Like all natural resources, the energy industry suffers from ups and downs. Not only the price of oil but also geopolitical events can dramatically affect the profitability of energy projects, which can take years, if not decades, of planning.
“Even though everything is very profitable right now, there’s still a lot of headwinds facing the traditional oil and gas industry,” says Xiaodi Jin at Borden Ladner Gervais LLP. “I think companies are just very cautious about what to do, what the future holds, and how to spend their money and time.”
Their caution is not just due to short-term economic trends, such as rising interest rates. Global uncertainty, such as the war in Ukraine and climate change, are long-term challenges that require long-term solutions.
Renewables are undoubtedly a big part of the solution to climate change. Investment in innovative storage technologies is also increasing. “Energy storage has picked up an incredible amount of momentum in 2022,” says John Vellone at BLG.
But absent significant technological developments around battery storage capacity, the sporadic nature of wind and solar makes it challenging for these sources to displace natural gas, says Simon Baines at Osler Hoskin & Harcourt LLP.
Because Russia’s invasion of Ukraine and the resulting sanctions have left a gap for many countries, the need for Canadian oil and gas is only likely to increase. That means the only feasible way for companies to reduce emissions while maintaining that production growth is through carbon capture.
But newer innovative energy sources outside of wind and solar are promising. This summer, Canada and Germany signed a pact establishing a transatlantic hydrogen supply network. Many view hydrogen as “one of the big clean energy tools” that will propel Canada through the energy transition, says Kerri Howard at McCarthy Tétrault LLP.
The energy industry, through renewables, oil and gas, or everything in between, is stepping up to the plate. Long-term solutions are emerging for tomorrow’s challenges. The future awaits.