Ottawa's pledge to boost oil and gas production this year to help ease the impact of sanctions tied to Vladimir Putin's war, closely matches growth forecasts made prior to the invasion, raising questions among industry observers about the announcement's significance.
"I don't think any of the actual production increases have anything to do with Russia and Ukraine," said Rory Johnston, managing director and market economist at Price Street, and the author of the Commodity Context newsletter. "This was all on the books well before Russia invaded Ukraine."
Citing an "energy security crisis" in Europe, Natural Resources Minister Jonathan Wilkinson pledged last month to boost Canada's oil and gas exports by the equivalent of 300,000 barrels per day (200,000 for oil, 100,000 for natural gas liquids).
"It would be incredibly irresponsible for Canada to say, 'We don't care. We're going to stick our fingers in our ears, and we're going to essentially pretend that the crisis didn't exist,'" he said during a March 24 phone conference with reporters.
The charitable way to view it is to point out that Canada was going to be a major contributor this yearRory Johnston, managing director and market economist at Price Street, and the author of the Commodity Context newsletter
Wilkinson says Ottawa is working with U.S. officials to ensure increased volumes flowing southward through existing pipelines improve the availability of oil and gas on international markets scrambling to replace Russian supply.
Johnston points to the U.S. Energy Information Administration's short-term energy outlook released in February, prior to the outbreak of Russia's war on Ukraine. The report predicts 5.85 million barrels per day of petroleum and other liquids production for Canada in 2022, a 290,000 barrels per day increase from last year.
"The charitable way to view it is to point out that Canada was going to be a major contributor this year," he said. "Canada has for months now been one of the largest incremental sources of production this year globally."
Johnston notes production in Canada was set to rise this year due to the Terra Nova oilfield project re-entering service off the coast of Newfoundland and Labrador, the Fort Hills mine ramping up production in Alberta, as well as expansion and development of other smaller projects.
'We're here to help'
Executives in Canada's energy industry say they're uniquely positioned to supply allies in Europe and play a larger role in the global market, as bans on Russia energy intensify.
Speaking at the 2022 Scotiabank CAPP Energy Symposium, Crescent Point Energy (CPG.TO)(CPG) president and CEO Craig Bryksa says Canada's massive oil reserves can address both energy security and affordability as global crude inventories sit near a five-year low.
"We see the opportunity, we're here to help," he said at a virtual press conference last Tuesday. "I'm excited to ideally put a stamp on every incremental barrel that makes its way onto the market, to have a Canadian flag stamped on that."
Tim McMillan, the outgoing president and CEO of the Canadian Association of Petroleum Producers (CAPP), echoes that sentiment, saying the current state of the energy market should be a "wake-up call" for Canada. Jeff Tonken, president and CEO of Birchcliff Energy (BIR.TO), adds that Canada should not just "sit and watch" while the industry south of the border ramps up production.
It's all politics.Eric Nutall, Ninepoint Partners
Their comments follow a report in the Wall Street Journal that U.S. President Joe Biden is seeking ways to boost oil imports from Canada without resurrecting the pipeline project he killed on his first day in office. According to CTV News, Joe Manchin, chair of the Senate Committee on Energy and Natural Resources, is set to visit two sites in Canada's energy patch this week to pressure Biden into changing his mind. Alberta Premier Jason Kenney tweeted on Friday that he welcomes Manchin's visit, and looks forward to "discussions we've been having about cooperating on North American energy security."
Bryksa says the 300,000 barrel per day figure by the end of 2022 recently put forward by the federal government reflects both time and capital constraints.
"Ideally, you expect that or hope for that to be more. But based on capital input this year, that's what we could do in a relatively short period of time," he said. "That's what we could do here in the near term, and by near term I mean three to six months. We have allies out there that need our help."
Eric Nuttall, manager of Toronto-based Ninepoint Partners' $1.6 billion energy fund, says investors want oil and gas companies to pass on extra free-cash-flow from higher commodity prices via stock buybacks and payouts, not invest in new production.
Given the correlation with production growth estimates prior to the Russia-Ukraine conflict, he questions the substance of Wilkinson's announcement last month.
"He's just reading what prior intentions already potentially were, and saying, 'Oh, we're going to step up,'" he said. "It's all politics."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.