The days of mega-projects and record-high oil prices are behind us.
That was the message from Syncrude CEO Mark Ward in a speech to the Fort McMurray Chamber of Commerce Monday. The longtime oil executive said that despite going through four oil price slumps before, this one is different.
“We’re starting to think that the environment we’re in today is really the new normal,” he said. “It’s not a short-term aberration, it’s not a short-term dip. It’s this low crude price environment that we’re going to be in for the long term.”
Ward spoke of how the industry allowed costs to run away when times were good, and that’s made the oilsands “uneconomical” in today’s price environment. He also pointed to the global reality of oil supply clogging up the market, with even more producers expected to come online in the next few years.
“The world is awash in oil,” he said. “Clearly we still need it. It’s the most significant energy source that we have, but there’s too many supplies online.”
Ward also took aim at government practices at all levels, starting with federal and provincial regulations.
He noted that while environmental regulation is “not necessarily a bad thing,” it makes it more difficult for companies to compete in tough times. He also seemed to suggest that Alberta’s regulatory burdens, from corporate taxes to lengthy review processes, are making the oilsands less viable.
“Quite frankly here lately, good returns have been difficult to come by in the oilsands,” Ward said.
Syncrude’s CEO brought numbers forward showing that Alberta’s share in the North American energy market has fallen significantly from 35% in 2000 to less than 17% today.
“Capital investment is very mobile,” he said. “It flows to where the best returns can be found. Resource isn’t enough.”
Ward later turned his attention to the RMWB’s capital budget, saying the municipality has caught up with the infrastructure gap and now needs to look at bringing their spending in line with other similarly-sized cities. He noted that the region’s capital spending is disproportionate to the population. Ward said that while Edmonton spent approximately $1bn in 2015 the RMWB spent $360m, despite the former’s population being 10-times larger.
“Seems like the ratios are a little out of sync,” he said.
Ward did re-affirm Syncrude’s commitment to employing locally, boasting that 75% of recent hires live in the region and that 95% of their workforce is local. He said that the company is hiring in small numbers, and most of reported job losses have been through retirements and attrition.
He added that the company is focusing on becoming more efficient.
“We’ve gotta (sic.) be more focused on the core needs of our business,” Ward said. “It’s looking for more efficient ways, using the processes that keep us safe and reliable to be able to deliver those results.”