- Increase in Consumption: What has been a nice surprise over this past year is how resilient demand for oil and gas has been. Lockdowns have suppressed global draw but as the lockdowns continue to lift the demand is rebounding, and this is happening very quickly. That was a huge unknown a year ago. Most countries did not know what the “time lag” for recovery would be from these lockdowns and it turned out to be quicker than expected. The EIA reports that global oil demand is already within 5% of pre-COVID annual consumption. Further, the EIA forecasts that annual consumption will recover completely by 2022. Five plus years of under-investment in oil and gas in combination with an elastic rebound of demand post-COVID points towards a strong pricing environment as the world returns to its new normal.
- US policies making Canadian Energy advantageous: How do we react to this? This is an all-hands-on-deck approach to meeting this demand. There is no scenario where oil and gas are not part of the solution. Solar, wind, oil and gas… – it is all required. There is energy demand and always will be. In the short term, consumption is increasing. Many investors are positioning themselves for a pandemic boom. Under President Trump, we saw the rollback of the Environmental Protection Agency (EPA). The EPA is coming back in full force under the Biden Administration. President Biden is making good on his promises to act on climate change through policy. From this, we will see eyes (and money) turn to Canada for energy.
- Increase in investment in the domestic energy sector: Consolidation of companies has affected jobs in the short term, but also can be good for investors. The good news is that, at times, the assets are purchased by companies which consistently invest in these recently acquired assets. As commodity prices are stabilizing, we should see an increased investment into Canadian assets that should create jobs long term. Gone are the days of large international companies sitting on huge amounts of Canadian land and not spending on developing the assets. Now assets are in the hands of companies which are committed to spending capital in Canada. Combine this with the commercial terms on ‘take or pay’ facilities processing and expiring land that needs to be dealt with; all contributing indicators for increased activity. Time flies, LNG 2025 will be coming online with huge capacity and upside to gas producers, improving access to international markets. Being bullish, and positioning oneself for an uptick might be the right move. As a geoscientist, having the resources to pick your drilling locations and be positioned for increased activity is now.
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