As the global oil industry contracts, Carney waits for pipeline developer

The global oil industry is facing down a “flashing red warning light” and firing thousands of workers as analysts project several years of low prices, just as the government of Prime Minister Mark Carney debates whether or when to designate a new oil pipeline as a priority project of “national interest”.

“The world’s biggest oil and gas companies are cutting jobs, slashing costs, and scaling back investments at the fastest pace since the coronavirus market collapse,” the Financial Times reports. “Spending plans have been reined in, with some projects paused or put up for sale as groups seek to balance the books.”

That news landed with Canadian media reporting that a new oil pipeline will not be included in the hotly-anticipated first list of national interest projects the federal government was due to release Thursday, September 11, notwithstanding a tentative list published by the Globe and Mail last week.

However, “behind the scenes, a Liberal source insisted that the absence of a pipeline on the initial list does not mean that one will never happen,” CBC reports, citing interviews gathered by Radio-Canada. “Approval of a natural gas pipeline project is also not out of the question.”

When the PM and Alberta Premier Danielle Smith discussed the matter over the summer, “Carney was clear: the involvement of a private developer is essential for a project to move forward,” CBC writes. “So far, no company has expressed interest in financing or carrying out such a project.”

But Smith is still pushing Carney to rescind the federal Impact Assessment Act and cap on oil and gas emissions, both enacted by the previous government led by then-PM Justin Trudeau, The Canadian Press says. She’s claiming those regulatory factors are the only thing holding back investment.

And yet, the impact of weak oil prices is affecting projects across the globe. The impact is falling most obviously on the U.S. shale industry, where the Times reported last week that colossal fossil ConocoPhillips was cutting one-quarter of its work force. That dispatch attributed the price drop to the decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to increase production, combined with “soaring production costs” brought on by Donald Trump’s tariffs on steel and other inputs.

But “this isn’t just a Conoco problem,” Kirk Edwards, president and CEO of Odessa, Texas-based Latigo Petroleum, told the Times. “It’s a flashing red warning light for the entire U.S. oil and gas industry.”

Crude oil prices are down by half from their peak during Vladimir Putin’s 2022 invasion of Ukraine, and “an OPEC+ decision at the weekend to continue boosting output, despite forecasts of a looming supply glut, will add to the price pressure.” the Times adds. At a price below US$60 per barrel—the threshold that analysts at Wood Mackenzie are projecting through the next few years—”none of the big western oil companies can cover their investment plans and the dividends and buybacks that investors expect.” Their borrowing, meanwhile, has been creeping up, with some companies taking on new debt to pay off their shareholders.

And it’s not just the U.S. or North American industry.

“Even the largest state-run energy companies have not been immune, with Saudi Aramco selling a $10-billion stake in a pipeline network to raise cash and Petronas of Malaysia cutting 5,000 jobs from its work force,” the Times writes. WoodMac expects capital investment in oil and gas production to fall 4.3% this year, its first drop since 2020, though it will still come in at $341.9 billion.

Mitchell Beer is publisher of The Energy Mix, a non-profit community news site and e-digest on climate change, energy and the shift off carbon. This article first appeared on The Energy Mix. . Read the original article here.