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It’s been two weeks since Finance Minister Bill Morneau told Canada’s battered energy sector that targeted aid was coming in “hours, potentially days.”
Rank and file oil and gas workers, C-suite executives, and scores of Canadians employed by businesses that rely on a functioning energy industry are anxious to hear Ottawa’s plan to help mitigate record-low oil prices and COVID-19’s crushing grip on demand. Patience is wearing thin.
On Tuesday, at the annual Canadian Association of Petroleum Producers (CAPP) conference, itself a casualty of the pandemic having been reduced to a webcast, Alberta Energy Minister Sonya Savage described energy firms in “very, very dire condition.” She criticized Ottawa for taking “too long” to respond to the sector’s concerns. Open letters recently signed by Canada’s largest oil companies and smaller drilling and service firms share her urgency.
A spokesperson for Morneau’s office confirmed on Tuesday that no timeline is in place, and said work is ongoing with provinces and stakeholders to provide credit measures for the industry and support for workers. Savage said the federal aid package could also include measures to hasten the cleanup of abandoned wells.
The finance ministry estimates Ottawa’s current package to protect the economy from the impact of COVID-19 will cost more than $250 billion. Rachel Ziemba, founder of Ziemba Insights, said the government has clearly fast-tracked policies that apply to the broadest swaths of workers and the economy.
“I do think that we will see some targeted support, but the federal government’s preference is very much for ways to support a range of linked industries. I think that means that those in the oil patch are not going to see it as sufficient,” she said.
Ziemba questions whether Ottawa may attach requirements to liquidity financing, such as maintaining a certain level of staff.
“The federal government also has a broader dilemma that it has had from day one, which is how much they care about the green agenda and renewable energy, and the oil and gas sector. Both of which are important to Canada,” she said. “That continues to complicate the response.”
Prime Minister Justin Trudeau announced on Friday that Canada is in talks with OPEC about cooperation to address the dire state of global oil markets. Savage said she will call into an "OPEC-plus-plus" meeting on Thursday that could include discussion of broadening production quotas beyond OPEC and Russia to include the United States, the world's largest producer, and Canada.
Ziemba said Canada needs to prepare its own supports for the energy sector, even if it plans to participate in a new type of production quota agreement with international partners.
“Despite the fact that we might see global measures, no matter what is done, this is going to be a year of a lot of pain for a lot of the fossil fuel industry,” she said.
Greg Taylor, chief investment officer at Purpose Investments, manages the Toronto-based firm’s Global Resource Fund. He applauds the Alberta government’s recent investment and loan guarantee for the Keystone XL pipeline.
Premier Jason Kenney has touted the move as a way to “rescue the future of the energy industry” and “power the country out of the COVID economic crash.” In a televised address on Tuesday, he warned that negative prices for Alberta oil, a $20 billion provincial deficit this year, and 25 per cent unemployment rate are on the table for his province.
“The biggest thing would be getting pipeline capacity up. What the Alberta government did by backstopping Keystone XL, I think was a massive step. It would be nice to see the federal government step in to do that or figure out some way to support that,” Taylor said. “It's probably unlikely.”
Taylor is awaiting the outcome of Canada’s participation in the upcoming OPEC+ talks. He said a North America-wide energy policy to oversee supply could be one positive outcome on the horizon. For now, he is critical of the timing of the Trudeau Liberal’s promised energy support.
“I think it’s embarrassing. At the end of the day, it really shows that the federal government is really not doing anything to help the West and the energy sector,” he said. “This isn't really a good thing in times of crisis. You want to overreact versus underreact.”
CAPP president and CEO Tim McMillan estimates Canadian energy companies slashed between $6 billion and $8 billion in planned capital spending in the last three weeks.
“This is a time when the energy sector is uniquely damaged by the actions of others as well as the pandemic itself,” he said, referring to the Saudi-Russian price war that has intensified COVID-19’s downward pressure on oil.
McMillan hopes Ottawa will eventually respond with a suite of measures aimed at improving short-term liquidity, protecting jobs and ensuring natural gas and heating fuel flows smoothly to customers.
“We are going to continue to engage with the federal ministers and government to try and ensure that it is effective and timely,” he said. “There is frustration on the timing right now.”
With files from The Canadian Press
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.