Canada’s Push to Advance Major Projects

Produced by ARC Energy Research Institute | September 16, 2025by ARC Energy Research Institute

This week, our guest is David Nikolejsin, Strategic Advisor at McCarthy Tétrault. David previously served the B.C. government as Deputy Minister for seven years under the Natural Gas Development and Energy and Mines Ministries. He was involved with implementing a successful “one window” approach that helped LNG Canada Phase 1 advance through construction.

In recent weeks, the Canadian federal government has announced several initiatives to fast-track major projects, including the establishment of the Major Projects Office (MPO) and the announcement of the first five projects.

Based on David’s experience in getting projects off the ground, both in government and now working with proponents, here are some of the questions we asked David: How are environmental reviews for major LNG projects currently conducted in B.C., and which level of government—provincial or federal—takes the lead? What advice would you offer the newly appointed CEO of the MPO, Dawn Farrell, as she begins her new role? In what ways have Indigenous rights in B.C. evolved over the past five or so years, and do projects now require Indigenous equity participation to get done? Given that B.C.’s and Canada’s climate goals conflict with the acceleration of LNG exports, should GHG reduction targets be revised to attract more capital investment to B.C.?

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Episode 295 transcript

Disclosure:

The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer:

This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the ARC Energy Ideas Podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian. Welcome back. We’re going to go back a couple weeks when the announcement of the Major Projects Office and CEO Dawn Farrell was appointed. So the Major Project Office, as it’s known as the MPO, so that’s getting to be in a lot of publications now, not to be confused with the PMO, which is the Prime Minister’s Office. This is the MPO, which is the Major Projects Office. So we’re going to talk about that, and we have a special guest, which we’re delighted to have, and we’ll introduce here in a minute. But I want to talk about the MPO for a minute. It is being led by Dawn Farrell, who was CEO of Trans Mountain, and she was on this podcast, oh, I don’t know, about a year ago, when Trans Mountain was about to start up. When was that?

Jackie Forrest:

Yeah, it was June of 2024.

Peter Tertzakian:

Okay, so it was over a year ago. Okay. And then she became chair of Trans Mountain, and now she’s been appointed to the MPO.

Jackie Forrest:

Well, in addition to that announcement back from August 29th, of course, last week, we learned September 11th that Mark Carney has these first five projects. Now this is the first tranche of more projects that are coming, including LNG Canada, phase two, the Ontario Small Modular Reactors, Port of Montreal capacity expansion, and two mining projects, one in BC and one in Saskatchewan. And the MPO is going to work. These are projects that are further along but have not yet reached final investment decision. And based on the notice that was given in the press release, the MPO is going to help fast-track so these proponents can advance their decision-making and their decision to invest here in Canada.

And if there was five other earlier-stage strategies that were also announced, including wind power and inland to Canada ports and rail, critical minerals, and the Pathways Project, which is the Carbon Capture Storage Project here in Alberta for the oil sands. Now we do expect more projects. We don’t know how many. This Globe and Mail article, and I will put a link to it in the show notes, since September 4th had a leaked list of potentially 32 projects. So we do know there will be more, but one thing we do know is the Major Projects Office certainly has a big scope of work, and likely this list of projects plus more coming in the future.

Peter Tertzakian:

So, to talk about major projects, let’s introduce our special guest, who has significant experience in all of this. So we’re delighted to have, straight from Vancouver, David Nikolejsin, who is a strategic advisor with McCarthy Tétrault. So welcome, David, to help us talk about these sorts of things, particularly from a BC perspective.

David Nikolejsin:

Thanks very much for having me on this show. I’m very honored to be here. Thank you.

Jackie Forrest:

Okay, well, David, maybe tell us a bit about your time in the BC government. You were the deputy minister for seven years under the Natural Gas Development and Energy and Mines Ministry. So tell us a bit about how you got to that role, and also what you’re doing now at McCarthy Tétrault.

David Nikolejsin:

Sure. I had a great career with the BC Public Service, 31-year careers, which basically was two different careers. The first half of that time, I was in high tech and IT. I actually rose to become government’s chief information officer, and then I was moved to the natural resource sector. So my first role there was head of the BC Environmental Assessment Office, which is the standalone office that actually does the environmental assessment process for major projects. And at 2012, when I moved there, all of the big LNG and pipeline projects we’re just proceeding through that process. So I participated in that and can talk about some lessons learned and things we did there later. In 2013, when Christy Clark formed government, she ran on a platform that was really pro LNG and very much focused in on that industry as a major part of her campaign.

And so when she formed government, she actually broke up the Ministry of Energy, Mines, and Petroleum Resources and created a dedicated ministry called the Ministry of LNG Development. I always actually took over everything else that was energy and mining, and other things that used to be in that ministry. So I became deputy ministry of everything else, which included BC Hydro and all that. But shortly after that, I actually moved to take over that ministry of LNG development. And so that’s where I spent a big part of my career, and it was heady days. Those were the gold rush days of LNG. Had 18 projects on the books, every super major in the world was beating a path to our door. We had 82 megatons of projects and pipelines and all sorts of things going on, including oil pipelines. Lots happening in those days. When John Horgan formed government in 2017, it was a minority government in partnership with the Green Party, which was interesting.

And one of the things Premier Horgan did was put the Ministry of Energy, Mines, and Petroleum Resources back together again. So essentially, my last two jobs, and then I was asked to stay on and lead that ministry. And so it’s in that role that we got some of these big approvals, I think that we want to talk about over the line. When I left government in 2020, I joined McCarthy Tétrault as a strategic adviser. And in that role, I assist our clients and partners in McCarthy’s around major projects and major project development, mostly in the energy and mining space, but also high-tech real estate.

And a lot of that work that I do there focuses back on Indigenous groups and working with them with those big projects because, as anyone and everyone has figured out, if you want to build anything big in Canada these days, you better figure out that part about how to work with Indigenous groups. And yeah, I work with projects all across Canada now very actively on the North Coast Transmission line, which is a $5 billion project to twin the high voltage system across Northern BC, and that is very much a novel opportunity to work with Indigenous groups around that in a very new way, silo ZIM’s LNG, wind farms, so on. So yeah, that’s a lot.

Jackie Forrest:

Okay, well, we’ve got lots of topics to dig into. We do want to talk about your views on Indigenous rights and how that maybe has changed, but let’s talk about this major project office. And I want to start at the high level. Tell us about BC’s LNG Canada Secretariat, your role in that, and how you think that helped advance LNG Canada phase one, which we are very happy to see started up this past summer.

David Nikolejsin:

Sure. So I’ll talk about what led up to the Secretariat because one of the big differences between that example and what’s going on nationally right now is, first of all, it was a project-focused office Secretariat as opposed to much broader as you spoke about earlier, but also when it came into being. So I talked earlier about the work I did at the Environmental Assessment Office around LNG Canada. I guess the thing I’d like to stress is that it’s so important to have the whole system working together and to do all of the necessary work in an organized way that leads up to what these corporations call their FID, their final investment decision. A lot of the work that I think the MPO has set up to do, and it was aspiring to do, happened before we actually formed that LNG Secretariat in BC. And what I like to tell people is it actually was an interesting time of two different governments actually working together, although not in a planful way.

So the Christy Clark government got the LNG Canada project up to the one-yard line. They did a lot of work and a lot of credit goes there, but it wasn’t done yet. John Horgan government comes in, and as I said, minority government with lots going on actually pushed it into the end zone, and to do that is a big negotiation with lots of moving parts. So that led to the successful FID, an announcement that the project was going to be built. The LNG Secretariat was created by me when that decision happened, around actually getting it built because what happens a lot, and I think project proponents would say this is half the job, is getting through environmental assessment, getting your capital together, announcing the project. The other half, and sometimes it’s the tougher half, is actually getting it built, and there’s thousands of permits needed, issues always coming up across the board. And the LNG Secretariat was created to deal with all of that and make sure the project actually got built on time and on budget.

Peter Tertzakian:

So just a couple of questions here because getting a little bit confused with all the different acronyms and departments. So, the BC LNG Canada Secretariat is that different from the Ministry of LNG Development that you talked about?

David Nikolejsin:

It was a department within the ministry.

Peter Tertzakian:

Okay. So now we have the MPO Major Projects Office federally, which is of seemingly a federal analog of the building of LNG infrastructure and the Ministry of LNG Development. So, can you talk about how having two layers of offices, federal and provincial, is going to work?

David Nikolejsin:

Yeah, it’s going to be interesting, and what I will also say is this isn’t the first major projects office either federally or provincially. Interestingly, when I created the LNG Secretariat in BC, there’s also was and still is a major projects office in BC, and the feds have had multiple major projects, offices in the past. So you’re asking the exact right question and what in my opinion I think needs to happen is something that’s been missing in the past, which is a really clear and comprehensive discussion about who’s going to do what and making sure that the federal office is asking itself the question, are we doing the things that only we can do as the federal government? And then actively making sure that they’re not duplicating things that should rightfully be done by the province. And conversely, on the provincial side, it depends which province you’re talking about.

So we’re focused in on BC. BC also needs to step up and actively meet up with, well, hopefully that attitude I just talked about, and then effectively recreate what was going on at that LNG Canada secretariat. The best test for whether these offices work or don’t work is not to ask the people who set them up or the people working there; it’s to ask the projects and the proponents, is this working? And the fact that the feds are setting up another one tells you there’s something missing there. But if you were to ask LNG Canada, they would very much say that secretariat worked. So I would really encourage people to look at why was that, what was different about it? And as much as possible, try to duplicate those features.

Jackie Forrest:

And I just want to add, and I’ve talked to a number of proponents for these LNG projects specifically in BC, actually, most of them say that the BC process is actually working fairly well to get to the environmental review and get your approval. And it’s because the BC government is mostly leading, the feds have said, “You know what? You guys can lead in most areas, but there’s certain areas the feds are still involved in.” And most of them say that’s the problem, actually, we’d like just one window, one regulator in it to be the province. The other thing is when I look at this announcement for the Major Project Office, it seems like it’s the feds going to be leading this.

And I’m like, well, you got something working well here in BC, so I hope they’ll be flexible to allow the province to take the lead. And then the second thing I wanted to ask you about, David, is it really seems in the materials for this Major Project Office, it is very much focused on getting that FID, getting the environmental review done. And when I talk to proponents, it’s exactly what you’re saying. These permits not only from the province, although I think from the BC province, they are less of an issue because there’s some coordination amongst departments, but federally, these permits can be really, really onerous for the proponents. Do you think it’s important that they consider all the way through to starting up?

David Nikolejsin:

Yeah, there’s two pieces to that question. On the first part, around the one project, one review. So when I took over the BC Environmental Assessment Office in 2012, I utilized part of the act, so the FEA Act at the time, the Federal Environmental Assessment Act had a provision in it that allowed a process called substitution. There was two processes. Substitution was a legally defined opportunity within that legislation for provinces to substitute the federal environmental assessment, and it was a very formal mechanism. So I put in place an MOU at the federal government to allow formal substitution.

So in order for that to work, the feds have to agree on a project-by-project basis. We will not do a federal process. We will substitute our process for the provincial one, and what the province agrees is, we will take into our provincial process any federal values that might be truly in the federal mandate. At the end of that, you have one review, one report that goes to two different decision makers. So there’s still two missile keys, one in BC and one in Ottawa, that both have to turn, but there’s only one process. So that’s why proponents like it. By the way, just as an aside, there’s also a process that allowed a thing called equivalency, which would’ve gone one step further and meant only one decision. So the feds would also delegate the decision. That’s never happened. There’s lots of examples where now almost every major project, mining, oil, and gas, doesn’t matter in BC, is a substituted process because it works for the feds, it works for the proponents.

Now let me tell you how that feeds into your real question, which was about permitting. What drives proponents crazy is they’ll go through massive expense and time to do baseline study work as part of an environmental assessment, and then they have to do it again when they turn to get their permits. And it may be hard for some listeners to believe, but anyone who’s worked on a project knows what I’m talking about, and it drives people crazy because all of the duplication. And so you get this federal-provincial duplication, but that’s where these major project offices could come in is helping with that second matter saying, “You know what? We have the authority here to talk to the statutory decision-maker community,” and say, “We’re not going to redo all this work just because you weren’t involved in that first study, we’re not going to redo it.”

And it’s that kind of expediting and power, quite frankly, in the system where these offices can be most effective at expediting things. And what I always, always, always warn about, and I tell you, I worried about it when we did it in BC, the point isn’t to duplicate or replicate because where these offices do go wrong is they say, “Well, department X isn’t getting it done quick enough, so I’m going to take it over and do it.” That’s deadly. If these offices become just another layer of bureaucracy, they don’t work.

Peter Tertzakian:

Yeah, let’s explore that some more because I want to distill this down to, I guess, a recommendation based on your experience. So duplication is one thing, but having different directives is another. And what I’m getting by that is if we think of the proponents metaphorically as airplanes and we have two air traffic controllers, one federal, one provincial, the potential for a crash here is quite high, or at a minimum, massive delays in getting nothing done. So what is, I guess, the recommendation here? Is it as you suggested, the equivalency that the Major Project Office at a federal level give the air traffic control over to the BC government again to get the projects that go through BC or are affected by BC jurisdictionally done? Is that the recommendation?

David Nikolejsin:

Yeah, I don’t think it’s going to be that simple. I think the current approach federally has something huge going for it that was missing before, which was if you… Is this idea of deemed approval, if you get through enough gates or whatever, that’s going to look like eventually, to be determined, and at which point then everything else in the system’s supposed to become about expediting things like permits. So, where I’m going with that is to say just delegating things isn’t going to get it done because we’ve got an entire generation, both federally and provincially, of bureaucrats that have been trained to manage risk to zero on everything all the time. And the problem that that creates, and that doesn’t mean they’re bad people or they’re not working hard.

It just means the cultures we’ve created is all about this idea of managing risk, and people have forgotten about the other side of the equation, which is building the economy and paying the bills and having economic development. And it needs to become much more of a balancing act. And so, where I go when I hear your question is yes, we do need to get those clear… I talked about that earlier: clear, stay in your lane, focus on the things that only you can do, and move those other things back to the provinces, and then respect those things. Don’t second-guess, don’t trip over each other, but having said that, the key will be execution and results as opposed to process.

Jackie Forrest:

We do hear feedback from proponents, things like species at risks or permits you need from the Department of Fisheries. These requirements don’t sort of look at the economic versus the cost. They’re just throw a bunch of requirements on these projects and not think about does the project make sense with these requirements on. So that’s what you’re trying to talk about, David, more balance in terms of what the expectations are with the goal of we want this over the finish line. So what’s reasonable within the constraints of getting this project done? One other question I have, since you’ve had experience. I look at the scope. I mean, I don’t know how many nation building projects we’re going to have. I don’t know, Peter, if you saw that Globe and Mail article-

Peter Tertzakian:

32.

Jackie Forrest:

… talking about 30-some in a potential list, but let’s say it’s even one per province, it’s like 13. When you think about the effort it took for you to do the BC Secretariat, which was just post-FID efforts for one project, do you think that this office can be effective if they’re advancing 13 or maybe even more-

Peter Tertzakian:

32.

Jackie Forrest:

… 32 projects in parallel?

David Nikolejsin:

Yeah, honestly, no. I worry about that. I mean, as soon as you start talking about every project becoming a major project, then no project’s a major project. That’s the way I look at it. So if you truly want to have some exceptional things done, then make them exceptional and treat them exceptionally and do exceptional things to make them work. That’s just my instinct, and honestly, it sounds like the classic thing that we do in Canada quite often, which is, oh, there’s something happening. We got to make sure there’s one per province or this many per capita or it’s got to be… You know what I mean? And honestly, I don’t think the true nation-building projects will divide up that way, and that shouldn’t be the main criteria. There’s other criteria that should and are being applied, but that one, I think, is going to make everything slower.

Peter Tertzakian:

Right. So 32 may be too much, even though other nations around the world seem to be able to do it, not naming names, so probably not 32, but some countries probably could do 320 and get stuff done. And we seem to have difficulty getting even three done. But let’s talk about getting it done in particular, the regulatory and permitting stuff. So what we’ve been hearing is that the identified projects may have their own special adjustments or exemptions on a project-by-project basis. And so the question really is, well, why not just reform the whole process rather? I guess what I’m getting at is instead of the government picking winners and losers, that other types of projects may also benefit from regulatory reform that may only accrue to a handful of projects. Does that make sense?

David Nikolejsin:

And that would be better. And by the way, your point about 320 versus three, 320 would be better. I just live in the world where it’s pretty broken. I mean, things are not working, and we need to do something. And what I imagine is this is actually going to turn out well if we get it right. And what we’re going to find out is we can work together with our Indigenous peoples, we can actually have a safe environment and have nice things and good projects, and people are going to start to turn that corner where things do become normalized as opposed to needing to be exceptional. But if we try to boil this ocean at once, I’ve seen this movie; the bureaucracy is a powerful, powerful thing, and it’s going to take some real management to get some things done.

Jackie Forrest:

So what advice would you give Dawn Farrell if she starts your new role? If you had a conversation, what’s the first thing she needs to do?

David Nikolejsin:

So I would say that Dawn Farrell is an excellent choice, by the way, to lead that office. I think good choice, and she’s forgotten more about management than I’ll ever know. And so I say this with humility, the number one thing I would say is do not be impressed by or settle for process. Far too often, bureaucracies are very impressed with how busy they are. They have lots of meetings, they work late, they work hard, they produce tons of reports by the truckload, but they don’t ask themselves the one most important question, which is from the proponents’ or project perspective, is what’s better on Friday than it was on Monday? And just producing a truckload of work doesn’t make that a good answer. And so my number one piece of advice would be focus on results, not process, because bureaucracies are very good at process.

And then the other piece of advice I’d give is focus back on your Indigenous support in those stakeholders and make partners of them. I mean, there’s all this controversy out there about that, and it’s unnecessary in my opinion and in my experience. And so go make partners of Indigenous people, Crystal Smith, who you folks know had it right. What most of those Indigenous folks want is a share and a say, and what you’ll find if you engage them in that way and build that trust, you’ll never find better partners.

Peter Tertzakian:

Well, let’s talk about the Indigenous issue and understand what’s changed based on your experience, say, over the last five years. Because when we talk about building infrastructure projects, certainly energy infrastructure projects, most of the economic roads go through BC, and Indigenous stakeholders are critical, as you pointed out. So what’s changed, and what do you see changing going forward?

David Nikolejsin:

Well, things have very much changed over the years, and it’s been this long history of change where everything changed overnight, it feels like, but BC has been the high bar for Indigenous jurisprudence in Canada for a long time, mostly because most of BC is not covered by treaties. Most of the rest of Canada is, and so that’s why a lot of the court cases have come out of BC, and the long history of court cases that have established that Indigenous folks have rights and, in fact, enjoy title and have been granted title over pretty big chunks of land in BC. And so all of that jurisprudence led up to the day in 2019 where British Columbia, which as far as I know is the first sub-national in the world that did this, passed a law that is called DRIPA, the Declaration on the Rights of Indigenous Peoples Act, that law enshrined the principles of UNDRIP into BC law and does call on every law on the books in British Columbia to be made consistent with the principles of UNDRIP.

So yeah, that’s a big, big, big change. And from there has stemmed these things we hear about in the news. So there’s lots of talk in BC about these consent agreements, what they call these government-to-government agreements that are being done in place of modern treaties. And those agreements are essentially the manifestation of what DRIPA calls on and very, very much changes the dynamic of who controls the land in British Columbia and what it’s going to take to work with those folks to get projects done. And some big examples are going on in BC, and by the way, most of them are actually turning out okay.

Jackie Forrest:

And also, the UNDRIP also resulted in changes to the BC environmental review process too. We’ve also had this Blueberry First Nations court decision. So when you think about some of these ideas of having fast tracking, like the Federal Bill C-5 wants to get approval done in two years, BC themselves have put forward their own fast tracking the Bill C-14 and C-15, maybe not for LNG, but for other types of energy projects and other kind of infrastructure projects. Do you think that politicians are going to have to weaken their Indigenous rights or repeal some of these rules in order to get these things done in two years? Because doesn’t this all just mean things take longer?

David Nikolejsin:

I would say they can repeal the laws if they want. It’s not going to change anything. The fact is, so politicians can pass laws like Bill 14, 15 in BC. They can pass laws like Bill C-5 in Ottawa; the government can change, they could repeal those laws, they can change them. That’s all good. None of that affects Section 35 of the Constitution, which defines the actual issue you’re talking about here.

And so whether you have Bill C-5 or not, whether you have Bill 14 and 15 or not, none of it trumps the requirements of Section 35 of the Constitution, nor that Supreme Court-tested case law I talked about earlier about the actual rights and how they manifest themselves. So those are inalienable. Unless someone’s going to take on changing the Constitution, which is not going to happen, to take out Section 35, because you cannot weaken your response, because the Constitution won’t let you. So, therefore, the right question is if you want to get something done in two years, you better figure out how to work effectively with Indigenous people, and let’s get on with it and stop fussing over the rest of it.

Peter Tertzakian:

Yeah, just for our audience, for those of us that have not studied the Constitution, what is Section 35?

David Nikolejsin:

The Constitution has a section in it that describes the rights of Indigenous peoples and when our Constitution was repatriated and became the Constitution of our country, that section has been tested over and over in different ways in some of those court cases I talked about earlier where the Constitution pretty simply spells out the fact that the Indigenous people enjoy rights, the extent of those rights, how they work with regard to the actual land itself has been the subject of all these other court cases that have come along. And it has been a consistent pattern of winning by Indigenous tests against the court that have established those rights that I talked about earlier.

And so unless you’re going to go undo all of that, which is impossible, technically, maybe possible, it’s practically impossible. The only path forward is to accept it and say, “Okay, what are we going to do?” And I keep saying there’s this mythology out there that this is somehow a problem we’re talking about. I don’t think it’s a problem. I think it’s an opportunity, and in fact, my experience working on major projects, the Indigenous people are not the problem. We need to turn our minds to the fact, okay, rather than trying to move that aside or make it easier, let’s go all in and let’s figure it out.

Jackie Forrest:

I wanted to come back to the Indigenous consultation that the government had in July, and people across the country saw a pretty negative reaction to C-5, and a reaction that Indigenous people didn’t want these projects to move forward quickly. Is that the right impression that I think a lot of Canadians got?

David Nikolejsin:

I would say not for a couple of reasons. So could the government have done a better job of rolling out C-5? Of course, that’s always true of any of us on any of these things. Having said that, the true test of what Indigenous people, First Nations, and others feel about Bill C-5 and moving major projects forward needs to be found by talking to the actual Section 35 rights holders. So let’s go back to Section 35 again. The rights are actually manifest in the nations whose territory it is, and there’s a lot of them. In BC alone, there’s 204 recognized First Nations, plus there’s hereditary chiefs, which we can talk about, plus Métis; there’s lots of groups, but if you just talk about First Nations for one moment, it decomposes pretty quickly if you’re trying to do a pipeline and there’s 20 or 30 First Nations online. But the honest truth is you’ve got to go one by one and you’ve got to find out what did the Section 35 rights holders thinks?

Not what did these national organizing bodies think or other groupings. And I’m not saying those groups don’t serve a useful purpose. Of course, they do because it’s a way for them to collectively represent things to government, but the government can’t negotiate consent with those national groups or any other group. You can only negotiate consent with the actual person who holds the rights, which is the person whose land you’re talking about. And my experience, I’ll keep saying it has been, if you engage those nations in a very productive way, not a consultant accommodates, so I can get you out of my way attitude, but an actual attitude of I want you to be supportive of this. What’s that look like? And have that conversation. You’re going to find it’s different nation by nation by nation, but what you’re going to find out is what they really think as opposed to listening to that story you were talking about.

Peter Tertzakian:

I completely agree. They have to be made partners of the process, and I believe there’s progress that’s been made over the past five years in involving them as equity stakeholders and partners in different ways. But let me ask you this, then whose role is it to do these negotiations? Is it the Major Projects office? Is it the proponents? How does this work, given that it’s sort of constitutionally charged, but yet the deal-making happens at the proponent level?

David Nikolejsin:

So the legal correct answer is it’s the duty of the Crown to do that. Constitutionally required consultation and accommodation is the duty of the Crown, and they can’t move that aside. What they can do is partner very effectively with industry. So let’s go back to the thing we started talking about was LNG Canada. It is the most understudied thing in Canada’s history. It blows my mind that people want to keep talking about what should we do, what should we do, as opposed to going back and looking at what worked and what will work again.

And was it perfect? No, there’s lots of things like I said, we can learn, but boy, oh boy, it worked. LNG Canada did a good job of this issue that we’re talking about, and there’s other examples out there. I just talked about the North Coast Transmission Line. There’s other big major projects, and there is the ability for a partnership between the Crown and the proponent, and the Indigenous people to move these projects forward. And if you can catch lightning in a bottle there, which is fully possible, you will move projects way faster than any other dream that the Major Project Office might come up with.

Jackie Forrest:

Okay. Well, there’s a growing narrative that if you want to get a project done, actually, you’d need to have equity Indigenous partnerships. However, LNG Canada, I do not think, had that. It maybe had generous benefit agreements. So would you think going forward that if you had a client that said, “I want to build a project in BC,” you’d say, “You have to have Indigenous equity,” or is there a way forward with a benefit agreement like would’ve been done in the past, but maybe more generous?

David Nikolejsin:

No, you do not need to do equity. What you need to do is find out what do those groups want. And like I said, nation by nation, it’s going to be different. Some want to be owners and take on full commercial risk and everything, and reap the benefits of taking on risk. Others want nothing to do with that. They’d rather just have a royalty. Others would rather have more of a traditional accommodation payment. Others might just actually say no. But the answer will be found by actually going nation to nation and figuring that out, but no, you don’t need to do equity. In fact, many of them don’t want it.

Peter Tertzakian:

Well, LNG Canada effectively was sort of like, well, there’s the Coastal Gas Link pipeline, then there’s the liquefaction industrial facility in the port. I want to move the discussion upstream because if we build pipes, we have to fill them. And drilling wells in Northeast BC has become challenging because of the Blueberry River First Nations Agreement with the BC government, which limits the cumulative impacts of industrial development. So, how do you think about that Blueberry issue?

David Nikolejsin:

Yeah, it’s a tough one and a bunch of technicalities under the covers of that decision and the government’s decision not to appeal it, that are now creating other issues with their neighbors on whose territory is whose and which controls apply where. So there’s lots of implementation issues around that. What I would say is the Treaty Eight Montney area is much, much larger than the Blueberry issue.

And in fact, there’s other nations who are working very productively and happily with companies on well completions and filling up the pipes for LNG Canada, so what we hear about is the trouble, and there are issues, but by and large, there is development still happening in the Montney, even in Blueberry’s territory. But writ large, there’s development happening, and I think it’s going to continue to get better. And one of the reasons that I’m a big proponent of the BC Montney is, and we’re not talking about this today, but there’s the intersection between climate policy and energy, gas, LNG development, and there’s some really good news stories of electrification of the upstream in BC that are very powerful parts of our message as good actors as Canadian producers.

Jackie Forrest:

Okay, well, we will maybe ask you a question on climate as we wrap up, but I did want to say, I mean, I think you’re right, but when you look at the amount of the Montney that is covered by this Blueberry Rivers First Nation, it’s quite a large part, actually, of the available resource. And we’re actually talking about maybe really ramping up LNG exports, not just LNG Canada Phase One, but maybe a second phase and maybe a couple other projects. It may become more of a constraint in the future when we need to grow more quickly. Now, in the absence of getting much more supply from BC, I think it can come from Alberta. There’s an Alberta side of the Montney as well. So I have no doubt there’ll be supply to fill those LNG terminals, but maybe not as much will come from BC as was potentially possible.

But let’s talk about the climate. The CleanBC Roadmap in 2021 set a target to cut oil and gas emissions by 33 to 38% by 2030 versus a 2007 baseline. Now, this covers everything, including LNG terminals, refining, upstream oil and gas pipelines. If we’re going to expand LNG exports to maybe six BCF per day. This is my kind of high-case scenario, but I think it is possible we could do that. I don’t see how we can live within this reduction target. You can’t grow LNG like that. We don’t have that much clean electricity by 2030 to avoid emissions from these LNG terminals in the upstream. So how do we square this box? Because we’ve got leaders, even of the BC government, not only Mark Carney, but leaders like Premier Eby and Minister Dix are talking like they support LNG, but these targets are in contrast to that. So, do you expect these targets are going to be changed?

David Nikolejsin:

Yeah, and by the way, my vision is bigger than six B day, and if you want to know how I think that, I’m happy to share, but I think our upside is bigger than that. And yes, to reap that upside, we are going to have to make some changes to those policies, and it’s going to take some political courage, and we’re going to see. But in my opinion, there are environmental policies both federally and provincially that are honestly not that effective as policy. They’re great at virtue signaling climate concern, but they’re not actually even that effective as policies; but they’re huge impediments to growth, quite frankly. And so those are going to have to change, and there’s a couple of ways to change them. Some just quite frankly need to go away. Others, we need to change the timelines on just to make them actually more achievably realistic.

But I’ll go back to the point, it’s going to take political courage because we all know there’s tension around fossil fuels, climate, Canada’s role in all of that. I go back to, I mentioned early on the work I did with John Horgan to get LNG Canada across the line. That is a great example of political courage because he was a premier of a minority government held up by the Green Party inside his caucus, and his cabinet it was far from unanimous, let me tell you that. In fact, a lot of the people that just formed that government ran on an anti-LNG platform, and he did it anyways. So it’s going to take some political courage to move some of these climate rules aside, change others.

But honestly, that signal, if we do that, I think, is the signal that the world, quite frankly, is looking for; it will cause capital to start to flow back into Canada. Because why the capital is on the sidelines right now is people don’t believe we can build anything in this country anymore. So if the combination of C-5, the MPO, all of that combined with some truly, I’ll use the word again, exceptional examples of signaling that we’re open for business by changing some of those climate constraints, I think will unlock a whole bunch of interest that’s standing on the sidelines right now and waiting to see if we’re going to actually be able to pull this off.

Peter Tertzakian:

Well, there is a lot of wait and see on many dimensions, and it’s been great having you, David. I mean, you’ve given us so much to think about as an expert on navigating the administration and the politics of building major projects, especially from a BC lens. You’ve given us sage advice as well as the Major Project Office some sage advice on the administration from a BC versus a federal perspective. Certainly gave us a good reminder about the Constitution, or if not a lesson for me about Bill C-35 and Indigenous participation, to view Indigenous participation as a positive and not an impediment. I think that’s a great lesson to impart on our audience and the decision makers here. And finally, some sage advice on climate policy, which we would concur with. So thanks so much. David Nikolejsin, strategic advisor of McCarthy Tétrault. It’s been a delight having you.

David Nikolejsin:

Thanks for having me.

Jackie Forrest:

Yeah, thank you, David. And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

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The Canadian Oil & Gas Investor Perspective with Eric Nuttall

Produced by ARC Energy Research Institute | September 9, 2025by ARC Energy Research Institute

This week, our guest is Eric Nuttall, Partner and Senior Portfolio Manager at Ninepoint Partners. Eric manages the Ninepoint Energy Fund (NNRG) and the Ninepoint Energy Income Fund (NRGI).

Here are some of the questions Peter and Jackie asked Eric: How would you compare investing in Canadian oil and gas producers versus U.S. companies? Do you still believe Canada is undervalued relative to the U.S., as you did when we spoke a few years ago? With OPEC announcing on September 7, 2025, that it will add even more supply to the market, why are oil prices remaining so resilient, and what is Saudi Arabia’s strategy? What are your expectations for North American natural gas prices, particularly in Canada, which has experienced exceptionally weak pricing this year? Canada has seen a wave of consolidation in the oil patch—how do you view corporate consolidation in this context? You have long advocated for oil and gas producers to buy back shares, but if Canada succeeds in building new export pipelines for oil and gas, would you support companies growing production to create value rather than relying solely on buybacks? How can new export pipelines be built if investors continue to prefer buybacks over growth? Finally, do you believe Canadian oil and gas companies still trade at a “green discount” due to climate policies that burden the sector?

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LinkedIn: @ARC Energy Research Institute

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Episode 294 transcript

Disclosure:

The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer:

This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the ARC Energy Ideas Podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian. Welcome back, as always. And as always, we’re going to talk about our favorite subject, or at least among the favorite subjects of our audience, and that is investment in the stock markets, particularly the markets for oil and gas. But before we go there, talk about some of the news that we’ve seen over the course of the last week since we recorded. We’ve got the EV mandates are changing and there’s some OPEC news. What do you want to tackle first?

Jackie Forrest:

Well, let’s talk about the OPEC one. Now, OPEC is kind of surprising everyone already because there were these three tranches of supply that they were keeping off the market and they put the first tranche, which was over 2 million barrels a day, they announced they wanted that back on the market a year early, but now over the weekend they say they’re going to even add another 1.6 million barrels a day, the second of three tranches.

And most analysts don’t think all of that really exists, that there is really not all that much spare capacity in countries outside of some key ones, like Saudi Arabia, UAE, Kuwait’s another one.

So probably not that much will come on the market, but it gets you thinking a little bit, what is Saudi’s plan here and is there a strategy change? So I think oil price is quite resilient as time of recording and actually when you think about the outlook for oil markets into the next quarter or two, it looks like there could be quite a significant oversupply. This makes it worse. Oil prices actually stayed pretty resilient in the face of that. Now there’s no inventory builds yet, so we’ll see how that happens.

But anyway, something to talk about. And then of course these EV mandates, 20% EVs by 2026 is what the automakers in Canada were supposed to deliver. Mark Carney has paused that and actually put a pause on the whole thing as they study it, which as a reminder, by 2035, a hundred percent sold in Canada, were supposed to be electric as the liberal policy was before. So I think it’s smart to revisit obviously the growth of electric cars, the rate of growth is changing, it’s slowing compared to what people thought, and I think it’s a smart move.

Peter Tertzakian:

Yeah, the rate of penetration of electric vehicles, at least on this hemisphere has slowed down, in China is still fairly strong and that has impact on the demand side. Actually the economy is the number one dictator of whether or not oil demand goes up or down, and we want to talk about that. In fact, we want to talk about that. We want to talk about the OPEC news and much more with our special guest who’s no stranger to our audience, because this is his third time back.

We are delighted that Eric Nuttall, Partner, Senior Portfolio Manager of Ninepoint Partners is back. Always a delight to have you, Eric, welcome.

Eric Nuttall:

Thank you so much. I really appreciate your podcast. It helps me many times get through heavy Toronto traffic.

Jackie Forrest:

Okay, well anything that can help with that. Well, we always listen to you too. So we’re really interested in the discussion that we’ve been following, because it has been since June of 2023 since we had you on the show, and I just thought I would recap your views there. And at that time you felt Canadian oil and gas companies were undervalued and you thought that the stock values were reflecting a lower price, 55 to $58 long term.

And with these companies having such great cash flow yields, you thought that there was a really compelling opportunity. And I went back and looked at the Canadian Stock Index, the one that kind of looks at all of the companies, the S&P, TSX Oil and Gas Index. It’s up about 15% since that time, and the US is pretty flat actually overall since that time. So Canadian stocks have come up quite a bit. So I thought I’d just kind of get your perspectives of when you think back of what’s happened since then.

Eric Nuttall:

Yeah, a lot has happened. Not much has changed from a sentiment perspective, from a valuation perspective. I’m happy that you pointed out the performance delta between Canadian and US stocks because I think it reiterates our view then and even now, that there remains a discount between Canadian energy companies and US. Less so now, without getting overly political, I think a lot of the hostilities that we experienced for 10 plus years have lessened a little. I think there’s a growing realization about some of the challenges that US shale faces from an inventory depletion perspective.

And at some point, I think in the near future, there is going to be a premium being placed on those companies and countries with long data reserves. And so from an investable perspective, Canada really, really shines well. I think the other thing that has changed the most over the past year that has really made it challenging for energy investors has been the volatility, having to deal with geopolitics.

Trump has been, I find very destabilizing from perverting people’s sense in terms of the abundance of US shale and drill, baby, drill, and demanding lower oil prices. So that’s been hurtful on sentiment. Dealing with geopolitics, which as an energy investor is not something you ever want have to deal with because it can distort supplied and demand balances and what that means for price, but having to deal with Israel and Iran and sanctions on Russia and price caps, and all of these different things.

So I think where we stand today versus back when I last joined you, energy stocks remain deeply out of favor. Sentiment remains very, very negative. Evaluations I find still very compelling, especially we think we’re… There’s caution, there’s a cause for pause right now for oil, but I am really quite optimistic about the outlook for 2026 and beyond. And now for natural gas, especially after the sell off, and especially with LNG Canada ramping other projects, the outlook for Canadian natural gas is finally positive for the first time in many, many, many years. So we remain bullish in the energy sector despite some of the short-term challenges that we face.

Peter Tertzakian:

Well, let’s drill down into some of these issues, if you pardon the pun, but I want to go back first of all to the comparison between the Canadian and the US oil and gas industry, and we want to make sure we’re comparing apples to apples or as the case may, be barrels to barrels. Can you break down the oil and gas composition? You talked about long-dated reserves, which are like the oil sands versus the other different types of producers, because we want to compare not only, say Canadian gas companies with US gas companies to make sure we get that right comparison, but there’s also the size of these companies. If you could also talk about the scale of a US company average versus Canadian companies.

Eric Nuttall:

Yeah, sure. So last time I joined you, we would’ve been just beginning to talk about the twilight of US shale. So the belief that we had then that I would say has been completely validated, and that is US shale companies through the worst pricing environment drill their very best acreage, and they went from, what we call a tier one rock to tier two, tier three. So drilling less and less productive rock. Back in 2023, I don’t think any companies were really admitting to it. And it’s amazing just in two years time that conversation has gone from, there is no problem to, well, maybe there is a problem, but it’s not us, to now it is, well, we’ve got five years of high quality inventory. Those other guys only have two or three.

And so it’s been a rapid change in that conversation and that’s really important from both what I call the micro and the macro. On the macro, the world has been so reliant for US shale production growth over the past 10 years. It’s been by far the biggest source of incremental barrels. I think that’s coming to an end, depending on price, we think US oil production or shale production at least is in a permanent plateau to decline.

From an investment perspective, as you said, the US companies I think really stole a lot of the oxygen from the room for those few people that actually want to own energy companies. They were attracted by the larger market caps, the better liquidity, the stocks just tended to do better for a while. And I think as investors are awaking to that these companies, like to a company all have inventory challenges. It’s just a matter of degree. And as that lends itself to a more positive outlook for the oil price, I think energy investors are going to search the world to say, okay, there’s this bullish setup for oil, OPEC production, we’ll talk about capacity, that’s going to be zero by midpoint next year.

The world’s losing or has lost the largest source of supply, where can we get size and scale in an investable jurisdiction? You’ve got four in the world, you’ve got Venezuela, Iran, Saudi and Canada in terms of size and scale. Then when you apply the investability filter to it, it really ranks Canada very well.

Peter Tertzakian:

So just to get back to that barrels to barrels comparison, what you’re saying is that the US shale, which is very short-dated because of the very rapid production declines after you drill a well versus for example, the long-dated oil sands, which is much more akin to a mining operation, where the declines are very shallow, so you can produce it for a long time without a lot of maintenance capital, versus again, going back to the shales, which you have to keep drilling like a treadmill, to keep the production flat, let alone grow.

Eric Nuttall:

And to add onto that also where the quality of your inventory doesn’t decline over time. What we’re seeing in the US, both for natural gas and for oil in the Permian and the Marcellus, you’ve got erosions of anywhere from two to 3% if you evaluate a well on a per-foot basis.

Peter Tertzakian:

Can you compare then… Now getting back to the valuation multiples, and as Jackie said earlier, oil and gas companies in Canada have risen by 15% relative to American ones. You’re saying that there’s a realization of the quality of the Canadian company that wasn’t there before?

Eric Nuttall:

I believe so, and especially something that’s near and dear to our heart, which is share buybacks, the ability of companies to retire shares funded out of free cash flow to drive a re-rating because those remaining shares day after day, week after week, month after month become more and more valuable, when you’re facing a massive decline rate. It’s in the mid-forties, depending on who you ask, 42 to 45% base decline rate in the United States right now for shale, because you’re sprinting on that treadmill so quickly, the availability of free cash flow is not nearly as much as it is for a Canadian oil company where depending on how you define declines, you’re facing, let’s say 10 to 15%.

So it’s that additional free cash flow that I think is making Canadian oil companies way more attractive than the US at the moment.

Jackie Forrest:

And the other thing maybe that isn’t fully baked in yet is the fact that there’s a lot of reserves on the Canadian companies compared to the Americans.

Eric Nuttall:

Absolutely.

Jackie Forrest:

Yeah. And our shale gas, we have the, what do you call it? The treadmill. We have the high decline rates on our shale gas, but we have a lot more resource potentially than some of these US companies as well. All right, we’re going to get back to how shareholders are thinking about share buybacks here, because that’s a question that we have for you. But let’s talk really quickly about your view on oil price. Over the weekend we learned that OPEC wants to add even more supply to the market and the price of oil’s quite resilient, near $63 I think at the time of recording, per WTI.

And actually, a lot of people say it’s kind of too resilient, if you look at what the IEA is expecting over the next few quarters, it’s like three to four million barrel a day oversupply. Now we have the news of even more oil. So why are prices staying resilient and what’s your view on this change in OPEC’s direction?

Eric Nuttall:

So I think we would need the entire podcast to throw enough stones at the IEA. So let’s set their number aside. Those more credible numbers, like in energy aspects for example, they are still expecting 2 million barrels per day built, and if that were to actually come to pass, the inventory glut would be more than double what it was during the peak of COVID. So that’s not, to call it a forecast. That’s what the arithmetic may add up to, that’s not a reasonable outcome because OPEC will act. There is the massive amount of uncertainty right now in terms of, we’ve had the unwind of the original voluntary deal by OPEC members. As you point out over this weekend, we’ve had a further unwinding of 1.66, and the mistake people are making is they’re adding those numbers up and saying, “Oh my God, we’ve got 6 million barrels per day, whatever coming to the market.”

Much of that production was air barrels. It wasn’t actual volumes that were hitting the market. Secondly, there’s been massive cheating on the part of almost all countries to those deals since they became into existence. Now, Kazakhstan and Iraq, two notable examples. For the oil bulls, they’ll say, “Well, look, we’ve had this massive unwinding of the deals and the market’s fully absorbed it and inventories haven’t gone up,” because they’re looking at, what’s called visible stocks in OECD countries, mainly the United States.

China has been a massive buyer of barrels this year. They’ve been adding to their SPR, the Strategic Petroleum Reserve. They’ve added about 80 million barrels so far. And so my contention is, were it not for that SPR buying, you would’ve had builds in the more visible areas which are more impactful on price. So for now, the things that I’m watching, literally when I wake up in the morning, I’m pulling up things like Saudi Arabian oil exports, Kazakhstan oil production, Brazil and Guyana exports because I do agree in the very short term there’s a lot of oil coming to the market.

We have Guyana, and FPSO is ramping up now. It’s 130,000 barrels per day as of this morning of new production. There’s a couple FPSOs coming online in Brazil that’s going to add 400,000 barrels per day of capacity. There is actual production coming from OPEC members, mainly Saudi, and especially during the summertime, they burn a lot of oil for air conditioning that’s now coming to an end. So we’re tracking exports, which now point to almost 7 million barrels per day for September. That number’s early. So net-net, there’s a lot of uncertainty to have high confidence in the price over the short term. What makes me really constructive at some point in, I think early to mid-2026, is the world is waking up and realizing there’s a lot less OPEC spare capacity than what most people thought. And it really resides with Saudi. And so as His Royal Highness Prince Abdulaziz bin Salman, the Minister of Energy of Saudi Arabia is really in the driver’s seat.

And so when we think of the world where, I think our views on long-term oil demand are in sync, this notion of peak demand is just absolute fantasy. I think the demand for hydrocarbons is going to grow longer and stronger. We’ve lost US shale production, which has been the biggest source of incremental barrels over the past decade, that has come to an end.

And once we get past 2025, a lot of the big projects from the Guyanas and the Brazils and even Canada are coming to an end short-term. And so there’s a line of thinking that thinks that non-OPEC supply, which is about two-thirds of total oil supply, is actually reaching a peak to plateau this year to early next year.

And then you would’ve said, “Well, that’s fine because there’s all this spare capacity held by OPEC,” but now what we’re learning is much of that was fictitious as well. And so the holy grail is demand growth far more than consensus, so long the consensus believes, you’ve lost historical supply and now spare capacity within OPEC has not just been normalized, but it’s actually been neutralized.

Peter Tertzakian:

Let’s talk about the spare capacity in terms of percentages. So whether the numbers, correct me if I’m wrong, there’s going to be spare capacity about 3 million barrels a day on pushing 105 million barrels a day of demand?

Eric Nuttall:

My own number on spare capacity now is 2.1 million.

Peter Tertzakian:

2.1. Okay.

Eric Nuttall:

And we’re consuming roughly 105.5 million today.

Peter Tertzakian:

So I mean this is just mental math, 1.8, 1.9%, which is very thin, and that 2.1 million barrels is figuratively or literally the bottom of the barrel. These are the lower quality crudes. So there’s not a lot of slack in the system for future growth.

Eric Nuttall:

And it’s an interesting pivot because Saudis always maintain spare capacity in the event of the geopolitical disruption. And I think it’s an interesting topic to get into. Okay, why are they pivoting? I’ve been in Riyadh a couple times a year for the past couple of years, and I think through public speeches that you can track, Saudi leadership has expressed this lack of appreciation that many people have had for Saudis investment in that spare capacity because it’s an enormous investment to maintain productive capacity that you’re not putting onto the market, therefore you’re not getting any revenue.

And so I think this is a very important shift on Saudis’ part, where in public speeches they’ve said, “Look, at anytime we have spare capacity, the US president is calling us up saying, Hey, why don’t you add those barrels because we want the gasoline price to drop heading into an election.” And so without that spare capacity, we are way more exposed to an actual supply outage from geopolitics, which we haven’t had yet but-

Peter Tertzakian:

So would you say the Saudi strategy is to gain market share now, position itself for higher prices sometime in the future, potentially not more than a year or two out?

Eric Nuttall:

No, I don’t. I do not think that Saudi’s battling for market share. I think what they’re trying to do is kind of cleanse the book, so to speak, where a lot of OPEC members have said, “We can produce X.” Meanwhile, they’ve produced at 70% of X and they’re all going through an exercise next year of resetting baselines. So I think by effectively going, not to say max capacity, but by resetting these ceilings that countries are exposed to, it’s really going to reveal, okay, what is the actual productive capacity, sustainable productive capacity of a lot of these countries?

And I think what it’s going to bear witness to is, there’s a lot less capacity in the system. There was a lot of chronic cheating that was occurring for the past year and a half, and the oil market is a whole lot tighter than what we would’ve thought six months ago.

Peter Tertzakian:

Just as a side note, a typical manufacturing system of widgets or products has spare manufacturing capacity of about 10 to 15%, so a spare capacity of less than 2% on this global system called oil is really thin.

Jackie Forrest:

Well, if Saudi has decided we’re not going to just keep 1 million barrels a day always on the sideline, that’s really dampened the reaction to potential outages. There’s going to be much more volatility in the oil markets without that spare capacity, especially on the upside.

Eric Nuttall:

And like we need more volatility.

Jackie Forrest:

Yeah. Talking about no volatility, how about natural gas in Canada? It’s been very low for a long time. Last three months, I think ACO has averaged about 75 cents and for the year to date, it’s only about 1.50 bucks. Of course, we have the very important startup of LNG Canada, but it takes a while to ramp these projects up. What are your expectations for North American Natural Gas and then specifically Canadian gas? Because it’s just been difficult.

Eric Nuttall:

Yeah. So we’ve been negative to neutral oil for the past three, four months for all the reasons that we spoke about, this fear of a wall of oil coming to the market Q4, and [inaudible 00:19:43] and such. And so we thought safe harbor might just be natural gas stocks because at the time there was the belief that we’ve got these LNG facilities coming on, both in Canada and the United States, there’s new sources of demand from AI and data centers, and then sure enough, mother nature provides one of the coolest summers, I think in 10 years. And so that’s taken some of the froth or hot air out of the price short term. I think natural gas has gone from being a bridge fuel to becoming the fuel to satisfy incremental meaningful demand for power. You’ve done great podcasts. You’ve highlighted how power demand in the United States was flat as a pancake for many, many years, and beginning in 2024, it’s really starting to inflect now.

I hang my hat on LNG, you’re going to grow from roughly, US is exporting about 15 and a half BCF a day now, that’s going to grow to about 29 to 30 of feedstock by the end of this decade. You’ve got AI data centers, you’ve done some great podcasts. I think the bookends are rather wide. We just look at companies like GE Vernova, highlighting about eight BCF a day of backlogs for their turbines, and there’s other sources. And so I find natural gas from the demand side, at least for LNG and power, it’s a lot easier to sink your teeth in.

When it comes to weather, of course, we just hope for a normal winter coming, we think that a lot of the excess storage can be easily worked off. And then when we speak to producers in the United States at least, $4 in MCF seems to be their line in the sand where they’re not willing to meaningfully grow production, and even growing, I’m talking about low single digits.

So when a TC Energy comes out and says, “Well, gas demand is going to grow by 45 BCF a day by 2035,” and we’re producing, let’s say 125 in North America, give or take, that’s a pretty bullish setup. For Canada, our challenge has been, LNG Canada was supposed to be a massive catalyst just as TMX expansion was for heavy oil. What was different was we had a few natural gas producers front run that demand shock, if I can use that term. And so a lot of these short term benefits were negated.

We hope that Canadian gas producers take a page from their US peers who have been way more responsive to curtailing production, dropping rates, et cetera, when prices fall. LNG Canada should lead to about $1.10 differential, should, I hate the word discipline, but if producers just acted a little more intelligently to sub $1 gas prices.

Peter Tertzakian:

But let’s explore that a little bit, Eric, because natural gas, yeah, we’re basically giving it away at 75 cents. Meanwhile, in the US, it’s anywhere between 3 and $4 US. But effectively it’s a byproduct. Natural gas is a byproduct and the value is in the stream of liquids that come up with the natural gas in the same well. And so how do you think about that as… Your comment just now would suggest that natural gas producers are drilling for natural gas, but in fact they are drilling for the liquids which are much higher value and getting surplus natural gas as a byproduct? Isn’t that the way to think about it?

Eric Nuttall:

That is a very fair comment to make, however, there are some producers where they’ve got a fairly lean liquids component of their overall stream, without getting specific, and they’re growing their gas volumes next year by 7% into an already, I’d say, let’s call it oversupplied or adequately supplied market.

To me, that just doesn’t make sense. I’d rather take the CapEx being spent on those wells either diverted into liquids or even better, take advantage of depressed share prices and go buy your stock instead with it.

Jackie Forrest:

Okay, well, let’s get into the equity markets because that is what a lot of companies have been doing, not growing and giving more money to their shareholders. Let’s talk about M&A first. You talked about the compelling case for Canada because of our reserves and in the case of the oil sands, our low decline rates, and we have seen more M&A in Canada in 2025. We talked about it on our previous podcast, but there’s been a number of deals. The big one is Whitecap with Veren, Vermillion acquired Westbrick, Tourmaline also acquired a company. From your perspective, do you generally like to see these companies getting larger and why?

Eric Nuttall:

Depends if I’m on the receiving end or not. It’s a little sensitive right now with MEG, I feel like I’m losing a best friend right now. Let’s talk about M&A in the context of… Going forward, I do think, as we talked about, US shale companies are going to have to replace depleted inventory. Canada is the only place where they can apply their skillset. We’ve got a friendly jurisdiction, we’ve got depth of administratory, et cetera. So I do think you’re going to see US companies coming to Canada soon, and in fact, during Stampede, the talk of the town was that you had a very large natural gas producer coming in, kicking the tires, so to speak, in a couple of panels, et cetera.

What we’ve seen more recently, I think, you mentioned Whitecap and Veren, you’ve got Strathcona/Cenovus and MEG, I think what you’re seeing are companies taking advantage of lulls in sentiment and being opportunistic.

We were a very significant shareholder in Veren. We had added to the position late last year as the stock weakened off on some poorer well result from a different completion technique. And the sentiment is so horrific. The market just said, “Well, look, there’s a quality [inaudible 00:25:12], et cetera.” The stock fell. We saw a huge opportunity. And I think whitecap buying them, it was them also recognizing that opportunity and realizing that we were months away or weeks away from an inflection and sentiment.

With Strathcona and MEG, what I think Adam Waterous, and Adam is, how can you not respect Adam Waterous? He’s created a fortune for his investors. I am at the same time a little miffed with him because what I think he was doing was taking advantage of weak sentiment on oil and putting into play what was a very unique story.

MEG has 35 plus years of state flat inventory, in my opinion, a very shareholder-friendly management team and board that were on an ongoing basis hoovering up stock. Low to no growth, huge free cashflow, and using that to buy back their shares. We thought that they’d be able to buy back about half of their company over the next five years just through buybacks. And so I think Adam was counting on Cenovus having a low cost of capital. They’ve been plagued by downstream, they were, especially then, a month ago or whatever, trading at a pretty big discount to their peers.

I think his thought process was we can capitalize on very poor sentiment and go after one of the last remaining crown jewels and the only other likely bidder has a low share price, they won’t be able to compete. So I think what we’ve seen in Canada so far is more opportunistic.

What I think we will see down the road is, out of a necessity, US companies having to replace their inventory and coming to the Montney and Duvernay. I think the oil sense is probably a bridge too far, but I think you’ll see Montney and you’ll see Duvernay transactions.

Peter Tertzakian:

I want to key in on this word opportunistic. Take that a little further here, because I’m not sure I completely agree that it’s just opportunistic based on, say, low valuations. I mean, we do know that scale matters in the business, in any type of business, the scale matters because it helps to reduce your costs with buying power for services and so on. But if we think about the oil and gas producers, historically there’s been a fairly wide gap between what the buyers are willing to pay versus what the sellers were willing to sell at.

In other words, there was that bid ask spread as they say in the business. I get the sense that that’s narrowed, that the sellers are now willing to sell at a lower price versus what the buyers were willing to pay. I mean, can you comment on that? I mean, the times have changed. There’s almost like a capitulation that scale matters and that small sellers need to sell to the bigger ones and they’re willing to actually take a lower price.

Eric Nuttall:

I’m not going to totally disagree, Peter. I do think that each transaction is unique, and having spoken to the Duvernay team, the morning of them announcing a massive premium, there was not joy in their voices, speaking with MEG individuals, I don’t think this is capitulation. This is them having to react to being put into play. I do agree, size and scale from an equity perspective matters. There is a battle for relevancy. There is zero appetite. We run still what is the largest energy fund in Canada. We don’t buy small caps. We can’t. There’s no liquidity. Even mid-caps, we own mid-caps, but it is more difficult to… You want to move around 20 or 30 million shares. It has its challenges, and so that larger market cap eliminates one objection that investors or potential investors may have.

So I do get that. I do see the cost synergies, but at the same time, when we’re on the receiving end, my fear is that as sentiment remains poor, and I see it every day, my inflows/outflows are the best proxy for sentiment in this space.

And we lose through redemptions of all public information every single day for the past year and a half, and we have, what I consider one competitor and he’s a great guy. Same thing for him. And so the sector is bleeding money every single day, and so sentiment is poor, and my worry is we’re going to lose some of our crown jewels at modest premiums where if there was a bit more patience, the money’s going to be made in the wait. You look out two to three years at a much, much more bullish outlook for oil and natural gas.

We see very meaningful upsides, and so I worry that investors are going to tender to a 10% premium or 20% premium when we think you can make multiples of that over time.

Jackie Forrest:

Okay. Well, you’ve mentioned share buybacks as very important. When a company buys back their shares, doesn’t it sort of say that they don’t really have any attractive opportunities to invest in? And I think up until now, Canada didn’t have enough pipelines for oil or gas, and that was kind of true because if everyone grew and we saw that in 2018, we’ve got a problem, right? But now with the advent of TMX, maybe expanding TMX, maybe a Prince Rupert pipeline, maybe more beyond LNG Canada phase one, there’s the potential for more projects because Mark Carney’s nation building projects is giving us hope that we will get some new infrastructure.

How do you look at share buybacks in that context where companies actually could grow? Would you rather them grow to get a return for you if they could?

Eric Nuttall:

My fiduciary duty to my clients is to make them money through investing in the oil and gas energy equities. And so what is my highest confidence path to achieving that? What you said is, I think for other sectors, why are you buying back stock? You’ve got nothing else to invest in. I think that is very reasonable. However, when you look at things through the filter of today, where the sector bleeds money every day through outflows, people are net sellers of energy stocks. They have been for the past year and a half, there is still ignorant views of peak demand, abundance of supply in US shale, all these different things.

I am not confident that a share price of an oil company will go up or natural gas company will go up if you just grow volumes. What I am absolutely confident in is if you buy back half of your stock, those remaining shares are becoming much, much more valuable because the ongoing share buybacks and even dividend potential grows exponentially.

And so that’s the philosophy that we’ve had for several years. We can easily point out that there’s a very high correlation between share price appreciation and those companies that have been aggressively buying back their stock. And so we just think it’s a surer path to getting share prices to go up in an environment where the sector is bleeding money every single day.

There will come a time, however, where that changes. I do think we’re heading towards, not to sound dramatic, but the world’s facing a supply crisis in the coming years, and there will be a massive call on incremental barrels, and there are only so many countries that have the ability to satisfy that. Canada is going to be one of them. But I think the atmosphere and the sentiment will be vastly improved then versus where it sits today because it’s a very similar conversation versus two years ago. It’s just people just don’t care about this space. It’s become very complicated. It’s become very volatile, very complex. And from a retail perspective, which is a massive source of buying, they’re much more happy buying Nvidia and Bitcoin, where seemingly they make all-time highs every day than versus the brain trauma required to invest in energy stocks right now.

Peter Tertzakian:

Well, given that you say the people are selling shares, it’s bleeding from the perspective of people finding other investment opportunities. Meantime, the industry will still generate $170 billion of revenue, and royalties and taxes to government will be over $30 billion, which is no small amount of change given the deficits that we see in government. And if you buy into the notion that we aren’t going to be in a supply crunch globally, and it is Canada’s opportunity, it would argue that now is actually the time to build more export capacity, to position ourselves to seize this moment coming up. What are your expectations that we will be able to do that under the new Carney liberal government that have signaled major infrastructure project building, including oil and gas export facilities? Are you optimistic that that’s going to happen?

Eric Nuttall:

You’ve had some fantastic guests on to address that topic. And I think the common view is, we’ve had a lot of talk. There’s been a lot of positivity. The right things are being said. I’ve yet to see any real action, and I believe Parliament is going to be resuming soon. I’m not confident just yet. We surely have a more sophisticated government in place now than we’ve had over the past decade. I do think there is a market demand for our product, both for LNG and for oil. I’m not yet confident that you’re going to have the private sector stepping up to satisfy that demand for a variety of reasons.

So I think it’s still too early to tell. I’d like to see some concrete action as opposed to just a lot of press conferences and talk.

Jackie Forrest:

Now, Eric, if we actually want to have these export projects, we actually need supply to fill them. And so producers are going to have to grow, and you’re telling them they can’t grow. So I’m feeling less optimistic talking to you that we’re going to have producers sign up for these.

Eric Nuttall:

It is a bit of a conundrum, and I admit to perhaps I’m part of the problem. Again, it goes back to, you’ve got two paths to have a rising share price because in the end, that’s what I think boards need to be worried about. And so path one is, let’s grow production. Let’s hope sentiment improves. Let’s hope people care. Path two is, let’s just buy back 15% of our stock a year. And there’s a surety that the remaining shares become more and more valuable with each passing day, and week and month, and especially as we’ve beaten this horse to death. But in a sector where there’s an abundance, massive wall of free cash flow, and yet the sector experiences investor outflows on a daily basis.

Peter Tertzakian:

So you’re favorable to share buybacks obviously now, but say you had a lot more certainty that export pipe would be built for both oil and gas, and able to attract high value markets. Would you then as an investor be more favorable to the companies that you own to plow money back into the ground instead of spending it on buying back shares to grow production and fill those pipes?

Eric Nuttall:

I think if the outlook improves from a perspective of OPEC having meaningful spare capacity for many years, and so at a time when there’s a lot of OPEC spare capacity, so in other words, they’re withholding barrels from the market. Why are we, Canada and the United States, when we’re a higher cost source of barrels, why are we adding barrels onto the market? The world’s going to be changing very soon where OPEC, and I do think this is a big shift. We’ve gone from OPEC not just normalizing spare capacity, but now indicating that they’re actually going to be eliminating spare capacity effectively over the next, I’m going to say nine months to a year.

So that’s a very, very different world than we’ve been living in. And so when there’s an actual significant call on those barrels, I think that’ll translate into improved investor sentiment, and then that will potentially green light companies from growing production more meaningfully than they have in the past couple of years.

Peter Tertzakian:

But that green light is somewhat dependent upon investors like you because when CEOs come to Bay Street, then they go to Wall Street and they speak to the portfolio managers, and you are effectively as a shareholder, guiding them as to what to do. So they look to investors to say, “Yes, it’s time for us to put money back into the ground versus buying back our shares.” I think this is a fundamental thing that we need to wrestle with. We don’t have to answer it right now, because everybody’s talking about building pipe, but not a lot of people are talking about how to fill the pipe.

Eric Nuttall:

It’s a very fair, and I appreciate how there’s tensions between different viewpoints as well. I’m sure government officials have a very different list of priorities than what an investor may, and it’s not easy, but neither has it been an energy investor for the past five years. Energy investors, the owners of these companies, I admit, government owns the resource but we own the companies. Both on an absolute and relative basis, they deserve to be rewarded for the patience over the past several years, because it’s been very difficult to be an energy investor.

Jackie Forrest:

Well, and we have a lot of national goals. And one thing, this has been a great conversation, Eric, we’re going to wrap it up here, unfortunately, we have so much more we can talk about. But one thing that’s on my mind, you talked about a green discount in 2023 because of the liberal policies. Most of those liberal policies are still here today. We’ve got the cap on the oil and gas emissions. It’s not in law, but it’s certainly still being talked about. We’ve got rising carbon price that’s in law. We’ve got very difficult 2030 greenhouse gas emission reduction targets, if we really are going to build these pipelines and do more LNG, it seems impossible to meet these goals.

We’ve got a government that’s saying the right things, as you said. So how is the green discount for Canadian oil companies now? Do you think it’s been erased a bit with the change in share price relative to 2023 compared to the Americans?

Eric Nuttall:

I still think that if we got out of our own way, it would lead to another re-rate for our shares. It’s just such a lost opportunity. Like here we have one of the most attractive and profitable at size and scale oil and natural gas plays on the planet, and yet we continue to shoot ourselves both in the foot and in the head from these stupid policies.

And so I just hope that, again, a lot of the talk translates into action. No other country in the world would do to themselves what Canada is doing to themselves. And so I think we just have to wake up and realize that we’re losing our competitiveness. Look at LNG, the United States, they’re exporting 15 and a half BCFs. We’re at one roughly as of today. Think of the lost opportunity in that.

And so I’m hopeful, I’m kind of optimistic that we’ve got a government that is starting to see that and less guided by environmental dogma and more about getting paychecks and improving our fiscal state because we sure as heck have the opportunity to do it.

Peter Tertzakian:

Well, thanks for sharing that and all your other views, Eric. It’s been a great conversation all the way from talking about the supply side, OPEC, spare capacity, global oil demand, US versus Canadian companies and plays, consolidation, share buybacks, and now carbon policy. So I think we covered the full gamut in a very short period of time. It’s always great to get your perspective as an investor because investment is critical to any business and industry.

So we hope to have you back as our first time fourth time guest in the near future. Thanks so much for taking time out of your valuable day. Eric Nuttall, Partner, Senior Portfolio Manager at Ninepoint Partners. Thanks again.

Eric Nuttall:

Thanks so much.

Jackie Forrest:

And thank you to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

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UNCATEGORIZED

Increasing Canada’s energy ambition is an economic and geopolitical imperative

Produced by Peter Tertzakian | September 9, 2025by Peter Tertzakian

This article was originally published in The Hub.

Setting the stage

Through energy projects like the Trans Mountain Expansion (TMX) and LNG Canada, Canada has begun to diversify its oil and gas exports. But in a geoeconomic world, these alone do not amount to a national playbook. Canada is competing in an arena where tariffs, sanctions, resource dominance, and fiscal coercion are weapons of statecraft. We must have a deeper understanding of our current energy ambition and where we want to be in the future.

Free market competition no longer governs prosperity—state power over markets is the new playbook. Strategic industries, from pipelines to semiconductors, have become extensions of statecraft, wielded as instruments of leverage, coercion, and survival. The global economy is starting to look like a geopolitical cage match. The impact of this new order—tariffs, sanctions, control of trade routes, and dominance over strategic resources—is now routinely felt in the global arena. For Canada, this shift is not an abstract debate. It is an urgent strategic question: How should a resource-rich, trade-dependent nation position itself in a world where economic force and state capitalism, not market fairness, set the rules?

Canada in the cage match

Canada is privileged with nearly every resource the world covets—from agriculture to critical minerals—but oil and natural gas remain the most strategically significant. In 2024, Canada exported $187 billion CAD in upstream oils, natural gas, and refined products—that’s a quarter of the $780 billion in total exports that year.

Unfortunately, we aren’t showing up in the ring like a serious contender should. Our posture continues to be passive, with oil and natural gas exports overwhelmingly tied to the U.S., leaving us exposed to recurring price discounts and political pressure—realities that are now impossible to ignore. We’ve been on the receiving end—tariffs here, trade bans there—and from canola to copper, our defence has often looked more like curling up on the ropes than counterpunching.

But the intent to fight is beginning to emerge. Canada’s federal and provincial governments are working to expand trade relationships and build infrastructure for new markets. The passing of Bill C-5 is a constructive step, akin to a pledge to hit the gym and add some muscle. But strength alone doesn’t win a match. Building a pipeline yields just a pipeline—there must be a strategic purpose behind it.

The opening of the TMX in 2024 improved our strategic position, at least for the time being. It narrowed the price discount for our heavy oil benchmark, Western Canadian Select, and sent over 220,000 barrels per day to Asia for the first time. When you consider that global consumption is over 100 million barrels daily, it’s not a lot, but it’s a start toward market diversification. The table below shows the latest data for tanker loadings from the TMX pipeline.

Table 1. Graphic credit: Janice Nelson.

Similarly, LNG Canada sent the first cargoes of LNG off the B.C. coast at Kitimat this summer. The export capacity for Phase 1 of this facility is about 14 million tonnes per year, roughly 1.8 billion cubic feet per day. While this is significant for easing Canada’s upstream natural gas constraints, it is a drop in the Pacific Basin bucket, where annual trade exceeds 300 million tonnes.

Canada has taken some long-overdue baby steps towards improving access to oil and gas markets beyond North America. But it hasn’t been easy: the buildout of TMX and LNG Canada came after a dozen years of arduous, expensive infrastructure-building challenges. For now, all we have achieved is some better commodity pricing for oil; natural gas is still discounted. In this aggressive geoeconomic arena, that’s just shadowboxing.

Levels of ambition in a geoeconomic era

As Canada negotiates this new order, there are four levels of ambition we can pursue in terms of how active and strategic a player we choose to be in the arena. At the moment, our country and our energy industry are trying to get promoted from the lowest level.

1. Market Hostage—Low level of ambition with a passive stance, highly vulnerable to market discounts and economic coercion

A passive stance is like watching a reality TV show—you see the drama but are powerless to shape the outcome. Hydrocarbon producers are forced to accept whatever price and terms buyers dictate, largely because they have no alternative markets.

The result is predictable: price discounts, lost revenues, royalties, and taxes, plus exposure to political pressure. Over the past 15 years, Canada’s experience selling heavy oil at steep discounts due to pipeline bottlenecks and overreliance on U.S. buyers is a textbook example of this passive vulnerability.

The financial consequences of being a Market Hostage are significant to all levels of government. On heavy oil and bitumen sales alone, the forfeited revenue to Canada’s upstream industry is of the order of a net $49 billion USD over the last 15 years, or an average of $3.3 billion USD per year. The figure below shows the monthly forfeitures since 2010, which peaked at $2.7 billion USD in July 2018.

Figure 2. Graphic credit: Janice Nelson.

2. Competitor—A more assertive stance, able to maximize market potential and withstand pressure, but often playing defence

A “Competitor”-level nation, along with its industries, actively invests in getting products to market and diversifies its customer base, capturing more value while remaining attractive to investors. The completion of the TMX nudged Canada toward this level by opening access to Asia, narrowing oil price discounts, and expanding supplier options. But the gain is fragile—as Figure 1 shows, almost half of all new TMX exports still go to the U.S. Without more export capacity to a wider base of international customers, the relatively small amount of market access is not a strong strategy for the times. The same can be said for our country’s first LNG export terminal, where export volumes are not yet significant enough to narrow Western Canadian natural gas price discounts.

3. Negotiator—Influential with the ability to use energy as a shield and a bargaining chip in national strategy

To achieve the title of “Negotiator,” our energy sector, Indigenous communities, provinces, and federal government must be aligned to maximize profitability, royalties, and taxes, and be ready to defend national economic interests. Oil and gas volumes become strategic bargaining chips, enabling Canada to respond to tariffs, sanctions, or other economic coercion.

Reaching this level requires building consequential global export capacity, meaning more transport to the coast from western producing regions. This would require aligning federal and provincial interests with upstream, midstream, and downstream sectors of the oil and gas industry.

At a time when many countries are increasingly migrating to various models of state-sponsored capitalism, Canada lacks the degree of state-industry alignment required to propel us to this level. Becoming a Negotiator doesn’t imply a need for state control or nationalization. This ambition could be achieved if Canada were to realize better collaboration between and among federal and provincial governments, Indigenous communities, and alignment with the entire supply chain of the oil and gas industry, including investors.

4. Aggressor—Wields market power of vital resources to gain geopolitical advantage

Aggressor nations not only control vital resources but also wield them decisively to achieve their geopolitical aims. The label “superpower” fits here, though the term is often thrown around too casually. The U.S. and China are the only two countries that truly deserve the title. Alliances and cartels can also achieve this ambition, with OPEC+ being a prime example.

Canada, due to our lack of export scale beyond North America and collegial approach to international relations, is not likely to achieve Aggressor status. However, by understanding this level, it can help us set realistic ambitions and clarify the gap between where we are and where we could be.

What will it take?

As Canadians consider our country’s energy ambitions in the broader context of geoeconomics and state capitalism, they should ask themselves these questions:

What oil and gas export volumes are necessary to achieve an ambition level of 2 or 3, or even 4?
What would it take to build—and keep—full, new oil and gas pipelines?
What consumer markets should be targeted?
What are the impediments and conditions required to achieve each level?
Where should investment come from?
How can investors—domestic and foreign—be enticed to help Canadian industry build the infrastructure it needs to further its ambitions?
How will climate policy aims be reconciled with a necessity to increase our geoeconomic ambitions?

Canada is slowly waking up to the understanding that a passive ambition is no longer acceptable, let alone in an era of economic aggression. The federal government’s creation of the Major Projects Office, designed to fast-track approvals for energy infrastructure, reflects this shift.

Paired with a shared national ambition, the office could become a powerful tool to align government, Indigenous communities, investors, and strategic industries, turning Canada’s resource wealth into enduring economic leverage.

A version of this post was originally published by Studio.Energy.