Pandell Leadership Series

Navigating Net Zero for the Energy Sector

How to Map Strategies & Adjust to the Realities of Energy Transition

Video Summary

In the growing climate change movement, “net zero” has become the new buzz-phrase. Net zero and carbon neutral commitments are on the rise in 2021, with companies, financial institutions, and countries affirming their alignment to global climate goals of reaching net zero emissions by 2050.

In this webinar Bill, Managing Director of Strategy and Sustainability for geoLOGIC, will discuss how these net-zero ambitions present mission critical considerations for the energy sector.


About The Pandell Leadership Series

The Pandell Leadership Series is a collection of free webinars featuring presentations by energy industry experts in a variety of specialized fields. Topics range from global business issues to recommended best practices in oil and gas; pipelines; mining; utilities; and the renewable energy industry (including wind, solar, hydrogen, geothermal, marine & hydrokinetic, nuclear and biomass power).

Please Note: Views and opinions expressed by the PLS presenter(s) do not necessarily represent the views of Pandell and its representatives.



Full Transcript

ELIZA WITH PANDELLOkay, welcome everybody. Thank you for joining us today. My name is Eliza, I’m the Customer Engagement Specialist here at Pandell. I’m pleased to welcome you to this Leadership series webinar called “Navigating net zero for the energy sector.”

We are delighted to have Bill Whitelaw as our speaker. Bill is the Managing Director of Strategy and Business Development for geoLOGIC and JWN Energy. He serves with a variety of industry organizations, including the Canadian Society for Unconventional Resources and the Energy Futures Lab.

We are delighted to have him present for us today, so without further ado I’ll introduce Bill Whitelaw and hand the stage over to you Bill.

BILL Thank you very much Eliza. And welcome to everybody who’s taken time out of what is undoubtedly a beautiful summer’s day. Here in Calgary, we have the Stampede going on and it’s hard to compete with the Stampede even at a reduced level. So, I promise to be brief, and I hope succinct. And I hope I leave you with some insights that perhaps that you’ve have had thought yourself before but taken together, come together in sort of a body of knowledge.

So, you know the framework here is navigating net zero. I mean it’s a terminology that has crept into our lexicon and we use it in daily discussions in the energy space. And it really is, I think probably symbolically the most important three words in navigating the realities of energy systems change that we’re in front of right now. In front of you today is the service providers perspective on how to watch the sector and how to continue to thrive and succeed as the sector goes through some of the most important contortions it will go through in the next ten years on the pathway to 2030 and beyond that to 2050.

So, the agenda today is quickly this, it is that service providers perspective, and we have a wonderful blend in our audience today of service providers and operating companies, and so both sides will resonate with my message somewhat differently. But perhaps there are some good take-aways because I think that the successful pathway to net zero in many respects is true partnership between service providers and operating companies and I’ll come to more of that in a second.

So, the net zero context at least in our company is just simply a mechanism. It’s a way to understand what’s going on in the leadership conversations that our customers are having. What is top of mind for them in terms of, as they figure out very complex and, in many cases, bewildering future. And really how we as service providers can really sort of step up to the plate and be part of their solution making.

And the other thing about the net zero context it’s really if you understand the forces that are changing our energy landscape then you can capitalize on them as businesses in terms of understanding how the whole system itself is contorting and convulsing but ideally in a way that progresses us forward.

I’ll speak to two pieces of our own research that really help you understand as service provider’s a couple of key drivers and how you can participate in that in terms of what’s happening to free cashflow and especially in the digital transformation space. I know that’s a big empty terminology sometimes when we talk about digital transformation but there is some very fascinating things going on in terms of the digital world and the data world combined.

And then I’ll close with some thoughts on the World Petroleum Congress [WPC] that’s happening in Houston in December and in 2023 in Calgary. Just also as ways of thinking through is how do you have your own conversations in your own company with your sales teams, with your own management teams around watching where the drill bit is going to be in terms of both the near term and the longer-term futures?

So, just a little about us for context, geoLOGIC Systems and JWN Energy we’re a full spectrum energy solutions and insights company. As you can see from the slide, we operate in five countries with about 170 staff. We’re based in Calgary, and we are a dominate force in West Canadian Sedimentary Basin [WCSB] in terms of our subsurface solutions like geoSCOUT.

And we recently acquired a company in Houston SSIO [SubsurfaceIO], which allows us to introduce our whole cloud product offering. And we have media channels like the Daily Oil Bulletin [DOB] plus our Global Group, Evaluate Energy through which we cover about 700 companies across the world in a nauseating level of detail in terms of their operating and finance insights.

Now all companies say this about themselves but I’m very proud that we do have a deep and diverse talent bench. And again, one of our key advantages when we go up against competitors is we do have two media channels that allow us to distribute our own content and also to engage with a much broader industry audience than perhaps some of the other energy intelligence companies. And that’s the shameless of self-promotion.

Every day we come to work in the energy sector, and we’re barraged by the headlines in our own press, in the industry press, the mainstream press, and even in the alternative press. And these are just, I won’t read them, but you’ll see them. They’re showing up and the question is how do we make sense of them as service providers? How do we think through what the decarbonization movement means to us and our customers businesses? How do we think through in the Canadian context when our Liberal government says that carbon will ultimately bare a price of $170 a metric ton? What does this mean to the way that we think about our business and the way we change our business and adapt as the entire energy ecosystems adapts around this.

We will see massive amounts of money being pouring into the clean tech space. We have wonderful organizations in Canada like Foresight, which is a great clean tech shop that does a wonderful amount of work helping energy companies define their clean technologies strategies.

At the other end of it, we’re also as an industry, in both the US and in Canada, burdened by our asset retirement obligations. In Alberta here for example, the Alberta Energy Regulator [AER] is very close to announcing a prescribed annual spend by operating companies on asset retirement. Getting at those wells that have been sitting in limbo for many years. Well, what does that mean to our business as cash is directed there?

Real opportunities in the indigenous partnerships and reconciliation space. In Canada, at least there’s phenomenal things happening in terms of companies partnering with First Nations communities and other indigenous communities. That should be an important part of any service providers strategy.

But we’re also, as the energy system transitions, we’re also barraged by contradictory reports and perspectives. And so, the International Energy Agency [IEA] recently released a report about net zero or the pathways to net zero 2050 that seemed to contradict other reports that it put out in terms of rising demand for hydrocarbon products. And so, how do you make sense of that as a service provider specifically in the definition of your own business?

A day doesn’t go by where we are barraged by ESG [Environmental, Social, and Governance] and sustainability issues. And the pandemic did one thing, it allowed the ESG era to come into the vacuum of everybody working from home. This is an important consideration as a service provider do you have an ESG framework that aligns in some fashion with your customers frameworks?

And there’s a ton going on in the innovation and ecosystems space where new shops are popping up all the time and how do you watch those from a potential acquisition perspective or a potential competitive threat to you?

And then lastly, you’ll see in headlines, again this is very much a Canadian thing right at the moment but a lot of the same thing going on in the US, is new names are becoming more relevant in terms of the way the industry has conversations with itself and with all of its member companies and other stakeholders. So, CRIN the Clean Resources Innovation Network, the Energy Futures Lab, and the Oilsands Pathway initiative, which was the initiative by five operating companies in Canada’s oilsands industry to collaboratively define a pathway to net zero. And so, in all of this, it’s complex, it’s bewildering, it’s confusing, it’s puzzling but it’s rife with opportunities for the right service provider if they’re able to pivot their businesses effectively within that.

So, in terms of where we sit right now, most of you will realize this, just because you go to work in it every day, in the North American context, we’re enjoying price recovery and newfound stability but it’s a different landscape. And people ask me all the time well when we recovery what’s it going to be like? And I said, it won’t be like any other recovery it’ll be more a period of stability as the industry goes through its own reflections on how it’s going to evolve.

So, gone are the halcyon days of the ebbs and flows, and everybody getting crazy around how they’re spending and that sort of thing. And one clear indication of that is what the pressures are on the companies free cashflow and I’ll speak to that in just a moment. But we also see our industry is getting stronger yet as it gets stronger it gets smaller. And so, you’re going to continue to see M&A [mergers and acquisition] as a dominant theme as companies continue to consolidate both on the operating side and the E&P [exploration and production] side. A lot of this is driven by a push for optimal efficiency. And in many regards, I would say it’s a ruthless optimal efficiency because these companies are getting bigger and they’re getting stronger but they’re looking for new ways of doing the way they do their business and they’re expecting their service providers to step into that.

So, in Canada you know you watch Tourmaline, Mike Rose’s company on the acquisition path have done some phenomenal deals to become the largest gas producer in Canada. Cenovus’ recent takeover of Husky makes a stronger more vital company, but it also redefines a lot of us in the service provider’s space. A fellow that we’ve talked to five years or ten years is gone and you know there’s a relationship reset. As service providers that we sort of have to figure out new ways of figuring out who do we talk to in these companies now as a way of getting our business done.

We’re also seeing virtually every day a flurry of net zero announcements especially the large international companies are making hay of that as their way of talking to their investment community. And all over the world, you know we see this in our Evaluate Energy practice, companies are making investments in different forms of energy.

Politically, the Biden and Trudeau administrations they create both certainty and uncertainty for investors and that sort of thing but remember the glorious days a lot of this started with Larry Fink’s letter which he laid out BlackRock’s future. And that should be really an important signal to us in the service providers space is the times they are a changing and lots of money to be made, and lots of hay to be made as long as we change with them.

And of course, at COP26 in Glasgow is only mere months away. All service providers should have a very keen interest in the conversations that go on at COP [Conference of the Parties] in order to figure out because you’ll get many clues out of that in terms of where your business is going to be in the next one to five, and even beyond those ten years.

So, that’s the North American context. Again, you all recognize it from a different perspective because you come to work in it every day but it’s when you step back, and you realize the range of forces and the complexity of those forces it really requires service providers to put their thinking caps on and do a lot of soul searching and redefine their businesses as our operating customers are redefining theirs.

And through a lot of our technology and our software we’re getting different types of questions all the time, is can you do this? Can you change geoSCOUT to do that? And it’s really a signal that these operating companies are thinking about efficiency, efficiency, and efficiency as they’re still trying to stabilize their balance sheets and grow the businesses.

So, one of the keyways, and many of you as service providers will do this already, is monitoring how companies are spending their cash? And what we saw starting last fall in the analysis that we did was companies were starting to enjoy a bit of strength and starting to generate a lot of free cashflow. We do quarterly assessments, and from our Q1 assessment we looked at 86 North American companies. As commodity prices stabilized and people said, well we sense that its stability, recovery is here we can start being more strategic about how we think about what we are going to do with the cash that we are going to generate as commodity prices seem stable and as we move forward.

So, what was interesting for us is figuring out among these 86 companies is, there was $9.3 billion of free cash generated. Compared to only, in the same quarter in 2020, $700 million. The key is these companies have a lot of cash on hand but they’re being very, very strategic with how they spend it. And so, what we look at and we try to analyze is where’s that money going? Is it going to CapEx [capital expenditure]? Is it debt dynamics that they’re looking at, are they doing share buybacks, or are they planning on acquisitions, or are they finally rewarding shareholders for patience?

And it was interesting, the US oil group among that 86 companies, they generated the highest free cashflow. And there’s much, we normally see in more normal times better balance between operating cashflow and CapEx but we saw this really significant growth in the free cashflow generations. Our oilsands producers in Alberta did very well as well. And when times are good, we tend to be because of the discipline they operate with they tend to generate good free cash. It’s important to watch this and where it’s going because you can monitor the pathways that the cash is flowing to and figure out where you’re going to play in that especially on the CapEx side.

Gas producers, both in the US and Canada, did quite well with the free cashflow this quarter. And we expect to see that continuing in Q2, but more importantly we’re watching where it’s going. And so, companies are paying down debt. Paying down debt so this quarter we saw 39% of that $9.3 billion went to debt repayments compared to just 6% in Q1 in 2020. So, that’s an important consideration for service providers, the more a company gets a handle on its debt the more likely it’s going to be growing and utilizing your services, so watch that.

[free cash flows over three years chart] Here’s just a historical graph that shows back from Q1 2018 the relationship between free cashflow and how it was spent from cash operations and CapEx property and acquisitions. And so, you can see that relationship. For anybody who wants the deeper report I’ll have my email address at the end and I’m more than happy to send you the analysis. And you can take it up with your management teams and start to have conversations around the importance of monitoring this in terms of your own balance sheets and your own revenues.

[how that cash is being used chart] And so, just again here’s another lens to look at it through. Again, those five things that we look at, CapEx, and acquisitions, net share repurchases, debt repayments, and dividend repayments. So, if you can see the change in the relationship between the purple bars on debt repayment you can see in Q1 2021 that 39% dominated what the companies were doing in addition to CapEx and the acquisitions. So, monitoring these relationships on a quarterly basis gives you real clues as a service provider to figure out how your companies inside the data set, that you would get where we looked at this, you’ll see specifically the companies that you’re working for and that we track and monitor. Many of those things would be familiar to you.

So, watching cashflow and free cashflow, and watching CapEx is really, really important in figuring out where you’re going to position your business as a service provider in terms of it.

So, when we take this analysis and we measure it, we watch very closely the way operating companies are changing their relationships to their own data sets and how they’re deploying data as part of the digital transformation strategy.

A piece of fairly significant research earlier this year in terms of what we could see as sort of demonstrable changes in how companies are thinking through about the importance of data. It’s a bit crazy to say you know data is the new oil in that sense but for many companies it truly is because they realize that the better and more efficient use of right data, from the right sources really help reach that optimal efficiency dynamic. And so, we’ve always been a data driven industry so there’s both new news and old news in this study. And again, I’m more than happy to send it to you but the key is to watch the trends over time. And that is the idea of saying well this operating company is actually pulling this kind of data, in this kind of way, their using this kind of analysis and they’re being better in the subsurface. Those are the companies that we would like to work for. And you know, let’s get inside that digital transformation.

So, in that recent study and this 45% of respondents, and these are about service providers and operators, rank operational efficiency as the most important. And that’s up ten points from two years ago when we last did this study. So, that’s up ten whole points and you can sort of see that they’re thinking about data in a different way and realizing that for all the data that we sit on we’re still not as efficient as we could be with this. And for service providers that are in that technology space this represents real opportunity to help operating companies get a handle on how they’re deploying the data and how they’re using to it to make the right decision.

For a lot of service companies, data is the driver of their business development strategies. Figuring out where that drill bits going to be. Who’s going to be turning it is going to be critically important? We found also competitive analysis; companies are paying a lot more attention than they were two years ago to what their competitors are doing. And this speaks to the dynamic around how they’re thinking around their relationship with their investor community and other stakeholder communities.

But they’re also using competitive analysis in very important way and that’s about the ESG dynamic and I’ll talk about that. Companies are using data driven ESG strategies as a way of trying to separate themselves from the rest of the pack in terms of Environmental, Social, and Governance performance [ESG].

And then lastly, this one didn’t change much but 25 points go to ranking project planning and R&D [research and development] as the main driver of data research. And you can kind of see here just by sector, the E&P sector, the oilfield services. And then we break the oilfield services down into the development side and production focused. And you can kind of see where the data is taking you in terms of how their using it.

Again, among many other graphs will be in the document that you’ll also receive, but this is the really important sort of inflection point. In the last few years, we’re seeing more and more E&P’s incorporating third party data and co-mingling it with their own data set into workflows. And so, that’s a fascinating change where it’s not dumping stuff into access or an excel word sheet, they’re looking at technologies and tools that will allow them to marry third party data, whether it’s from regulatory data; third party providers like ourselves; and other great providers and their combing like I said with their own data into new workflows that are achieving those efficiencies.

And what’s important there is we also track and as close as we can figure is most operating companies are operating between 75 and 80% of their former workforce size. And so, the need for new tools and new technologies from the workflow perspective is incredibly important so you don’t burn out the people who remain.

But it’s not a perfect world. In the report we looked at sort of lightness to the heaviness of data usage. And what we found was the heavy data users, on who’s backs a lot of this falls from a burden perspective, they’re finding real challenges of finding right technology, and the right processes, and the right providers to say we can create a one single source of truth and workflow for you in terms of getting all the right data into the right places, for the right decision making. So, a real opportunity there in the tech space for a lot of service providers. And you know one in six continue to say their data and tools are mostly in silos and really hard to access and get dancing together.

So, lots of progress being made but lots of progress still to be made. And again, for those of you on the call who are in that technology provision cloud-based space lots of opportunity to get inside and help make these companies more efficient.

As we sort of move to the end, coming back to the net zero context, if you’re a service provider here are some of the realities that we’re facing. And in that reality, I mean it to sound not so harsh but how to figure out how to make your opportunities within the realities of an energy systems transition context.

We do a lot of research in around are purse strings going to loosen to a degree even though capital spending may be increasing. But service providers, and most of you on the call will know this that pricing pressures will continue. They may loosen a bit but the pricing pressures that we’ve experienced the last few years, if you take them as a given and figure out how to operate within that context, you’re more likely to win that work than others who go expecting a lot more cash simply because companies have a lot more cash on hand. That doesn’t mean you can’t ask for more but that means you have to be very, very diligent in how you do ask.

And that’s a bit challenging and a bit confusing because of course the operating companies are also continuing to shift onto service providers this responsibility for research and innovation. And that’s always been a part of our industry and it goes in cycles and service tech really is in many cases the brains behind a lot of the great efficiencies that companies come up with. And so, you have this contradictory dynamic of saying don’t ask us for more, but we want more from you. Service providers have to learn to navigate within that reality.

One of the things that we find with our oilfield services clients is we push them in different directions to monitor these new voices and the way legacy voices are shifting and I’ll give you two examples. In the Canadian context, there’s a great organization called the Energy Futures Lab. And the Energy Futures Lab is really based on the mandate of figuring out what they call future fit hydrocarbons. And some phenomenal work going on among the 75 fellows that form the backbone of the lab working with the staff. But if you look at the work, they are doing in the lithium space, in the hydrogen space, in the geothermal space you can uncover all kinds of great nuggets for future business opportunities. Organizations like the Energy Futures Lab, like the Clean Resource Innovation Network [CRIN] these are all…they are very, very important for service providers to watch even engage with because they’re really going ahead of the curve and figuring out where the next big opportunities are going to be.

But also, at the same time we’re seeing the shift in the legacy voices as the industry organizations adapt to the new reality. And those of you in the Canadian context will remember the recent great announcement by the Canadian Association of Oilwell Drilling Contractors [CAODC] now called Canadian Association of Energy Contractors [CAOEC] that’s a deliberate strategy undertaken by the board on behalf of the members to remain in sync with the way the industry changes are unfolding out in particular in that net zero context.

I think that service companies that are figuring out their own energy transitions strategies are the ones that are also winning business. You can see on the global service providers like the Schlumbergers, and the Halliburtons, the Bakers of the world doing some phenomenal stuff in what you would call energy transitions technology. And so, to the degree as the smaller service provider you watch what they’re doing, what they’re investing in and how they’re engaging with the sector on this.

Every company of any size can have their own energy transition strategy. It’s really what are your inputs into that strategic discussion that you’re going to have. And again, the net zero framework is a useful framework for you and your leadership teams and staff members to sort of figure out how do we play in this net zero space?

Again, the other thing I would pin to that is having your own digital transition plan. Most of you already have this. And again, the key is how often do you update it, how often to you keep it sharpened so that you’re matching your digital and data driven thinking with what your operating customers are doing. And that’s not an easy task. It requires a lot of investment from the sales folks, and from the BD [business development] folks, and from even your leadership team to engage with the C-suite of…we’re finding that the c-suite of operating companies are open to conversations like they’ve never been before simply because they realize the importance of the service provider in achieving their ultimate corporate goals.

And again, this leads me to be able to say, you should really think through how you would develop your own ESG framework. And one that aligns very nicely with how your customers are thinking about their own ESG strategies. So, if you don’t have somebody on your staff who’s downloading every sustainability report, or every news announcement that your customers are making then that’s something you should contemplate doing right away. To say okay this is what Cenovus is saying about its emissions strategy. And that’s different from what Suncor is saying, to use two Canadian examples, about its emissions strategy. How do you figure out how that’s going to impact on your business and how your own ESG thinking can adapt to that?

I’ll give you an example of a great Canadian service company CDN Controls out of Grande Prairie and Calgary, had just released its own ESG sustainability report a couple of months back. Phenomenal piece of work in terms of declaring what they are all about as a customer. And you better believe that, that kind of report and the publicity that’s generated around that, gets the attention of the people who are buying their services as well. At a certain point you’re going to be asked as part of this bid process, send us along what you have as a sustainability document. That’s already happening in many cases. When we audit our own field services clients they say, yep, a conversation doesn’t go by without it at least being mentioned.

So, no harm in developing your own strategy. It’s an iterative process. The first report does not have to be perfect it should show intent. And to understand these things and it should lay the foundation for the way you think about things because it’ll become almost, I guarantee it within a year or two, pretty much a requirement to do business.

So, again as a service provider there’s lots of regulatory and policy shifts and they’re really focusing on what I call AWL or the air, water, land dynamic. As I mentioned earlier, the Alberta Energy Regulator [AER] it’s new liability spending framework will compel companies to spend somewhere between four and five percent of their annual revenues on their asset retirement obligations. So, if you’re in that abandonment space and decommissioning space this is phenomenally good news in terms of being able to position yourself to get that business with these companies in an Alberta context. I have no doubt other regulators will follow suit in that space.

So, again the point as a service provider having somebody on your staff who’s monitoring these things and then pulling that information back into the organization. And a ton of this stuff is driven by that net zero framework.

Again, I mentioned earlier, COP26 [Conference of the Parties] is on the horizon. If you haven’t started this kind of thinking as a service provider this may be a good enough place…start having monitoring the news coverage, and the dialogue, and the opinions, and all the Op-ed [opinions and editorials] pieces that will come out. COP runs from October 31 to November 12, 2021. Have somebody on your staff just simply gather as much information that’s COP related, pre-COP, during COP, and post COP. Then ask yourself as a question to your business how does all this stuff affect our business? In the near term and then five years from now, and 2030 from now? And ask those questions. I guarantee you inside of all that will be all kinds of ways and means of thinking about how you might reposition, pivot, make acquisitions, or change your business models to adapt to these new realities. Again, this can all be incorporated into your own net zero strategy.

At geoLOGIC and JWN we’re sort of halfway through that process of saying if we want to continue to do the business that we do we’ve got to move in lock step with our customers and to the degree that our net zero strategy has to pare with their net zero strategy and still drive our business forward. We’re finding it a very useful framework to talk at all levels within our organization. On how to think through…and net zero is a great framework because when your staff members go home, they’re also barraged by net zero conversations on the evening news, in the newspapers that they read, and what their neighbors are talking about. All pathways lead to this net zero slash climate conversation.

The only other thing that I would say is following close behind it, and I don’t know what the name of it will be, is watch water carefully. Watch water carefully and if you’re remotely related as a service provider to the water business, once the emissions is cracked the water conversation will closely follow it from a sustainability, and this comes back to the air, water, land perspective. So, it’s not all just about emissions and net zero it’s all about total stewardship of the way we do business.

Again these are probably things that are happening in your organization but again if you are looking for an organizational framework to be able to sort of put them into a box that all staff, at all levels, that your shareholders, that your own stakeholders can also understand and say oh okay the net zero framework is a very, very useful organizing taxonomy to figure out how we are going to drive our business.

So, lastly again on what you watch and how you watch it, and how you would report back into the organization. You’re all familiar with the World Petroleum Council [WPC], great organization. Every three years it organizes a massive gathering of World Petroleum Congress. We’re so honored in the North American context to be hosting back-to-back congresses in Houston in December of this year and in Calgary in 2023.

These are important because if you have a way of monitoring conversations and a way of taking the temperature of the nuances of what people are saying, and if you can get people to these things, they’re great inputs back to your own net zero plan. So, in Houston the theme is Innovative Energy Solutions. And you can see the numbers there it’s a big gathering. The organizers in Houston have done a phenomenal job working in a pandemic context they’re going to bring off a very, very good show. And then unbelievable business development and competitive intelligence insights can be garnered from just watching. Better to be there, but if you just watch it from a distance, lots of great media coverage on it and this one will have a blend of both online events and in-person events.

If you’re a Canadian stakeholder the key is Canada will have a massive pavilion in Houston and they’ll really be promoting what’s going to happen in 2023 when the World Petroleum Council Canadian arm, as I said have a major presence in Houston. But what’s really important is the World Petroleum Congress and the theme that you can see there, Energy Transitions: The Path to Net Zero.

I have no insider knowledge of this, but I can imagine that would have been a very, very good sales presentation to the World Petroleum Congress to get that as the legitimate theme. I suspect the WPC Canada folks put on a very compelling bid and they won with that theme on that. So, again an important indicator of where the world is going and as service providers the rules that we play in that. There will be between Houston 2021 and Calgary 2023 lots of WPC narratives and dialogues. And again, very important that you sort of figure out a way of building those into your business as you define your own net zero framework and strategy.

So, with that I’m happy to take questions and we’ll go from there.

ELIZA WITH PANDELL Great. Thank you, Bill. We do have one question from the audience. Suncor CEO Mark Little has said that to reach net zero by 2050 would cost about $60 billion and a large portion of the money would have to come from the government as it has been done in Norway. What are your thoughts on this?

BILL It’s an excellent question and you’ll notice in that interview where Mark Little made that point it was a co-interview with Alex Pourbaix, who’s CEO of Cenovus. So, what you’re seeing in the oil sands space is, again how shall I say it, a new generation of collaboration between the operators. They’ve always been very good at collaborating. They’ve got it to a strategic level. As I said, one of the important things to watch if you could, Oil Sands Pathways to Net Zero, the new website of the five operating companies that have joined including Cenovus and Suncor. You’ll see that they’ve laid out a very clear path to what 2050 scenario might look like. And these interviews with Mark Little, and Alex, and Derek Evans, and the other players that are involved in that are really all about filling in the space behind that declaration. And by that what I mean is that they need government onboard.

They need government onboard through organizations, to use a couple of Alberta examples, Alberta Innovates, Emissions Reduction Alberta, and all those agencies that the government has set up to be a part of that process because Mark Little is absolutely right. You got to remember in a Canadian context, that we all own as Canadians, we all own those mineral rights in the interest of the Crown. And this is what I think the sub-text of what Mark Little is getting at, the mineral rights owners have a role to play through government participation in these conversations because at the end of the day what the government needs and what Suncor needs in this instance is a healthy economy propelling things forward. So, the government…all Mark Little is doing there is signaling what the government already knows and is already aware of how it’s participating in those kinds of conversations.

I’ll give one great example, for service providers again to watch is Alberta Innovates has this phenomenal research program called Bitumen Beyond Combustion. And if you sort of watch what they are doing in that research initiative it’s all about the carbon materials world. You’ll start to see Mark Little, and Alex, and Derek Evans, and these other folks they’ll start to reference these programs because there’s this kind of neat interrelationship between the way the companies operate, and the companies operate with the government partnerships.

The Clean Resource Innovation Network of which Suncor, and Cenovus, and lots of other companies are involved in is largely a federally funded initiative out of the federal government’s strategic innovation fund. And it’s a way that the government has found appropriate to support the way the industry evolves in the energy transition space through further and further adoption of new next generation clean technologies.

So, government is a big partner in this process. All Mark’s doing is signaling to the public and stakeholders is that the government will be a partner in that. A long-winded answer to a short question but a great question.

ELIZA WITH PANDELL Thank you and this person asks if you have a preference between Prime Minister Trudeau’s carbon tax and Erin O’Toole’s carbon savings account in terms of which will help us get to net zero earlier?

BILL If I had the answer to that I’d be putting it in bottles and selling it and retiring in two days. It’s very hard for any business to sort of unpack or tease out from the politics of carbon which is the most appropriate methodology that will help us reach our goals.

I talk to people every day, economists who are in big favor of cap-and-trade systems, and the next economist is saying no, absolute reductions are the only way to go because you just get into the mugs game into fooling yourself into buying someone else’s efficiency.

I don’t really have an answer to that question other than that you have to figure it out for your own business what are the forces in impinging upon the carbon conversation that have a, how shall I say it, the best you can figure it have the most direct impact on your company in terms of the implications for it? And it’s going to be a crazy, messy, set of conversations over the next few years on this. And the more you can sort of set yourself up to be insulated from the politics of carbon and be able to tease out what the practicalities of carbon are. Now if governments change, that’s a pivot that you have to make as company to say what did they preserve from the old government, and what did they rebrand and renew?

I’ll give you an example, in Alberta the reigning conservative government saw some sense in what the NDP government set up in the climate change emissions management corporation they just rebranded it as Energy Reduction Alberta and left it largely intact. A bit of change to the funding mechanism and that sort of thing but fundamentally it’s the same set of processes by which we penalize the emitters and then take the penalty money and put it back into research and innovation. Those are the more practical things to watch in terms of what’s really happening in the real emissions reduction space I sense rather than what really is a part of a party’s platform right now because most economist and most scientists will tell you a lot of that is built on vapor ware to begin with.

ELIZA WITH PANDELL Okay, great thanks Bill it’s a great answer. How far behind are the US companies compared to Canadians in terms to their approach to net zero?

BILL That’s a loaded question and I would say the best way is, you have leaders of the pack in both countries, and you have laggards in the pack in both countries. And again, I wouldn’t say that Canada is particularly any distance ahead of the US. I would say that the leading companies in both Canada and the US are doing very, very well in terms of, how shall I say it, in that sustainability net zero-foot race. So, we’ve got best of breed companies in both places, but we have laggards of the pack as well.

You know that’s a really good question because the other thing to reflect on is, what are the bigger operator companies going to do in order to…because you can’t have a fragmented approach within the sector of someone really performing well and someone really performing poorly, society expects the whole industry to pull together.

So, you’re going to start to see lots of pressure from the bigger operators on the smaller operators to pick up the pace of their own sustainability thinking and strategy. We already see that happening and the true leaders of the group are doing it through collaboration and not shaming. And so, that’s an important thing to watch across your whole customer base is, oh all of a sudden are these companies that are getting with it, with the act on it simply because the bigger companies are putting the pressure on them to perform.

In Canada, we like to thump our chest and say we’re better at this than anybody else, but the reality is that some companies are better. And in the US, there’s lots of great companies doing some fascinating things. But the best way to understand that it is to look at your customer group, download their sustainability reports which are available on their websites and really start to dive into them to find if they’re truly leading in change or their really just talking about change.

ELIZA WITH PANDELL When do you expect SCOPE 3 emissions disclosure to be made mandatory? And do you see this as a factor in forcing service companies to become net zero?

BILL Another wonderful question. So, in fact we’re actually running courses now on SCOPE 3 dynamics and what it means to companies. I suspect that you’ll start to see that, you’ve already seen some of the major international companies say that they’re going to tackle SCOPE 3 emissions, and of course that is really, really engaging with your stakeholder world in a much different way in terms of asking people who drive cars, and who are using your products and making their own emissions to behave in a different way.

But I suspect that within the next five years we’ll see the industry, not only through the corporations but the industry organizations figuring out a way that all members of the industry can participate in the SCOPE 3 conversation which will be critical from those absolute reductions process on that pathway. I would just guide folks to look at Shell’s own movement in this space in terms of figuring out how and monitor how Shell is moving towards its SCOPE 3 strategy.

ELIZA WITH PANDELL Thank you Bill. Alright that is all the questions for today. Thank you to everybody for joining us. Bill thank you so much for your time…

BILL Thank you.

ELIZA WITH PANDELL ...your expertise, we all enjoyed it very much and have a wonderful summer.

BILL Alright thanks everybody.

ELIZA WITH PANDELL Bye everyone.