Canadian Energy Centre
Oil and gas companies are once again the top performers on the TSX. Why do people still listen to the divestment movement?
From the Canadian Energy Centre
By Gina Pappano
The TSX30—the annual ranking of the top-performing stocks on the Toronto Stock Exchange—was recently released and, once again, oil and gas companies made up the lion’s share of the list.
Half of the top companies (11 producers and four energy service companies) are in the oil and gas sector.
Share prices have been driven up due to energy supply and security concerns and ever-increasing demand for oil and gas. The industry and its investors have enjoyed extraordinary three-year returns. The average share price return for the 15 oil and gas companies in the TSX30 was 210 per cent.
But what about the large endowment funds, pension plans, institutional funds and, more recently, banks that have bowed to pressure from divestment-promoting activists to stop investing in the natural resource sector?
In removing oil and gas from their investment pool, they have ignored their responsibility to their beneficiaries, who have missed out on these remarkable returns.
Trustees have a fiduciary duty to act in the best interest of their beneficiaries, which in this case means maximizing the risk-adjusted return for their clients.
But for ideological reasons, oil and gas companies are often being left out of the investment equation.
What’s more, the divestors aren’t even achieving their ideological goal.
Abundant energy is the prerequisite for modern life. Divestment does not stop oil and gas production because it does nothing to reduce demand. After more than a decade of divestment pledges, demand for oil and gas has only continued to go up. This demand is projected to continue to grow for years to come.
If Canada does not supply the oil and gas the world wants and needs, it will be supplied from elsewhere, including by authoritarian regimes in poorly regulated, undemocratic countries that are less responsible and less environmentally friendly.
It would be better if Canadian companies like those on the TSX30 were the ones to step up and meet the world’s ever-growing energy needs.
It would be better for Canadians as well. Canada is blessed with abundant natural resources, and oil and gas is central to our prosperity. All of the companies on the TSX30 list rely on the oil and gas sector to fuel their business, from industrials to mining, to aviation, technology and yes, even to renewable energy.
Investing in the Canadian oil and gas sector means investing in energy companies that can and should be the suppliers of the energy demanded by our power-hungry world.
These companies have high environmental and governance standards, are driven to innovate—an essential process for emissions reduction—and have had some of the strongest returns on the TSX in recent years.
Can our banks and fund managers possibly continue to ignore the significant value in the energy space? Only time will tell.
Gina Pappano is the former head of market intelligence at the Toronto Stock Exchange and TSX Venture Exchange and executive director of InvestNow, a non-profit dedicated to demonstrating that investing in Canada’s resource sectors helps Canada and the world. Join the movement and pass the InvestNow resolution at investnow.org.
Taiwan Semiconductor Manufacturing Company’s campus in Nanjing, China
From the Canadian Energy Centre
Canada inches away from first large-scale LNG exports
The world’s leading producer of semiconductor chips wants access to Canadian energy as demand for artificial intelligence (AI) rapidly advances.
Specifically, Canadian liquefied natural gas (LNG).
The Taiwan Semiconductor Manufacturing Company (TSMC) produces at least 90 per cent of advanced chips in the global market, powering tech giants like Apple and Nvidia.
Taiwanese companies together produce more than 60 per cent of chips used around the world.
That takes a lot of electricity – so much that TSMC alone is on track to consume nearly one-quarter of Taiwan’s energy demand by 2030, according to S&P Global.
“We are coming to the age of AI, and that is consuming more electricity demand than before,” said Harry Tseng, Taiwan’s representative in Canada, in a webcast hosted by Energy for a Secure Future.
According to Taiwan’s Energy Administration, today coal (42 per cent), natural gas (40 per cent), renewables (9.5 per cent) and nuclear (6.3 per cent), primarily supply the country’s electricity.
The government is working to phase out both nuclear energy and coal-fired power.
“We are trying to diversify the sources of power supply. We are looking at Canada and hoping that your natural gas, LNG, can help us,” Tseng said.
Canada is inches away from its first large-scale LNG exports, expected mainly to travel to Asia.
The Coastal GasLink pipeline connecting LNG Canada is now officially in commercial service, and the terminal’s owners are ramping up natural gas production to record rates, according to RBN Energy.
RBN analyst Martin King expects the first shipments to leave LNG Canada by early next year, setting up for commercial operations in mid-2025.
Cenovus Energy’s Sunrise oil sands project in northern Alberta
From the Canadian Energy Centre
By Will Gibson
‘Canada continues to be resource-rich and competes very well against major U.S. resource bases’
A new report on North American energy highlights the important role that Canada’s oil sands and Montney natural gas resources play in supplying growing global energy demand.
In its annual North American supply outlook, Calgary-based Enverus Intelligence Research (a subsidiary of Enverus, which is headquartered in Texas and also operates in Europe and Asia) forecasts that by 2030, the world will require an additional seven million barrels per day (bbl/d) of oil and another 40 billion cubic feet per day (bcf/d) of natural gas.
“North America is one of the few regions where we’ve seen meaningful growth in the past 20 years,” said Enverus supply forecasting analyst Alex Ljubojevic.
Since 2005, North America has added 15 million bbl/d of liquid hydrocarbons and 50 bcf/d of gas production to the global market.
Enverus projects that by the end of this decade, that could grow by a further two million bbl/d of liquids and 15 bcf/d of natural gas if the oil benchmark WTI stays between US$70 and $80 per barrel and the natural gas benchmark Henry Hub stays between US$3.50 and $4 per million British thermal unit.
Ljubojevic said the oil sands in Alberta and the Montney play straddling Alberta and B.C.’s northern boarder are key assets because of their low cost structures and long-life resource inventories.
“Canada continues to be resource-rich and competes very well against major U.S. resource bases. Both the Montney and oil sands have comparable costs versus key U.S. basins such as the Permian,” he said.
“In the Montney, wells are being drilled longer and faster. In the oil sands, the big build outs of infrastructure have taken place. The companies are now fine-tuning those operations, making small improvements year-on-year [and] operators have continued to reduce their operating costs. Investment dollars will always flow to the lowest cost plays,” he said.
“Are the Montney and oil sands globally significant? Yes, and we expect that will continue to be the case moving forward.”
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