Clean energy demands driving change in the oil & gas industry.

By Nicolette Beharie

Emerging threats to health, food production, infrastructure and livelihoods from global warming continue to make headlines across the globe. As pressure to significantly curb greenhouse gas emisssions  intensifies, oil and gas companies are at the forefront of the challenge to fuel a cleaner–yet still prosperous–economy. And the metal manufacturers that supply them are gearing up for the ride.

Jay Averill, spokesperson for the Canadian Association of Petroleum Producers (CAPP), suggests the oil and gas industry has reached a pivotal moment in history. “The world is facing a double-threat crisis today related to energy security and climate change. And the biggest challenge of this crisis is that we have to tackle the threats concurrently,” he explains, highlighting the global effects of Europe’s energy crisis in 2022. 

Andrew Botterill, national oil and gas leader at Deloitte, recognizes the difficult challenge facing the industry—especially as the world emerges from the COVID-19 pandemic and economic and travel demands increase. “We need to decarbonize, but we also need to bring cheap affordable energies to our economies,” he says. “I think the opportunity is in the balance sheets of our oil and gas companies that are going to make the big investments that are going to decarbonize our economies,” he adds. 

CAPP members are now focusing on how they can help solve this “double-threat crisis” of energy security and climate change, says Averill. “And the path to the future for Canada’s oil and gas industry is a big part of the solution.”

Earlier this year, Imperial Oil announced it will invest $720 million to build the largest renewable diesel facility in Canada. Based at Imperial’s Strathcona refinery near Edmonton, the project is expected to produce more than one billion litres of renewable diesel annually, primarily from locally sourced feedstocks like canola oil.

The renewable diesel facility will use low-carbon hydrogen produced with carbon capture and storage technology to help Canada meet low emission fuel standards, says a press release from Imperial.

“Imperial supports Canada’s vision for a lower-emission future, and we are making strategic investments to reduce greenhouse gas emissions from our own operations and to help customers in vital sectors of the economy reduce their emissions,” said Brad Corson, Imperial chairman, president and chief executive officer. “The investment at our Strathcona refinery will deliver immediate benefits to the local economy creating jobs and contributing to a lower-emission energy future for our employees, neighbours and communities.”

The oil and gas industry is a significant investor in clean technology, says Averill. “We are one of the largest spenders on environmental protection, precisely because we understand the scale of this challenge. Game-changing technologies and investments —including carbon capture utilization and storage (CCUS), solvent processes, waste-heat recovery and electrification— will enable Canada’s oil and gas producers to continue reducing emissions.”

Transforming Energy Systems

Along with other G7 nations, Canada has joined over 120 countries in committing to be net-zero emissions by 2050. “Achieving net-zero emissions means our economy either emits no greenhouse gas emissions or offsets its emissions, for example, through actions such as tree planting or employing technologies that can capture carbon before it is released into the air,” says the federal government.

“A global energy crisis requires a global perspective,” says Averill, noting that global demand for energy has returned to pre-pandemic levels and is growing. 

“It’s an exceptional opportunity for Canada to help stabilize energy security without compromising net global emissions reduction,” Averill adds. “With its relatively small population but with the third largest oil reserves on the planet—along with some of the most prolific and economic gas fields in the world—Canada has great potential to become a preferred global supplier of responsibly produced energy for decades to come.” 

But information from Shell Global suggests supplying renewable energy is only half the battle. “If the world is to shift to a net zero future, building the supply of low-carbon energy is not enough. Because the energy transition is not just about supply, it is about demand as well,” says Shell. “Customers must want low- and zero-carbon products and have the right equipment to use them.” That is why Shell is working sector by sector to identify the low- and zero-carbon products and services that their customers need. 

“Our entire economy is going to go through some growing pains in the next decade,” Botterill points out. “All of our industries are going to be pressured in different directions.”

Adapting to Change

Although the push for decarbonization has increased in recent years, Canadian metal manufacturers have dealt with uncertainty in the oil and gas industry before. 

David Hood is the director of sales and marketing at New Era Group in North York, Ont. He remembers a time when the company’s sales dropped 50 per cent—right in line with a major drop in oil prices.

“During that period, we were at the mercy of a traded commodity,” he says, noting that most of the company’s business was tied to the oil and gas sector. Since then, New Era has adapted to the volatility by performing a full market segmentation around multiple industries. This has allowed them to diversify and acquire new customers. 

Ron Feigel, who leads business development at Universe Machine in Edmonton, says the company has also made changes to its customer base. “Universe Machine has been adjusting and diversifying into other industries, including alternative energy, mining, forestry and agriculture,” he says. “It takes time to effectively and profitably diversify. In the longer-term surviving companies will have to be more diversified and stronger, which in turn should be positive for our economy.”  

In order to navigate through difficult times, Feigel says the company also focuses on remaining lean and efficient. “Universe has also taken the opportunity to invest in research and development,” he says. “We have increased the number of apprentices we train and offer more opportunities for staff to learn new skills and grow within the organization.”

Now that the oil and gas industry is moving toward green energy sources, Hood says he is seeing a demand for the new machinery required to process liquefied natural gas (LNG). In order to adapt to the changing landscape of the industry, New Era is now trying to attract new customers to stay competitive.

Botterill expects metal manufacturers will also have to explore new technologies and materials as the oil and gas industry moves towards decarbonization. “For example, if you’re going to do carbon capture, you can’t [create] pipelines and valves with the same make up because if you’re handling CO2 you need a different metal supply.”

Reliable performance will continue to be important, adds Botterill, and metal manufacturers will play a role in the infrastructure changes needed to support decarbonization.  

It is still uncertain whether the demand for renewable energy will significantly outweigh the need for fossil fuels in the near future. But Hood suggests that metal manufacturers keep an open mind. 

“Whether it be fossil fueled energy or renewable energy, the demand for energy will remain,” he says. “There’s tremendous opportunity out there to get on the bandwagon, so to speak. Although the equipment needs may vary, metal manufacturers will still play a crucial role in supplying energy producers in the future. SMT

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