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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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.

Announcer:

For more ideas and insights, visit ARCenergyinstitute.com.

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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.

UNCATEGORIZED

September 8, 2025 Charts

Produced by wp_user | September 9, 2025by wp_user

We’re Back! Catching Up on Summer’s Energy Headlines

Produced by ARC Energy Research Institute | September 2, 2025by ARC Energy Research Institute

After a summer break, Peter and Jackie are back with their weekly podcast. This week, they catch up on the events and news headlines from the summer, including:

Geoeconomics – recap examples where countries use economic tools to influence foreign affairs – as well as more moves towards state capitalism by the United States, where the government exercises more control over institutions and companies.
Canadian oil patch M&A news.
Updates regarding the federal government’s Bill C-5 and its plans for advancing nation-building projects.
Tariff negotiation tactics, including news that Canada is removing countervailing tariffs on the United States.
The United States is exerting more influence over the International Energy Agency (IEA), with the organization planning to reintroduce the Current Policies Scenario in the next World Energy Outlook to be released in the fall of 2025.

Content referenced in this podcast:

Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/

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LinkedIn: @ARC Energy Research Institute

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Episode 293 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. Well, we’re back. We are back after our short summer break. What was it? Four or five weeks?

Jackie Forrest:

Yeah, something like that. I think our last episode was the middle of July and it went fast for me. How about you, Peter?

Peter Tertzakian:

Yeah, it seems like a distant memory. Summer. It was a good one.

Jackie Forrest:

Yeah. Let’s hope we still have some summer coming.

Peter Tertzakian:

Yeah, I think we do.

Jackie Forrest:

It’s quite warm as we’re recording. Finally. It was a cool summer. I actually didn’t mind it though because I did a lot of hiking and biking and I didn’t mind the cool weather. I really enjoyed the summer.

Peter Tertzakian:

No, I think the temperatures were just fine. We needed the moisture, so I’ll be positive about that. And it looks like we’re headed into a nice fall, so there’s a lot to talk about. As always.

Jackie Forrest:

Yes. So I think we’re going to spend this time going over some of the headlines over the last six weeks, some of the things that caught our attention. When you think about all the news flow, it definitely slows down in the summer a little bit. What are some of your reflections?

Peter Tertzakian:

Well, I think that the big reflections from, let’s start from a big picture, macro point of view. Obviously there was the themes like trying to get a peace deal in Ukraine, and then the ongoing announcements by the U.S government vis-a-vis the tariffs culminating even over the last week or so with the 50% tariff on India, the tariffs on Brazil, negotiations ending up in sort of a handshake deal in Europe. I mean, it’s sort of this ongoing running theme and I put that into a broader category of recognizing what’s going on in the world. And that is that this whole theme that, I think, we brought up as we were signing off for the summer, the theme of geo-economic warfare where economic coercion is used to achieve geopolitical aims is a running theme in the world. And obviously we feel it most closely by our proximity to the United States and what the United States is doing. But if you actually look around the world, the use of economic muscle to influence geopolitics, whether it’s by China or other countries, it’s just a running theme.

And this is an important theme that I think we’re going to have to carry through the fall, winter and beyond because I don’t think this is going away. Some people say when Donald Trump exits the political scene, ultimately, that we’re going back to some sort of collegial world where free trade will reign once again. But I don’t think so. I think that we are in this world with unpredictable events which redefine the nature of how people think about risk and return and that redefinition of risk and return is consequential to boardroom decisions and ultimately to decisions like who’s going to pay for a pipeline or power lines or whatever energy infrastructure that we decide to build. So these are some of the themes that I want to touch on Jackie as we talk in the podcast, is the changing nature of risk, how it affects capital flows, how it affects the energy business, and ultimately, at a slightly higher level, how it affects Canada’s ability to compete in this global cage match, I’ll call it, of people throwing their economic weight around or nations throwing their economic weight around.

Jackie Forrest:

Yeah, we’re going to dive into these topics as we get into the fall podcast episodes and we have a number booked right now and we’ll tell you a little bit about that. But another thing that caught my eye, which is related, is some of the firings that have happened over the summer. So President Trump fired the boss of the Bureau of Labor Statistics after they released weaker than expected jobs data in early August and just recently, Federal Reserve Governor Lisa Cook looks like going to be fired or wants to fire them. And of course there’s been lots of threats against Jerome Powell, the Federal Reserve chair. So I bring this up because I think it’s quite concerning that important data about the economy could be wrong in a country like the US. So far, the stock markets have been quite resilient to all of this. The US Dow Jones is near a 52-week high at the time of recording, but not knowing or feeling that that Bureau of Labor Statistics data is not reliable.

I mean that doesn’t help investors feel trust and confidence in their investing. And then having a politicized central bank is also a big issue. I think there’s risks like inflation, capital flight, it’s not going to happen overnight, but people may start diversifying away from the US dollar if they think the central bank is unpredictable because political decisions are going to affect it, not just what’s the right thing to do in terms of managing the money supply. So it’s interesting to me, the equity markets have been so resilient.

And then we add to this, the tariffs. Now, there has been a few tariff deals over the summer like with Europe, so maybe a bit more certainty on some of the tariffs, but like you say, we just find out India’s getting slapped with a 50% tariff. So there’s still a lot of uncertainty in terms of how this will affect the economy, and it hasn’t really slowed the economy down yet, and maybe if interest rates are cut, that will help offset the potential for a slowdown in the economy and create more demand for products. But certainly there’s a lot of nervousness, I think, in terms of the future.

Peter Tertzakian:

I think that’s the right word. Nervousness, if not anxiety, about going forward and that leads to some sense of paralysis. I’ve noticed in boardrooms that I’ve attended meetings, there’s a level of anxiety, cautiousness. Ultimately leading to potential paralysis of making big dollar decisions going forward. So I think this is all concerning and getting back to the firing of some of these key people or potential firings. This points to get into a broader theme that I sense and that is the theme of state capitalism. In other words, that there’s now going be greater state control over agencies, if not even corporations.

I mean, if you look at the moves that the United States governments is making in terms of taking equity position in Intel, the type of deal it cut with Nvidia with a 15%, almost like an overriding royalty on their sales to China. I mean, I think that these are examples of increasing desire to have state control over things, and that is consistent with that theme of geoeconomic warfare that I talked about, economic coercion. Because for a state, a nation to be able to exert economic weight, it has to have alignment not only with its institutions but with its industries.

This is something that China and other countries are very much accustomed to, arguably even countries in the OPEC realm where a lot of their oil and gas businesses are state controlled outright or is heavily influenced by the state. So this is the type of era that we’re heading into. And like it or not, Canada has to recognize this because to stay economically relevant in this changing world is going to require some different kind of thinking.

Jackie Forrest:

Okay, well, let’s get to Canada in a minute here because we of course have these nation building projects and it’s been quiet this summer, but there has been some news and I want to review that. Before I get to that, let’s talk about Canadian oil Patch, M&A news. So 2025 has brought consolidation to Canada. There’s been some examples of big deals this year, like Whitecap combining with Veren, which was the former Crescent Point. Vermilion acquired Westbrick Energy. Tourmaline also made an acquisition. There’s also been some asset sales, but news on August 22nd was Cenovus is making a friendly offer for Meg. The company had another offer from Strathcona Resources earlier in the summer, but it was rejected by the Meg board. Now this deal for Cenovus to acquire Meg is not final. There’s going to be a shareholder vote still, but it looks like it has a higher chance of going forward for sure with support of the board. So of course there’s a lot of synergies just geographically. Meg, Christina Lake operation, their only operation is close proximity to the Cenovus Christina Lake, but not everyone’s happy with this deal, I guess.

Peter Tertzakian:

No, not everybody’s happy with the deals. Some would argue that they didn’t pay enough. Some would argue that the cash flow and share buybacks of Meg were compelling and therefore it was taken out too early. There’s all sorts of arguments. We’re going to talk about that more with an upcoming guest surprise. So we’ll keep you hanging on that one. But I’d like to talk more broadly again about the consolidation trend because there’s two sides to that coin. One side is that it’s necessary if our Canadian oil and gas industry is going to compete to have scale and size, because scale matters in terms of things like cost reduction and competitiveness.

So it’s interesting that even let’s just go back 20 years ago, you would say, well, how many companies are there in the Canadian oil and gas industry? You can probably say a few hundred, but now really there’s only the top 25 will account for probably 90 to 95% of what’s going on in the basin and the other companies. At most there is, if you really added it all up with the little company’s 150 to 200 companies, that’s all that’s really remaining. But it’s really a basin story about the top 20.

Jackie Forrest:

Right? Well, and it’s interesting, as you know, I looked at a list of the top 20 US companies and I took out Devon and ConocoPhillips, Chevron, the really, really big ones. Sort of looked at the top 20. If you take out what I would consider majors or really large companies. And I compared that to Canada’s top 20. In that top 20 list, the US had a whole range of companies, but the smallest companies were about 3 billion dollar market cap, and there was only a couple in that size range. Everything else was like four or five, six or even tens of billions of dollars. Canada’s top 20 smallest companies were about one and a half billion, and there were six in this. Six out of 20 were in that range. So our companies are still very small compared to the Americans. Now the American industry is larger, produces more, but I think in public markets, having that larger size is helpful. So.

Peter Tertzakian:

Yes, the larger size is important. It’s also important if we’re talking about building new infrastructure, whether it’s LNG facilities and the pipes to support it or more oil pipelines, the question remains, well, who’s going to pay for it? Well, ultimately, larger companies have a greater capacity to access capital to help pay for it, to backstop all the way from the long-term pipeline deals that have to be struck, the take or pay kind of deals. And so it’s, in that regard, the consolidation is a good thing if we want to build out the basin more. But from a competition standpoint, obviously there’s less of it. So that poses a different set of issues.

Jackie Forrest:

And competition has been something that has enabled companies to innovate and find new ways to extract oil and gas more efficiently. We should have a podcast in the future on this too, but this idea that we’re going to build a bunch of oil pipelines, we are going to need to grow supply too. And, I think, bigger companies will have a better chance of raising the equity that they might need to do that. Now, here’s the question I have been asking for two years. Are we ever going to start seeing US or foreign companies coming into Canada?

Up until now, we’ve really had a trend over the last decade, including the end of last year, where American companies are leaving and other foreign companies as well. So Chevron left at the end of 2024. Devon left, Shell left, Marathon BP. We could just go on and on. Right? Will we see some of those companies come back, especially the American companies? There’s talk that maybe the resource down there is getting a little thin and that maybe some of these companies need more well locations and Canada’s got ample resources. If we have a more supportive federal government, which it looks like the signposts are that we do, if we’re going to get new infrastructure including oil and gas export pipelines, could we start to see Americans come up here? We haven’t seen it yet, but maybe that will be a new trend over the next year or two.

Peter Tertzakian:

Yeah, I think if there’s stronger signals, and we’ll see this fall with a Bill C-5 what sort of projects get announced, but if there is increasing probability that there’s going to be more infrastructure built, then I think it will wake up international investors, including the American investors, but not limited to, that may come here and revisit. If you look at long-term involvement of foreign investors in the Canadian oil and gas industry, which spans a century, but just take it back to, say, the late seventies, early eighties, there is a cyclicality to companies coming in and out. And definitely over the course of the last 15 years, there’s been an exodus where the interests of a foreign multinational like Chevron or Shell, they’ve sold their interests and it’s been consolidated by Canadian companies like CNRL and Cenovus and Suncor and others. The question is, are they going to come back to a basin that’s now more mature, more consolidated? We’ll see. But I think that does depend upon whether or not there’s infrastructure that will allow the industry to grow.

Jackie Forrest:

And the policies.

Peter Tertzakian:

And the policies.

Jackie Forrest:

So let’s get to our next topic, nation-building projects. So of course we had Canada Day, the passing of Canada’s federal Bill C-5 that aims to fast-track projects. It has been a quieter summer, but there has been some news that I think we should review. In July, the First Nations consultations occurred on Bill C-5 and overall, there’s quite a few negative news headlines coming out of this process. I don’t know if you remember in July some of the media coverage and there’s even a legal challenge by some groups against the government on C-5. But what I take from this is the folks that are in the media and maybe unhappy with the situation are not necessarily the folks that we need on board. What really matters is when we have these nation-building projects that the indigenous communities that are in the area and directly impacted by these projects, what matters is that they are on board with the process. And so I think that that media coverage kind of missed the plot a bit in that it is not everyone in the country needs to be okay with this. It’s just the affected communities.

Peter Tertzakian:

Yeah. I think that that’s the themes that is being recognized in other parts of the world, including the United States and elsewhere. And not that we need to emulate others, but there’s no question, as I said earlier, that the various stakeholders have to align if we’re going to be relevant in this new geoeconomic type world. We can’t have industry paddling in one direction, provincial government in another, indigenous and other groups, different direction and the federal government and so on. There has to be some sense of direction and direction overall requires leadership, and the ultimate leadership has to come from a federal government because it is the overarching jurisdiction for our nation.

Jackie Forrest:

Right. And it will be on some of those projects specifically and with the groups that are affected that I think matters the most. Talking about leadership and getting these projects done, the major projects office. So this is this one window, this empowered office that’s going to help fast track and get these projects through the environmental review. Now, we are recording this right before the Labor Day weekend. This will be released after Labor Day weekend, but we have been told by Prime Minister Carney that we will see some announcements around this office being set up on Labor Day, including announcing a CEO, which would be announced in early September. So I think this is really important. We’re actually going to have a future podcast on this topic. We have learned over the summer that BC has been pretty successful with this approach. This was one of the ways that they got LNG Canada over the finish line.

Peter Tertzakian:

Right.

Jackie Forrest:

Okay. What to expect though, I think the big question on everyone’s mind as we enter the fall is we’ve been told we’re going to learn about these projects in the fall. What does that mean? The fall in the government’s definition could be right up until December it seems. And how will these announcements be made? There was some information on that. I will put a link to this in the show notes, but The Vassy Kapelos show did have an interview with Energy and natural resources minister Tim Hodgson, and there was some really good information in there, and I just want to highlight some of the things I learned by listening to that interview. First of all, minister Hodgson expects a range of potential projects. So he talked about natural gas and even actually on his recent trip to Germany, he was really plugging natural gas.

I don’t know if you saw that headline, Peter, but I want to read the quote because for many people in the industry, Justin Trudeau’s comments that there was no business case for LNG several years ago has just really stuck with people and made people pretty angry. But what did our minister Tim Hodgson say? He said, unlike the previous Canadian government, which closed the door to LNG exports, prime Minister Carney’s government has opened them. If the demand is here and the infrastructure is built, Canada will deliver. So finally we have a federal government that thinks there’s a business case for LNG.

Peter Tertzakian:

Yeah, it’s about time. I mean, I think the whole comment a couple years ago that there was no business case for LNG was really misguided. I mean, let the industry decide that. It’s not for the federal government to decide whether or not there’s a business case. As I said at the national level, it’s the question about whether or not we are willing to align with our allies in Europe to participate in this world that we’re facing with aggressors and so on. So I think it is a new day. I think there is going to be receptivity to this. I think the issues are, though, how do you get the gas to LNG terminals, which historically have been proposed in Atlantic Canada in particular the Maritimes. So we’ll see what happens. Or actually in Quebec, right?

Jackie Forrest:

Yeah, yeah. There was a project in Quebec, so you basically bring the tanker up to st. Lawrence. I mean the advantage of that location is you just need to extend the existing TransCanada gas system. There’s some greenfield, but it’s not too much to get it to that location.

Peter Tertzakian:

Lots of talk about Churchill too.

Jackie Forrest:

Yeah, so for sure, we learned on Prime Minister Carney’s recent trip to Germany that port expansions at Churchill and Montreal are going to be on the list and will be formally announced in the first few weeks of September. So we know that will be part of it. He did come to Stampede and talk about likelihood of an oil pipeline being on there, but he did say many times, and so did Minister Hodgson, that they want to see private capital support these. They want to have proponents behind these projects. So for an oil pipeline to happen, we need to see a project with a proponent, and we haven’t seen that yet.

I want to bring up another topic on this Vassy show. She really pushed Minister Hodgson that, would the feds commit to removing existing policy that could be a barrier to these nation-building projects. So she talked about things like the oil and gas emissions cap or the tanker ban or bill C-69 or even our overall emission goals for 2030, that if you actually wanted to reduce emissions at the rate that the federal government has committed to, it’d be very difficult to build a bunch of LNG terminals or oil export pipelines because it would make those 2030 goals very difficult to achieve.

And she really pushed him and Mr. Hodgson said he didn’t want to make any comments on scrapping policy in general, these specific policies. He said he doesn’t want to deal with a hypothetical, they’ll deal with these issues when the projects get announced. And so she pushed him quite a few times on this and kind of got the same answer each time. I mean, what do I take from that? These are not his words, but just sort of what I took from the discussion. It seems to me that maybe they’re going to give exceptions for these specific projects and maybe not deal with repealing some of this policy. I don’t believe that’s the right direction to go.

Peter Tertzakian:

No, you can’t pick the winners and losers. And with due respect to the minister, I’d key in on this word hypothetical. It’s not hypothetical, it’s real. It is. The emissions cap is not hypothetical. It’s out there, it’s lingering. It’s an uncertainty. It needs to go. It needs to go for the whole industry, not just whomever the potential proponents are for say an LNG facility, a pipeline, an oil. These are not hypothetical issues. They have been lingering for nearly five years for sure, if not a decade, some of these issues. So as it relates to carbon policy at large, and things like tanker bans, we need to think about plan B. It’s not that emissions aren’t an issue, it’s just that we have long said on this podcast, the legacy carbon policy set, which is dense and complex, so dense and complex, nobody can understand it. It is an impediment to investment and nobody is going to finance any of this stuff unless it goes away.

Jackie Forrest:

Yeah, I can understand for the tanker bans, for instance, you could build a pipeline to Prince Rupert and say, the tanker ban doesn’t apply to this project. Okay. I couldn’t live with that one. But when it comes to the oil and gas emissions cap, they’re going to build a million barrel a day oil pipeline. That emissions cap is going to mean that companies won’t be able to grow their supply to fill that pipeline. And if there isn’t growth in supply, there’s not going to be enough support for the pipeline. So I just don’t see how you can do that on a project by project basis. That’s one that affects the whole upstream system and puts it in a good chance of not going forward because it won’t get the support from producers.

And the same for the natural gas, LNG export terminals. You need to have the ability to grow on the upstream side. So we’ll wait and see. I mean, politically, they’re trying to walk a tightrope, in my opinion. They were trying to keep those climate voters and not wanting to repeal some kind of policy around climate, which maybe has some backlash, but they’re going to have to make some of those changes, I think if they really want to get us to be the fastest growing economy in the G7.

Peter Tertzakian:

Yeah, I think we just need to bring greater simplicity and clarity by overhauling or renovating, if you want to use that term, our whole policy regulatory construct around energy infrastructure. Which is largely dominated by legacy carbon policy. That needs to be re-thought because, and this is my opinion, it’s not working. It’s just not working. In fact, it’s not working, and it’s an impediment to investment, and it’s not just an impediment to investment in oil and gas. It’s an impediment to investment in all sorts of other industries that have significant emissions, including mining and all sorts of other businesses.

Jackie Forrest:

Right. And especially the export industries that have to compete on a global stage. And competing jurisdictions don’t require that. Okay. Well, this will be a topic that we will dive into many more times, I’m sure, over the fall. And onto the next topic, which is another one we’ll keep talking about for the rest of the year, I’m sure, is these tariff negotiations. So it has been a pretty quiet summer despite these big deadlines. We blew through them. July 21st deadline, August 1st, nothing really happened. There’s been a little bit of movement now on August 22nd. The Prime Minister announced the removal of some of Canada’s counter tariffs.

These were the tariffs that Canada was charging on things, goods we were importing for the US. So that was kind of hurting us at the grocery store and other places. Prime Minister Carney talked about removing those. Now, there’s been lots of commentary on this. Some people say it was the elbows down tactic and we need our elbows to stay up. Others say it was a smart move because it helps reduce friction in the negotiations. At the time of recording, last week of August, end of the last week of August, it looks like it’s working in that there seems to be more meetings going on between ministers and lots more Canadian officials down in DC talking about tariffs. So maybe it started the conversation going.

Peter Tertzakian:

Yeah, well, I think this elbows up thing, I guess it works if you’re playing hockey, human against human, but this is elbows up against a gorilla. So I favor the tactics that are being used now, which are, okay, let’s just take this calm and collectively and move it along. Because if we’re going to put up a fight against a 800 pound gorilla, it’s not going to work. We just do not have the economic leverage to be able to really fight this out.

Jackie Forrest:

Yeah. And I think the other thing is we’re doing better than most other countries.

Peter Tertzakian:

Well, we are.

Jackie Forrest:

Also, Prime Minister Carney’s press release, when he announced this on August 22nd. He talked about our average rate is 5.6% tariff across all goods. So yes, things like copper, steel, aluminum, they’re high. Like 50%. I think autos is something like 27% or 25%. But when you look across all the goods we send to the U.S. 5.6%, well that looks pretty good. Europe actually did agree to a trade deal over the summer, and they’re broadly getting about 15% tariffs on everything. There are some exceptions, but not really that many around some things like military and pharmaceuticals. And they still have those higher tariffs on things like steel, aluminum, copper and autos that we face.

So 5.6% is looking pretty good compared to what a lot of countries are getting. So we’ll wait and see what happens if we do get some movement on these sectorial tariffs. But I think really the talk needs to go towards what’s going to happen in 2026. Are we going to continue to get this favored zero, no tariff for many of our goods under the CUSMA or the USMCA as the Americans call it. I think that that really is the more consequential negotiation now for Canada, because with everyone else getting 15% tariffs, I think we can assume that maybe the deal we have today, it may not be around after 2026.

Peter Tertzakian:

Right. I want to bring back the idea that it’s not just the United States that’s throwing their weight around with economic coercion. There’s the Chinese tariffs against Canada on the canola.

Jackie Forrest:

Yeah, and we had that increased in August.

Peter Tertzakian:

75%.

Jackie Forrest:

75% on canola seed. This is an addition to the hundred percent on meal and oil put in place in March.

Peter Tertzakian:

So this is again an example where Canada has basically no leverage. We have no recourse. What elbows do you put up against this kind of thing? This is why it is so vital for us to have more economic relevance. In other words, to be able to take market share in, say, the Pacific basin with liquefied natural gas, our oil, agricultural products and others. So at least we have some kind of economic leverage against countries that put these sorts of tariffs against us in the future. This is not something that’s going away. The use of economic instruments to achieve geopolitical influence or to push other nations around is only new in the context of the last 20 to 30 years.

If you look back at the history of the use of economic instruments to, as I said, jockey for position in the world, I mean, this has been going on for a long time, and so we have to wake up to this and Bill C- in my opinion, is one step in the right direction. But we’ve got a long way to go to be able to be in a position where we can actually defend ourselves, have some kind of lever to pull, say if you put a tariff on us, we are going to do this as a recourse.

Jackie Forrest:

Well think about a hypothetical world now, but over the last decade, it would’ve been possible for us to build 2 million barrels a day of pipelines for oil off our west coast, probably seven to 10 BCF per day of gas. If in 2025 we were exporting that much to Asia, would that make us stronger versus the Chinese? Absolutely. Would it change how they’re treating us on canola? I don’t know for sure, but it would certainly increase the chances that they would treat us differently. And at the same time, the Americans probably would be treating us differently too, because we’d have more alternative markets too. So hindsight’s 2020, but hopefully in the next decade we can be in that position to have more leverage over our trading partners.

Peter Tertzakian:

All right, so boy, we’ve been talking for half an hour here. What’s next? And we wrap up.

Jackie Forrest:

Well, the last topic I thought would have some fun because another thing that happened over the summer was a series of stories around the IEA, the International Energy Agency. They have those long-term scenarios that we also love to beat up because we think they’re quite unrealistic. So they have different scenarios about how oil demand and energy will evolve between now and 2050. And the Americans have really worked hard over the summer to start to influence the IEA to be, as the Republicans might describe it, kind of more realistic. So there’s a number of events here. The Republicans actually approved a bill in kind of the end of July where a house committee wants to withdraw its funding to the IEA because the Republican lawmakers consider the IEA has strayed from its mission to safeguard energy security and been pushing the green energy policies too much. So this still hasn’t gone through Congress or anything, but this is a proposal for the 2026 budget that they would cut the funding for the IEA.

Peter Tertzakian:

I think we have to go back and look at what the IEA was first set up to do. So the International Energy Agency was set up, I think, in the seventies in response to the oil embargo, oil price shocks, and so on, because of the recognition that we needed energy security from the perspective of oil. And so the IEA was, I think it was 30 some countries, western countries was set up to provide independent data on energy trends and actually to encourage the growth in the production of oil in particular, and also to encourage the setting up of strategic petroleum reserves in the event of future oil price shocks that may affect dominantly the Western alliance. That’s why it was set up.

Jackie Forrest:

And also to create more transparency to the data because at that time of the oil embargoes, it wasn’t clear how much supply each country had. So having totally transparent, honest data around oil supply and demand and things like that.

Peter Tertzakian:

So it was set up in Paris and over the course of the years, I mean the many, many reports, many of them very high quality, excellent reports, particularly through the nineties when I started using the data and started crunching the numbers into the early two thousands. I mean, it was sort of the gold standard in terms of the data, not necessarily the gold standard in terms of some of the forecasts they were making, which were subject to debate, but certainly in terms of keeping the data and getting an objective idea of what was going on in the world of energy, it was good.

But then into the 2010s, and particularly the latter part of the 2010s, the whole climate movement got involved and the whole notion of energy transition. And so they started following necessarily in terms of the renewables coming into the system and how that affects the various supply chains competition between the various energy systems and so on and so forth.

But there was also a bias that was introduced that it was going to be the end of oil and all that sort of stuff. And there was heavily influenced. And so now what we see is sort of a backlash by the United States, which is the dominant funder of the International Energy Agency basically saying, well, wait a minute, we’re not seeing any sort of energy transition. Now everybody’s got a different opinion on that and how they interpret the data, but I’m just describing here what’s going on and what’s happening. So we are going to see an increasingly heavy influence, which by the way is another example of what I described earlier where the state influences agencies, institutions and industry to align with its interests.

So here we have the United States basically going to be dictating not only who runs this thing, but what they’re probably going to say. Now the data is the data and what they’re going to say for the forecasts is probably going to be skewed in a different direction, probably.

Jackie Forrest:

Yeah. Well, and that’s another piece of news. The U.S. wants to fire the second ranking person at the IEA, which has traditionally been filled by an American. So based on media reports, the official who was formerly at the State Department, Mary Warlick, is the main target for replacement. So yeah, changing out some of the people that are at the IEA, Chris Wright, the Secretary of US Energy said we want to do one of two things. We’ll reform the way the IEA operates or we will withdraw. Looks like Congress wants to withdraw at least the Republican Congress members. I do want to say one piece of news that I think is really constructive is the IEA did announce that they’re bringing back what they call the current policy scenario. So about four or five years ago, they withdrew that scenario. So they used to have one that was the policies that are actually in law today and what that would mean for oil gas demand as well as growth and clean energy.

And those four years ago or so showed actually ongoing growth of oil and gas. And then they had this stated policy scenario, kind of the base case they have now, and that includes policies the governments have stated as things they want to do, but aren’t necessarily put into legislation, for example, needing all your vehicles to be combustion engine vehicles by the late 2030s or something like that.

It’s a stated goal of the government, but it’s not necessarily something that’s achievable or policies in place to actually enforce that. And what they did is they got rid of that current policy one and just had the stated policy one. Which. Again, I think wasn’t objective because just because a country or a politician says that they want to do something, it doesn’t mean it’s actually going to happen. And so they took away that view of what would be sort of, I think the base case in my view, which is the current policies. So they announced in the 2025 World’s Energy Outlook, which will come out later this year, we’re actually going to see that. So there’s already been some changes. And I think that’s a welcomed change, to give people a view of, okay, well what does it look like with today’s policies? Which I think is more realistic.

Peter Tertzakian:

Yeah, well, what this all points to, whether it’s the firing of the Bureau of Labor Statistics person, I forgot their name or any other data collecting agency anywhere in the world, whether it’s in Russia, China, the US, or even Canada. You got to do your own research, because you have to dig deeper. It’s just we’re entering into this era where if you really want an objective view of what the data is, you really have to work at it. There’s a lot of skew selection biases, confirmation biases, other types of cognitive biases, and all this information that’s coming out at us to the point where we don’t even know what we believe anymore. The only way you can get comfortable with it as a decision maker is to actually go to the data and even in proxy types of data to be able to assess what’s going on. So that’s the era that we’re heading into.

Jackie Forrest:

Well, I would actually argue, though, when it comes to the IEA, you had to be doing that all along because the last five years or so where they’ve been promoting these, what I will call imaginary scenarios of the future, you couldn’t believe those either. They were skewed too much on the green side and not being realistic in terms of the rate of change.

Peter Tertzakian:

Well, I think it’s just like your stated policy scenario. I would hazard to say that it was the LSS, the lip service scenario. People were saying things but not necessarily following through even at a national level. And now, of course, in this new era where all of a sudden we’re in an era of fiscal policies like tariffs and the geo-economic warfare that’s going on, all that stuff becomes a secondary consideration, like it or not.

Jackie Forrest:

Right. Yeah. The chances of all of those stated goals actually happening or legislation coming in are lesser now because countries have a lot of other priorities as well, including energy affordability, security.

Peter Tertzakian:

Okay. Well, that’s a lot to digest. Glad we’re back.

Jackie Forrest:

Yeah, happy to be back. And thanks to our listeners for tuning in. I hope you had a great summer. And we’ll be back to our weekly cadence here. So lots to talk about as we go into the fall.

Peter Tertzakian:

All right, till next week, have a good week.

Jackie Forrest:

Have a good week, and thank you to our listeners. If you enjoyed this podcast, please write us on the app that you listen to and tell someone else about us.

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