7 things that could go right (or wrong) for Canada's energy sector in 2020
Pipeline protests, nuclear energy, climate policy and an enormous oilsands mine are some of the key issues
It's been another tumultuous year for Canada's oil and gas sector.
From regulatory upheaval to layoffs to pipeline bottlenecks and mandatory production cuts, there's been no shortage of news to shake up the oilpatch.
Those issues will continue during the year ahead — as will scrutiny of its environmental performance amid broader discussions about climate change.
But, as the year drew to a close, the industry also saw progress on two long-awaited pipeline projects, perhaps giving those who work in the sector a reason for some optimism.
Here is a look at some of things to watch in the oil and gas sector — as well as nuclear and renewables — in 2020.
Already about 1,000 workers are on site in Kitimat, B.C., as construction begins on the main natural gas export facility as part of the $40-billion project. So far, they are predominantly setting the stage for the next few years, such as building the massive work camp to accommodate the 7,500 people who will be employed on the project during peak construction.
For context, the LNG Canada site covers 400 hectares, which is about the size of 550 soccer fields.
Completion is still several years away, but the facility offers hope to the struggling natural gas sector.
Construction is also ramping up on the Trans Mountain Expansion oil pipeline from Edmonton to the Vancouver area. Again, the project won't be finished for a while, but the federal government-owned pipeline will be watched closely by everyone involved.
"There is still a lot of concern [by industry] that protestors could throw the project dramatically off schedule," said Warren Mabee, director of the Queen's Institute for Energy and Environmental Policy.
"How things proceed will be very interesting."
Near term, more oil export capacity is expected to be added in 2020 as companies work to eliminate existing pipeline bottlenecks and as Enbridge completes its Line 3 replacement project, which is expected within the next 12 months. Line 3 reached a milestone in December when the Canadian segment of the pipeline began commercial operation.
Federal and provincial environmental regulators are both recommending approval of a massive new oilsands mine, but whether the environment minister in Ottawa agrees is up in the air.
Teck's Frontier project is estimated to cost $20.6 billion, significantly more than any other facility in the region. It would also be the northernmost oilsands operation and cover a territory about half the size of Montreal.
Even if it receives the green light, it may not get built. Investors aren't keen these days to sink big money into an oilsands project that will take many years to produce a return.
In addition, oil prices will need to rise to between $70 and $80 US per barrel before large oilsands mines can be economically viable, said Mark Oberstoetter, a Calgary-based oil and gas analyst at Wood Mackenzie.
Some industry insiders believe that Teck may look to sell the project to an existing oilsands player in the area, if it receives federal approval.
Renewables and nuclear
Renewable energy may not dominate headlines, but more and more of these projects continue to pop up across the country. It's one of the fastest-growing sectors in the energy industry.
"It's very cheap energy, which is good news for Canadians because it can help keep our costs down," said Mabee, with Queen's University.
In the electricity market, the other development to watch in 2020 is the resurgence of interest in nuclear, particularly small modular reactors.
Ontario, Saskatchewan and New Brunswick have pledged to work together to research and build the reactors.
With a minority government in Ottawa and most of the parties in favour of increasing efforts to tackle climate change, there may be an increased level of carbon policy to come.
The federal Liberal government had already proposed a clean fuel standard — a measure aimed at reducing greenhouse gas emissions with significant economic consequences for many industries, including the oil and gas sector.
The government has delayed the policy in the past, but with the election now in the rearview mirror, the clean fuel standard may get renewed attention.
The Alberta spot price for natural gas rallied some 400 per cent this fall thanks to improved market access and expectations of very low storage volumes headed into next year.
"Even though we see gas prices strengthening through the course of 2020, I think for the Canadian operator to react to that, it's more likely to be a 2021, like a winter 2021 story, as opposed to the next quarter or so," said Ian Nieboer, director of RS Energy Group.
When Canada's oil and gas sector was heaving a few years ago, companies splashed out on workers, equipment and construction.
In 2014, capital investment by the oil and gas industry reached $81 billion. In 2019, they're expected to be around $33 billion, according to one analysis.
And in 2020? Analysts expect the oilpatch to keep a tight rein on spending.
"I would expect some fiscal restraint," said Nieboer, speaking to reporters in early December.
Still, there are some bright spots, like Canadian Natural Resources' announcement it will spend $250 million more in 2020 and Suncor Energy's $300-million investment toward a newly-sanctioned natural gas power plant.
Analysts will also be watching to see how companies use the money they do have. In 2019, a lot of cash went back to investors as dividends or share buybacks.
In its final report of 2019, the Conference Board of Canada delivered a glimmer of hope for Canada's oilpatch; the organization expects the sector to have a better ride 2020 than it experienced over the last 12 months.
A "turnaround" is in store for the oil and gas industry, although it will be modest, pointing to an expected increase in both energy exports and energy investment next year.