Associates (CERA), said the industry faces new challenges globally.
While the energy industry is entering its strongest investment cycle since the 1970s, Ruth said, the rules have changed over the past 30 years.
The CERA executive said three converging forces—strong economic growth, new energy infrastructure requirements, and increasing environmental and social concerns—are creating a dilemma for the industry. Energy companies need to invest to meet the world's energy appetite. At the same time, local communities are reluctant to grant permission for new energy projects.
Ruth said the result of this is a tension between globalization as growing economies search for new energy sources and localization, as local communities demand to be part of the decisions affecting their neighborhoods.
The speaker said that no energy sector is immune from this tension and that the ability to deal successfully with local communities has become a critical success factor in most parts of the world. Ruth said the challenge for the industry is that practices that worked in the past may no longer work with the same effectiveness. Former actions, she said, focused primarily on financial payments or financing local community projects.
"Today, she said, "project managers for energy companies need to be two parts engineer and one part diplomat."
Ruth said oil companies think in terms of maps, and there has been a major shift in the demand map. The center of that map has shifted to Asia, especially China.
The CERA executive said the industry is operating in a carbon-restrained environment, looking further afield for reserves, with many areas of the world cluttered with off-limit signs. She said Canada stands out as a politically stable environment, compared to many areas, such as Iraq and Iran.
Canada, she said, is also No. 2 in oil reserves to Saudi Arabia if oil sands reserves are taken into account.
Ruth said trust is at the core of all relationships with stakeholders, but it is difficult to achieve, cannot be bought, and must be earned.
"The industry needs to build a foundation of trust," she said.
US energy demand
George Eynon, CERI senior director of gas research, noted that the US consumes about 25% of the world supply of both crude oil and natural gas, or 20.52 million b/d of oil and 60.48 bcfd of gas. Canada, he said, supplied 16% of US gas consumption and 8% of US crude consumption.
Eynon said much US demand for oil and gas is relatively inelastic, used for the transportation and the residential-commercial sectors respectively, and those sector demands are expected to increase.
Eynon said there are wide variations in demand estimates, but many sources forecast 25 million b/d for oil and 25 tcf for gas by about 2015.
The CERI speaker said meeting that demand from Canadian and US sources alone is impossible. But developing domestic resources will be vitally important, and that will have environmental implications.
Eynon said meeting US demand of 25 tcf/year would require steady production from existing basins, a quadrupling of LNG imports, and self-sufficiency in Mexico, to which the US now exports gas.
He said there would be pressure to develop domestic resources wherever they are. Eynon also said a tight supply situation for the next decade will likely require demand side adjustments and higher prices.
Contact Jim Stott at [email protected].
