Daniel Yergin on the Troubled Energy Transition

Daniel Yergin on the Troubled Energy Transition

Produced by ARC Energy Research Institute | by

This week, our special guest is Daniel Yergin, Vice Chairman of S&P Global and Chairman of S&P’s CERAWeek conference. Daniel is the Pulitzer Prize-winning author of “The Prize: The Epic Quest for Oil, Money, and Power”. His most recent book is “The New Map: Energy, Climate, and the Clash of Nations”.

Please note that the interview with Daniel Yergin was recorded on June 11th, before the Israel and Iran conflict began on June 13th, 2025.

Here are some of the questions Peter and Jackie asked Daniel Yergin: Why did you describe the energy transition as troubled and in need of a pragmatic path forward? Do you believe there is a growing consensus that the “fast energy transition” scenario is unrealistic? Do you anticipate Europe softening its green policies and subsidies or extending timelines for net-zero goals? How do you foresee the trade war and competition between the G2 (the United States and China) evolving? How dominant is China in clean energy, and what implications does this hold for the United States’ ability to compete? What is OPEC’s motivation for reintroducing supply to the market during a period of weaker demand? What strategy would you recommend for Canada to address US trade pressures and potential annexation threats?

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Episode 289 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. Well, lots going on in Alberta with the G7 meeting underway in Calgary. In fact, this is Monday that I’m recording this and I saw Air Force One landing on Sunday evening here in Calgary, so that was pretty exciting. Of course, there’s a lot of geopolitical developments going on with direct impact on the oil markets too. As of last Friday, June 13th, we had Israel striking some nuclear facilities in Iran and over the weekend missile strikes in both directions, including some hits to domestic energy infrastructure in Iran. At this point, the time of recording here on June 16th Monday morning, neither side is showing signs of backing down from this conflict. And oil price currently is over $70 a barrel up from about $65 just before the conflict, and $60 in early June. So up about 10 bucks over what we were seeing in early June.

Now, it’s important to note that there was a more bearish sentiment in the oil markets generally prior to this event. I know that prices had run up in the days coming up to it, but the overall sentiment was because of the outlook for slower demand growth, demand still growing, but not at the rate expected at the beginning of the year because of these tariffs and the potential for recession. And then of course, OPEC adding more supply in the second half of the year. So we had this bearish sentiment. So the question is, how do the oil markets evolve with this new situation here? And I think there’s a number of scenarios, and I don’t think anyone can tell you exactly how this is going to all play out.

One is the conflict dissipates, and I think we go back to that more bearish sentiment, especially as we get into the second half of the year. Another one is the conflict results in the loss of Iranian oil production or exports. Iran produces about 3 million barrels a day of oil, and about half of that is sent to the export markets. And so if those exports were cut off or the production was impacted, overall that will create a bit more stability to the oil price. However, it can be offset by OPEC’s spare capacity. Right now, OPEC group has 6 million barrels a day of spare capacity, and so this is enough to offset a loss of Iranian oil exports. And so I do think prices are higher than they would be otherwise, but I think they’re still quite moderate because of that spare capacity.

And of course, there’s another scenario that’s being talked about is the Strait of Hormuz, which is a critical choke point for all the oil supplies leaving the Middle East, about 20% of all oil supply when you consider refined products and crude oil, go through this transit route. And if this was cut off well we would have quite a bit higher prices. Iran borders the Strait of Hormuz on the east side, so they’re in a pretty strategic location there. I don’t think most people see as a likely scenario since Iran themselves will want to get their oil out of that choke point. And of course, many of the Middle East countries use that transit route and the Americans would also want to see that stay open, but there is that potential scenario. So we’ll be watching closely how these events unfold and what it means for the people in the Middle East in Iran, Israel, and the oil markets.

But in the meantime, I’m excited to share a conversation with Daniel Yergin, Global Vice Chairman of S&P Global and Chairman of S&P’s CERAWeek Conference. This conversation was recorded with Peter and myself just prior to news that we had this Israel-Iran conflict. So while oil prices were still low when we had this conversation, there’s still a lot of value here because it’s a wide-ranging conversation covering energy transition, the changing clean energy policy and North America and even in Europe and Canada’s role as an energy superpower. So I hope you enjoy the conversation.

Peter Tertzakian:

Welcome a guest who needs no introduction. He’s back for the third time. Delighted to have with us Daniel Yergin. He’s the Global Vice Chairman of S&P Global, Chairman of S&P’s CERAWeek Conference, and also the Pulitzer Prize winning author of The Prize. Welcome, Dan.

Daniel Yergin:

Well, glad to be back with you all. Thanks for the invitation.

Jackie Forrest:

I do want to talk about the new map. It was initially released in 2020 and it forecasted a lot of things and we want to talk about some of those, including the shifting era to a great power rivalry. You talked about the G2, we’re talking about the G7, you talked about the G2 and I think we’re seeing this play out today in the growing rivalry between the U.S. and China with this trade war. But you were also cautious on the pace of energy transition in the book and actually a position that you were criticized for in 2020. Any thoughts on that now? There’s starting to be a growing consensus and we’ll get to your article, but a growing consensus that the transition is going to take longer and a bit harder than people thought when you released your book.

Daniel Yergin:

Yeah, I think when the book came out, there was still this kind of magical thinking almost about energy transition. It was during COVID when prices were down, demand was down, and it looked pretty easy to just draw a line on a graph and get to net-zero by 2050 and everything would fall in place, but it didn’t match up with the historical experience or the scale of what was being challenged. And I think that there is a different view. We’ve heard the British Prime Minister Keir Starmer say that, “Sorry to tell you all this, but oil and gas is going to be around for a long time in the mix.” The new German energy ministers has called for a reality check, and I think it is a question of reality. And as you say, we went further to kind of try and explain what are the reasons we’re not seeing the energy transition unfold as particularly a few years ago in our new article in Foreign Affairs magazine.

Peter Tertzakian:

Yeah. Well, let’s talk about that article a little bit. It’s called the Troubled Energy Transition, How to Find a Pragmatic Path Forward. So can you elaborate on that? What is the pragmatic path forward?

Daniel Yergin:

I think the first pragmatic thing is to recognize reality. And we said seven realities that force one to rethink energy transition. One is the simple scale of transforming $115 trillion world economy in a matter of a quarter of a century when all the other transitions took us century and were really all energy addition because nothing disappeared except whale oil. And then secondly is of course the costs and more challenging for Europe now because Europe now has to spend money on defense, worry about competitiveness. And so those costs loom larger. Third was the return of energy security, which kind of fell off the table for most countries. You could afford to forget about it. There seemed to be no supply problems until the morning of February 24th, 2022 when Russia invaded Ukraine. And then I think the mineral issue, which is obviously one that is also significant in more than one way for Canada, even as the IEA said that it’s a mineral intensive energy system if you move rapidly to renewables.

And to take one example and we’ll come back and talk about copper, but it’s about two and a half times as much copper in an electric car as a conventional car. So there’s this whole mineral thing that was just underestimated. And as we’ve seen unfolding as we speak, that intersected with China and China’s domination of so much of mineral processing, mining, particularly rare earths, and this is where you saw energy transition collide with geopolitics and even more so in these trade battles. And then I think last thing that kind of just was not on the agenda when a lot of the thinking about energy transition was formed was AI. And I was just struck at our CERAWeek Conference is the degree to which AI and how do you fuel AI, the electricity, this was not a consideration until about a year and a half ago now it means a big change in the attitude and thinking about natural gas.

All those things come together to say energy transition is not going to be linear, it’s not going to look like one of those nice graphics. It’s going to be multidimensional, it’s going to unfold in different forms in different paces with different mixes of technology in different regions and governments with different priorities. We have our Energy Asia conference coming up and we’re going to hear from Asian countries talking about we have to care about economic growth and reducing poverty as well. So all of those things come together, and I know this has been a long answer to say we are in a period where energy transition needs to be rethought. Affordability, reliability, those are on the table now, which were not part of the discussion a couple of years ago.

Jackie Forrest:

Okay. Well, and we will put a link to your Foreign Affairs article. It was you co-authored it with a couple of other authors. Do you think there’s a growing recognition amongst thought leaders and governments and policymakers that yeah, the energy transition is not going to happen as fast as people thought. And we noticed at the big CERAWeek conference, the IEA’s Fatih Birol made a real change in his messaging. He said, “There is a need for oil and gas upstream investment, full-stop.” Well, the position in 2021 seemed to be quite different than that where they said no new investing.

Daniel Yergin:

I remember him saying, “No more investment in oil and gas.” So it’s a big change. Of course, he’s also aware that there’s a different administration here in Washington with a different, very different perspective, and the U.S. is the biggest funder of the IEA.

Jackie Forrest:

So that could be part of it. But the IEA is very influential if they say that you need to invest in oil and gas or you don’t as they did in 2021, people listen to that. Are you expecting the IEA maybe to have different types of scenarios this year that are more realistic?

Daniel Yergin:

I think that’s a good question. I’ll tell you here in Washington among those who follow energy things, there’s a lot of discussion about what the IEA is going to do in terms if it’s both scenarios and in terms of what it’s going to use as its base case. The last few days I’ve heard people kind of watching and looking and maybe the IEA is going through something of an energy transition.

Peter Tertzakian:

Mm-hmm. Do you think there’d be more of a focus on natural gas because it’s got to grow, it’s got to feed the AI machine. We’ve gone from AI being a curiosity for writing wedding speeches and making memes to something that’s essential part of modern productivity. And I think it’s going to even become even more prevalent in actually part of national security considerations and stuff as countries realize the power and potential of this thing. But it comes down to rapidly grow it out, natural gas being probably the dominant fuel that powers it in the near term anyway.

Daniel Yergin:

Yes, I’m interested to hear about all those wedding speeches that were written by AI. So we’ve seen some reports recently that have come out which seem to have where the footnotes only exist in AI as well. So that’s an interesting comment. But it is true. I mean here again in D.C., you hear all the time about the AI arms race between the U.S. and China. That means electricity and that means a much bigger role for natural gas in electric generation. One of the vendors of gas turbines at CERAWeek said in 2022, there was only one order for a gas turbine and they didn’t get it, so their market share was zero. Now, of course, everybody is sold out until about 2028, 2029. So there’s that aspect in North America and elsewhere. And then LNG, Japan now in its latest energy strategy talks about increasing LNG imports and it’s linked to AI. So I think AI is one of the factors that’s changed the energy perspective and highlighted the role of natural gas. And if I think about our CERAWeek Conference in March, LNG was so much front and center.

Jackie Forrest:

Yeah. Yeah, and it’s definitely I think a bullish outlook there. I want to ask you, you used a term in your article you said, “Green lash,” which is basically a green backlash and that you said that there was the potential for that in Europe. A lot of folks in the energy transition space are really depending now on the European green policies because we’re going to get to it. The U.S. Congress looks like they’re getting rid of a lot of the green subsidies in the United States. Do you think there’s the potential to see Europe soften some of their green policies and subsidies and push out the timelines for transition? Or do you think that is a market that looks more firm?

Daniel Yergin:

Well, we’ve heard at CERAWeek, we’ve heard from the European Energy Commissioner that they’re committed to going forward, but I think you point to Britain. I think this issue about Europe’s competitiveness, the EU, the European Commission people in Europe said that what it manufactures is regulations and that obviously it’s been very heavy hand on climate. This notion that all the cars have to be electric cars by 2035. You want to elect the AfD in Germany, continue to push that. And I think we’ve seen it in Germany that whatever you call them, the far-right parties or the populist parties, their number one issue is immigration. Number two is often around spending and the speed of the energy transition and spending on changing the energy system. You see the same in France. I think you see the same with the Reform Party in Britain. So the consensus is being challenged, and I don’t know if I would call it green-lash in the United States, but you sure have like 180 degree turn in policy with the Trump Administration as opposed to the Biden Administration. That’s already happening.

Peter Tertzakian:

Yeah, I mean you look at the cut in the subsidies for clean energy under the Inflation Reduction Act, the shredding of a lot of policies, I’ll call it. What do you see forward as we move past the Big Beautiful Bill Act and all that stuff? How do you see the whole clean energy space evolving?

Daniel Yergin:

Well, I think that the takeaway from CERAWeek and we had a big technology, energy technology, clean technology section in what we call the innovation agora. And I think the takeaway is that you now got to make your way in the market. You’re not going to be able to depend upon government to facilitate it. If they cut those subsidies incentives, that will be a big problem. Well, of course, you see, at the same time you see how fast China is moving ahead in call it energy transition investment and those technologies.

Jackie Forrest:

Yeah, I know the bill is the Big Beautiful Bill Act, can’t even make up this stuff, but it’s not final yet but it does look like it’s going to cut almost all the subsidies and that would make a lot less investment go on in the U.S. Do you think it’s likely that the Senate will add some of that back? What are you hearing in D.C.?

Daniel Yergin:

There’s some senators who come from red states, Republicans, but where wind for instance is a big factor. So I think we’re still in the horse-trading thing and nobody knows passing legislation was compared to making sausage, and I think there’s going to be a lot of sausage making between now. I think the target the president wants is July 4th. We’ll see. They have a Republican majority in the Senate, but I wouldn’t want to make predictions, but I’d say the Administration, certainly their goal is at this point at least is the only incentives would remain would be for nuclear and geothermal.

Jackie Forrest:

Mm-hmm.

Peter Tertzakian:

Right.

Jackie Forrest:

And they’ve kept the carbon capture storage as well, I think, right?

Daniel Yergin:

Well, I think the carbon capture storage of course has a great deal of support in the traditional energy industry, and that would be a setback for those efforts. So let’s put it this way, I think they’re pretty intense discussions going on.

Peter Tertzakian:

Can you talk about the conflicting circumstances? On one hand, we have President Trump signing executive orders that aims to fast track energy infrastructure projects potentially using wartime measures to do so. A lot of those infrastructure projects are oil and gas-based, the whole, “Drill, baby, drill,” narrative conflicting with pretty low oil prices, which isn’t really conducive to drill baby, drill and potentially even building infrastructure. So how do you see that reconciling itself?

Daniel Yergin:

Well, I think you’ve laid it out, Peter. Drill, baby drill has been a mantra, but it’s also the Administration clearly likes lower oil prices as an offset to inflation.

Peter Tertzakian:

But let’s just explore the dynamic here. We’ve got OPEC+ that has somewhat surprised the market so far by accelerating their supply additions. What do you think is the motivation for that?

Daniel Yergin:

I think fundamentally, I was just in Saudi Arabia actually at the time that President Trump was there, I think OPEC+, i.e. basically the Gulf countries, Saudi Arabia felt that they had restrained production long enough and that it was time to start bringing it in. And what they might lose in terms of price they would make up in volume. They didn’t want to just keep shrinking while other people increased. And there was a specific case of other countries overproducing their quotas. So I think that was they want to bring their oil back into the market obviously at a time when demand is pretty weak. On the weak side of world economy, you’ve just seen that the OECD and others have lowered their forecast for economic growth.

Jackie Forrest:

You talked about China. Let’s talk about China, in The New Map you talked about watching the G2. What do you think about the growing potential for conflict with the U.S. and China and the trade war and how this is all going to end?

Daniel Yergin:

There are maybe three different vectors of conflict. One is kind of the overall, call it the international order and China wanting to change the international order, one that has been dominated at least by the United States since the Second World War and the Europeans and Japan, that has shaped a certain kind of international order. The second is economic competition trade, and that’s of course been front and center. And then there’s a larger geopolitical competition. And in the paperback of The New Map, I was able to include what had been in the book originally and had been taken out because of space, but I thought it was really important an essay called The Four Ghosts Who Haunt the South China Sea. I regard that as a very important part of the book because it is basically a warning of the kind of risks and dangers that can exist and things can happen by accident, not intentional. If you look at the U.S. military, the Chinese military, they increasingly see each other as the potential adversary and the trade disputes about semiconductors and so forth are really fundamentally about military competition.

Jackie Forrest:

Well, in that case though, then, do you see a resolution to the trade war? Is it just a part of the escalating conflict?

Daniel Yergin:

We have to see. I think it has been. I think it’s interesting because only about 15% of China’s exports actually go to the United States, but a slower world economy is difficult, you know, problems for China as it is for the United States. So I think that both countries appear to have come to a view that they can work it out. We’ll see what the details are of how this proceeds, but I think national security, military power are very much wrapped up in these issues. The rare earth thing has been stunning in the message that it’s sent about how dependent Western economies are, United States, how dependent not only the automobile industry, for instance, but also the military on rare earth. So that’s an advantage to China. That’s a high card that China has.

Jackie Forrest:

Talking about the rare earths and the magnets and all the things that China produces that the U.S. doesn’t. I think an increasing area of conflict between the China and the U.S. is on the clean energy front. China is just so dominant in so many areas of clean energy, whether it be EVs, batteries, solar. Is there a risk with these tariffs that the U.S. falls so far behind by not importing Chinese goods or by keeping them out? I look at where their electric cars are, and if American automakers don’t need to compete with the Chinese, they could fall really far behind. Is there a risk to this whole strategy?

Daniel Yergin:

I think it’s tough for the automakers both in the U.S. and in Europe and Canada, because the signals keep changing about what you’re supposed to do. Is the gasoline engine going to stay for a while? Is it supposed to go away? And that’s being fought out right now between Washington and California. There’s no question, one of the things that was really interesting for me to write about in The New Map was China’s commitment to EVs because they realized they could never compete against the internal combustion engine, but they have obviously leapfrogged on EVs. And it was just the anecdotes. I talked to fellow in our S&P office in Karachi. He’s just bought a BYD SUV at a very modest price. Just talking to somebody in Brazil, and he says every third Uber he goes into seems to be a BYD.

So I think Chinese electric cars are rolling across the global map. They’re kept out of the U.S. There’s also, by the way, the concern about data that these electric cars, where does the data go? And Europe is at sixes and sevens, is really caught in contradictions about it. But China clearly has a lead. And on batteries, I mean BYD and CATL, there’s so much at the forefront.

Peter Tertzakian:

Yeah, no, they’re a manufacturing juggernaut and there’s no question that EVs are gaining a lot of market share globally through China, but they rely upon critical minerals. As you point out, there’s oil, there’s gas. Geopolitics, and natural resources are inextricably intertwined. So let’s come back across the Pacific to North America, to Canada. We are the fourth-largest producer of oil and gas in the world.

Daniel Yergin:

I’m so glad you said that because I think one of the best kept secrets in the whole energy world, maybe even in Canada, is that Canada is the fourth-largest oil producer in the world. I ask people all the time, I like to ask them, we know who the big three are, U.S., Russia, Saudi Arabia. Big four people say, “I don’t know, Iraq,” but it’s Canada. It’s a really well hidden fact.

Peter Tertzakian:

Well hidden fact. And now we’re getting into the global LNG game at the end of this month with the first tanker that is going to pull into the Kitimat area. So we’re super consequential and now we have a new prime minister. He was elected in April, Prime Minister Mark Carney. He is pledging to make Canada and energy superpower over and above both in clean and conventional energy, fast tracking projects. And so we are really positioned well to become even more consequential in the energy world.

Daniel Yergin:

How do you become a superpower in clean energy?

Jackie Forrest:

Well, we already have a lot of hydro, and so I think we’re going to expand that. Well, there’s projects for green hydrogen, there’s biofuels projects, carbon capture storage I think is another area that he even stated in his platform he wants us to be leaders in. I’d argue we already are, but we’re maybe falling behind the Americans right now.

Daniel Yergin:

But if you say where do you really have the potential to really be a heavyweight, it’s in your hydrocarbon resources.

Peter Tertzakian:

And yes, I agree, and we already are because it also drives a large part of the economy. So how do you view, you personally, but also the United States, view Canada with this new push to build out energy infrastructure and fast track?

Daniel Yergin:

Well, I think this, it’s a cry around the world about you’ve got to get infrastructure done. And of course, that’s one of the major tenets of the Trump Administration too with its National Energy Dominance Council. And it means endless delays, either permitting delays or judicial reviews. You have to find a way to get over that. We’re doing our new study on copper. To bring a new mine on average in the world online is 16 years. In the U.S. it’s 29 years.

But I think that Canada can expedite these projects that would be a very important contribution to not only an energy to global supply, but doing two other critical things. One, diversifying Canada’s markets, which is the lesson is that you need to diversify your markets. And two, helping to get Canada out of this sort of low growth trough that it’s been in and infrastructure the way to do it. And so I don’t know what the mechanisms are in Canada to do that, but it really means you need some certainty about these projects to get them financed and executed. So if that is one of the major planks of the new liberal government as opposed to the previous liberal government, that would be a big contribution to Canada’s economic vitality.

Jackie Forrest:

Right. Well, and the news is that we have a bill that’s been put forward or tabled in our Parliament called C-5, which aims to pick some nation building projects and say, “You know what? They don’t need to go through that existing long onerous uncertain process. We are going to write a letter that says they’re approved with conditions and get going on them.” And so everyone in this country is, well, the industry and the private sector is very excited about the opportunity because like you say, our economy has been slow because no one can get anything done around here.

Daniel Yergin:

Your economy has been weaker than the U.S. economy, and yet you have this tremendous potential to bring to bear. And if that bill passes, would it then be challenged on constitutional grounds or would it be the law of the land?

Jackie Forrest:

There probably will be some challenges of it. It does require indigenous consultation, which is the requirement of the government to do. And so I will hope that we don’t see a bunch of legal challenges to the projects that go forward under it, but it’s like the U.S., we’re maybe a little less litigious than the Americans.

Peter Tertzakian:

Yeah, I don’t think the actual bill is likely to be litigated, but what follows in the bill in terms of what is going to be built potentially will, but we shall see. It’s a great step in the right direction. And it includes, by the way, projects for critical minerals, which we already talked about are vitally important. And hopefully along with that are secondary industries that process the critical minerals because that’s a real value add.

Daniel Yergin:

And that’s an area where, I’ll tell you here in Washington, there’s kind of a panic now about critical minerals. I can’t tell you the number of sessions that are being held at think tanks and other places about it. Obviously a smooth relationship between the U.S. and Canada makes a lot of sense in terms of addressing the critical minerals. Copper for some is called critical and some is not, depending on who does it, but improving the flow and the investment and the certainty would be a major contribution to addressing it.

We’re just doing a new study called Copper in the Age of AI based upon the one we did in 2022 on copper and energy transition. And I think people don’t have a sense of how much copper demand is going to surge, A, because of AI and its electricity needs. And B, because of the increase in defense spending, which people don’t think about it as much in terms of that. But the ability to develop the minerals that you need, copper and other minerals, suddenly it’s become an urgent question. I wrote about it in The New Map. It wasn’t much on the agenda, but it certainly is right now. And the controversies between the U.S. and China over rare earth and the concentration of processing in China shows you how important this is.

Jackie Forrest:

Right. Well, and I think about four years ago, S&P did a study on copper already showing that there was going to be a shortage. And as you say, there’s been development since then. The military, the AI, that just makes it more.

Daniel Yergin:

And what you all were just talking about, the permitting delays, the judicial challenges, the ability to get things done. It’s a problem in the U.S. It’s been a problem in Canada. And it’s a problem in many other countries. It’s just that these projects end up taking a long time and the costs go up very substantially.

Jackie Forrest:

I want to come back to one point you said Canada and the U.S. Should have a smooth relationship. That would make things easier on critical minerals, but we don’t seem to have a smooth relationship. We have the American president talking about annexing Canada, making us the 51st state. Just this week or in the last few weeks, we’ve had elevated tariffs on steel and aluminum. So what’s your advice to Canada? How can we get back to a smooth relationship?

Daniel Yergin:

Well, I think your new Prime Minister, given his background and connections is certainly working on that. It’s hard to know why Canada has turned into this kind of target. There are many other countries where things are more problematic and both countries benefited from the economic integration. I think it’s just a question of working at it. We’ll see how this great sort of wall of tariffs all works out. You do have presidents saying that tariffs is the most beautiful word in the vocabulary, but I think it is also obviously critical for Canada to diversify its economic relations looking both East and West, Europe and Asia.

Peter Tertzakian:

Yeah, no, sage advice, which we’re looking to follow on too. And yeah, the notion of economic integration between the U.S. and Canada is so vital because a large part of that economic integration is resource integration. As always, Daniel Yergin, you’ve given us just great global insights on resources, whether it’s oil, gas, and critical minerals. I would argue actually copper is a critical vital mineral because all electrification depends upon that and-

Daniel Yergin:

Exactly, you’re exactly right. It is the metal of electrification and it’s just funny how different agencies categorize it, but your categorization is the right categorization.

Peter Tertzakian:

Yeah. Thanks. So we’re delighted to have you, the Pulitzer Prize winning author of The Prize, The Quest, the New Map. You’re a prolific author. You’re one of my inspirations for the books that I’ve written. Delighted to have you for the third time. I think you’re the only guest we’ve had for three times.

Jackie Forrest:

And I want to add something, Dan. You talked about the oil sands dialogue in D.C., the meeting happening recently. This is how Dan Yergin and I got to know each other when I worked at IHS. I started the oil sands dialogue, and I just want to thank you for the support of the Canadian energy industry all these years. You get the word out, you get the information out. You have these sessions in D.C. where you teach people, “This is what Canada is, and these are the growing supplies coming from them.” So we really appreciate your support of the Canadian industry as well.

Daniel Yergin:

I come at it from the viewpoint of energy security and economic growth, and it just seems this North American collaboration is such a big opportunity and so vital. And I think it has been frustrating that people don’t realize how significant it is and the value it brings. So we started together the oil sands dialogue, and it’s a very important dialogue to continue.

Peter Tertzakian:

As are many dialogues to come, which you’re a part of. And thanks for doing that. Thanks for being on the podcast for the third time. We will now let you catch your flight to Malaysia. So, thanks.

Daniel Yergin:

Thank you, and great to be on and to see you. And thank you for the honor of being a three time winner here.

Jackie Forrest:

Oh, you’re always invited back. 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:

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The View From St. John’s: Investment, Energy, and Nation-Building

The View From St. John’s: Investment, Energy, and Nation-Building

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This week on the podcast, we discussed Jackie’s recent visit to St. John’s, Newfoundland and Labrador, to attend the Energy NL conference. Energy NL is the province’s energy supply and service sector association, which annually hosts the province’s flagship conference on conventional and clean energy.

This week, Charlene Johnson, Chief Executive Officer of Energy NL, joins the podcast to explore Newfoundland and Labrador’s energy potential and the discussions at the conference. Among the topics covered were potential nation-building projects, such as the Churchill River hydroelectric development—a joint $33 billion potential initiative by Newfoundland and Labrador Hydro and Hydro-Québec that aims to add nearly 4 GW of new electricity generation capacity on the river. Another significant project discussed was Equinor’s Bay du Nord offshore oil development, which could open a new offshore basin 500 km off the coast of Newfoundland.

In addition to covering the conference highlights, Jackie and Peter recapped the past week’s events, including the constructive First Ministers’ meeting in Saskatoon on June 2nd. During this meeting, Prime Minister Carney outlined the criteria for nation-building projects. Furthermore, on June 6th, the Carney government tabled new legislation, “Bill C-5: One Canadian Economy: An Act to enact the Free Trade and Labour Mobility in Canada Act and the Building Canada Act.” The goal is to pass the bill into law by Canada Day.

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Episode 288 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. Well, Jackie, it just seems like one week goes by and there’s lots of news. In the intervening week since our last podcast we’ve had First Ministers’ meeting, we’ve had the tabling a Bill C-5 federally, the National Interest Legislation. We’ve had provincial legislation, I don’t know if it’s legislation, but AESO came out with something on the data centers. Of course, there’s the forest fires that are raging. Our thoughts are certainly with the people who have had to evacuate or been otherwise affected by those. Where do you want to start in terms of talking about things?

Jackie Forrest:

You forgot the really big news. You had your art show on Saturday.

Peter Tertzakian:

Oh, yes. Well, I had the art show in Canmore at the Elevation Gallery and Three Sisters, which was a expose or an exploration, maybe that’s a better word, an exploration of energy infrastructure and how to think about it. Some infrastructure persists, some becomes obsolescent, and some renews itself. That’s going to be a big theme as we think about the country’s aim to build out infrastructure. If you’re out in Canmore, I’d love to host you. If you’re out there, just let me know and try and get out there and show you the show.

Jackie Forrest:

Yeah, it’s around Three Sisters, the Elevation Gallery, and it’s open until August 5th, I guess, that you’ll have the art show up.

Peter Tertzakian:

Yeah, a lot of the pieces will be up probably beyond that in the gallery, but it’s the Studio Energy Gallery there in Canmore.

Jackie Forrest:

Okay, well, let’s talk a little bit about that AESO announcement, just because we just had our Beacon AI Center podcast. We had a lot of good feedback on that and a lot of people very interested in the topic, but there’s already some changes. Apparently, I hadn’t looked at the AESO queue at the moment we did it and it was already up to 16 gigawatts, so I got corrected on that. We talked about 12 gigawatts, so that’s how fast people are adding things to the queue.

But we also had the bigger news that the AESO has come out with a limit of 1.2 gigawatts to be allocated on a pro rata basis amongst developers, so that’s certainly a lot less than the developers would like. Still would increase peak load by 10%, and there will be another process post 2028 to add more, but this is coming with some negative response and I will put a link in our show notes to a LinkedIn post by Avik Dey, who’s the president and CEO of Capital Power, criticizing the decision, that we’re thinking too small here and this small amount is not going to bring the large scale data centers that the province really wants to attract, in his view.

Peter Tertzakian:

Yeah, it’s not that much when you think about what our guest, Josh Schurzler, said last week. We’re talking 10 gigawatts plus, as you just said, and so the 1.2 is hardly anything. Having said that, the process of building out a data center and commissioning it and getting it up and running and flipping the switch to on takes probably three to four years given the lead time for all the equipment, which we’ve also discussed. But nevertheless, it doesn’t necessarily send the right signal that you’re substantially choking off capacity potential.

Jackie Forrest:

Yeah, and at the same time, we want to have reliable power too, so it’s a difficult problem. But I think 2028 maybe there’ll be an ability to add some more, and of course these data center people, they could add generation to help bring on more as well. All right, let’s talk about the lots of news, the First Ministers’ meeting in Saskatoon. I mean, have you ever seen a happier set of premiers, Peter?

Peter Tertzakian:

No. No, I sometimes have to wonder if I’m in Canada.

Jackie Forrest:

Yeah, usually they’re frowning and angry at these meetings, but everyone seemed very happy and energized by this nation building project idea. It’s worth talking about the… We will put a link to the PMO statement that came out of the meeting because these were the same words that were in the actual legislation that got tabled on Friday about what defines a nation building project. It must be something that strengthens Canada’s autonomy, resilience, and security, supports economic growth. We keep talking about our goal of Canada becoming the fastest growing country in the G-7. Well, we certainly aren’t there now, so I think it’s going to have to be big projects, I think measured in tens of billions. That’s my words, that wasn’t in there.

But if you’re going to move the dial in economic growth in the country, a high likelihood of success, high priority for Indigenous leaders, and clean growth potential such as the use of clean technologies and sustainable practices. I don’t know that the project has to meet all of those, but those are definitely things to think about and gives us some clues, I think, to what we’re going to be looking at. I don’t think it’s 50 or 100 projects, I think it’s probably 12 or 15, something like that. I think they’re going to be big.

Peter Tertzakian:

I think it’s probably less than 10, to be honest with you, if you’re talking about these big projects, at least to start, and trying to prioritize based on those criteria. The criteria notionally makes sense, but getting down to actually quantifying things like contribution to economy in the future and autonomy, sovereignty, energy security, etc, quantifying the benefits and rank order in the projects is going to be the trick.

Jackie Forrest:

Yeah, and everybody has a nation building project. I’ve found that in my conversations in the last week, every single person is talking about why their project is there. I’m sure these members of parliament are getting lots of inbound letters and things about projects and why they meet the criteria.

But to finish off the week, and I think this was a surprise for me anyway, that the government’s moving so quickly, we actually have the Bill C-5, which was tabled, and I think the expectation is that this will be finalized before Canada Day, July 1st, but the aim is to fast track existing processes for nation building projects. It’s quite simple in its approach compared a lot of legislation that’s come out of this liberal government. I mean, it didn’t take me that long to read it. It seems like the right approach for projects to get unstuck, to me, and create that political certainty that the proponents need to spend billions of dollars in a reasonable amount of time.

Now, I didn’t notice that it actually had a timeline, but definitely that idea of moving fast is there. The minister can provide authorization with conditions and the regulator will be consulted in making this document. So for example, if it was a nuclear project that fell under the nuclear regulator, they would be consulted. If it fell under the CER, they would be consulted to look at some of these conditions and in the letter that comes out for the approval, but the actual approval would come from the minister. This legislation, if it went through, would go in force as soon as the gazette is issued. There is a requirement to do Indigenous consultation, so it’s not getting rid of that, but it is saying that you don’t need to follow a lot of the other requirements under an Impact Assessment Act or something like that.

Peter Tertzakian:

Yeah. Well, we’ll wait and see because the legislation will affect us here in Canada coast-to-coast. Speaking of coast-to-coast, let’s go to the East Coast. We’ve got a special guest today to talk about what’s going on from an energy perspective, energy infrastructure perspective, even. We’d like to welcome Charlene Johnson, who’s the CEO of Energy Newfoundland and Labrador. Welcome, Charlene.

Charlene Johnson:

Thank you for having me.

Jackie Forrest:

Right, Charlene. Well, I had the pleasure of visiting Newfoundland and Labrador, well St. John’s actually, last week and to your great conference, your Energy NL Conference, which is the real premier event for, I think, the energy industry, both green and traditional, conventional energy. I had a great time, so thank you for the invite.

Charlene Johnson:

Great to have you there. You gave a great keynote and lots of great feedback about it, Jackie, so thank you.

Jackie Forrest:

Well, and the entire business community out there was energized by the potential to get things done. You had your premier come, he had some great things to say about the conference. He described the meeting in Saskatoon as having incredible potential for Newfoundland and Labrador, and he talked about several nation-building projects, which we will get into. But before we do that, I wanted to talk a bit about your event and what was the mood of the conference this year?

Charlene Johnson:

Well, certainly pun intended, it was very energizing. This is our third year in a row that we have the sold out event now. About a thousand people come through the doors of the convention center. We have had a waitlist for our exhibition booth space and we had tremendous speakers, including yourself. We had updates on all of the major projects, including oil and wind, and of course the big hydroelectric project, the agreement that was struck between the premier of Newfoundland Labrador, previous premier, and the premier Quebec for the development of 3,900 megawatts of hydroelectricity, so a lot of interest in that. So a lot of discussion around the economy, regulations always comes up and the uncertainty of the regulations in Canada over the last number of years and how that is changing now, we’re seeing a shift from Prime Minister Carney, and also discussions around Indigenous partnerships. So a lot packed into three days.

Jackie Forrest:

Yeah, and I really enjoyed the conference because it was both clean energies and conventional energies altogether. You don’t get many conferences like that, so I really enjoyed the diversity of the conversation.

Peter Tertzakian:

Well, you’ve mentioned the hydro, Charlene, 3.9 gigawatts or 3,900 megawatts. Tell us about the $33 billion investment or potential investment on the Churchill River, and specifically I think it’s called the Gull Island Project.

Charlene Johnson:

Yeah, so that will be almost four gigawatts of power within the next 10 years to have up and running. So major upgrades to Gull Island development, upgrades to the current facility that is there, and as well as some smaller 550 megawatt upgrades. That is a tremendous amount of work for our members to happen in a very short order of time. We’re seeing, as was mentioned at the conference, there’s some site work being done already this summer. So things are happening fairly quickly and there’s also the need to construct a couple of hundred kilometers of transmission lines, so that’s the next biggest project here that will bring a lot of work to Energy NL members.

Peter Tertzakian:

Where does the power go? Where will it go?

Charlene Johnson:

Well, Quebec will receive some of the power, that’s why they are partnering in this project, but there will also be some more power staying in Newfoundland and Labrador. This can help with the mining sector in Newfoundland and Labrador. This can help develop other projects. One of the interesting things is the development of green steel is being talked about a lot. So with additional power, there are numerous uses. The opportunities are endless.

Jackie Forrest:

Right, and there’s a portion that’s been, I think it was at two gigawatts or something, that’s being reserved for Newfoundland and Labrador for power. I did want to just pause on the historic significance of this deal. You had a great panel where you had the CEO of Newfoundland and Labrador Hydro, Jennifer Williams, sitting there with Michael Sabia, president and CEO of Hydro Quebec. We have to just acknowledge the significance. This has been something like a 60-year dispute stemming from a contract that paid Newfoundland a very small amount for its electricity, something like 0.2 cents per kilowatt hour, and there was no inflation adjustment and it was really an issue that resulted in even something like Muskrat Falls, where they built an undersea cable to avoid having to take the power through Quebec because they had been warring for so long.

The fact that these two groups have come together, and obviously this to me is a very high contender for national interest, it was actually on the premier of Quebec and Newfoundland Labrador’s list during the minister’s meeting, but if this isn’t a project of national significance, I don’t know what is. It’s going to provide energy for Quebec, for Newfoundland Labrador, and potentially economic development that comes with that.

Charlene Johnson:

Yes, so again, you’re right. There has been a history here with the original Churchill Falls project, but it was great to hear both speakers focusing on the future and not dwelling in the past. For our members this will create a tremendous amount of work. At Energy NL, our mandate is to ensure that our members have the market intelligence and are ready for any of the contracts that are to come with this work. We don’t dive down into how much cents per kilowatt hour or how many billions of dollars the province is going to get from this project. We focus on work for our members. We did hear Michael Sabia say at conference that there’s so much work going on in Quebec right now for Quebec companies and that the focus will be on Newfoundland and Labrador companies getting this work, and Newfoundland Labrador Hydro has committed to the same, so we’re really looking forward to the work to come.

Jackie Forrest:

Right. Well, it’s worth clarifying, in addition to hosting the conference, your main association is representing service companies and construction companies in the energy sector. Is that right?

Charlene Johnson:

Yes, and before March of 2022, we were just NOIA, Newfoundland and Labrador Oil and Gas Industries Association. So our mandate was solely for oil and gas. That was at the time when Muskrat Falls was being developed and there was no association to advocate for work for Newfoundland and Labrador companies. There was no association to have supplier development sessions where they could get that market intelligence. As part of the consultation for considering to expand our mandate to include renewables, we had a lot of feedback from our members saying that there was no association to advocate for us during Muskrat Falls, and they’re very pleased to see that we are there doing that now for the Churchill Project.

Peter Tertzakian:

Wow, that’s amazing in terms of the scale of the project. The other big scale projects, of course, are offshore oil and gas. Fast fact, I’m not going to say how long ago, but for those who know the Hibernia Project, you know how long ago that was that I was one of the original on the team to characterize that reservoir and it started producing at late 1997. Since then the White Rose Project, which we’ll talk about here in a minute, but now there’s Bay du Nord. Can you talk about Bay du Nord and the excitement around that? Because a lot of that production in Hibernia has declined, so bringing new production on is really important to Newfoundland and Labrador, particularly from the perspective of royalties and maintaining a lot of the jobs and the service industry for the offshore. Can you talk about Bay du Nord?

Charlene Johnson:

Yes, happy to. So Bay du Nord was first discovered in 2013. Here we are 12 years later and we still expect first oil not to come for another six years, in 2031. This is truly a nation-building project. We had an economic impact analysis done for this project and it is expected over the life of field, approximately 25 years, to bring in $97 billion of GDP to the country, 82 billion of that to Newfoundland and Labrador, we are the primary beneficiary, but that still leaves $15 billion to the rest of the country for GDP. When you look at jobs, 14,000 jobs annually for this project. That’s direct, indirect, and induced. About 9,000 of those in Newfoundland Labrador. Again, that leaves 5,000 jobs for other provinces in Canada.

So when you look at manufacturing in Ontario and Quebec, project management in Alberta. The supply vessels that you would’ve seen at the conference in the harbor last week, that’s the Irving Company out of New Brunswick. So it’s truly a nation-building project in that it spreads the economic benefits throughout the country. But also, when it comes to energy security, the big topic these days as well given everything happening south of the border, as you know, Canada imports $20 billion worth of oil every year. This project could provide more oil to Canada if need be at some point.

Peter Tertzakian:

Well, certainly that energy security is important to central Canada, which gets, as you said, Charlene, the bulk of its oil and indeed natural gas from the United States. So having an eastern growth outlet to be able to bring that into central Canada from the east is very important to security

Jackie Forrest:

I would add too, the technical challenge of this project is really opening up this new basin, but it’s 500 kilometers offshore where the current projects are something like 300 kilometers offshore, just to give you a sense. It’s a long ways. It has to contend with icebergs and it’s in very deep water. Now, the project has the approval. It was delayed, it took longer than people would’ve liked, but it does have its approval. The actual challenge here is more economics. It’s just too expensive. We heard from Equinor Canada talking about they need to do it, but need to do it in a way that they can make some money here. Now, of course there are broader benefits, as you just talked about Charlene, and I think there’s a return to Canada by getting this project going. But do you think it’s going to take maybe some change in the government take to help Equinor find a way to make this project work economically? What is it going to take to get this one going?

Charlene Johnson:

So at the recent Prime Minister’s meeting, I know our premier, John Hogan, did raise having an investment tax credit to hopefully accelerate the final investment decision for this project, which isn’t expected until 2027. We understand from Equinor, if there was such an investment tax credit in place, that that would accelerate that decision. I know that he did advocate for that at the Prime Minister’s table, and this incentive was in place up until 2012. There was an incentive very similar to it called the Atlantic Investment Tax Credit. That was ended for oil and gas companies and mining companies in 2012, so we’re just asking that that be reinstated or have an energy security investment tax credit, call it what you like. We really think that help get this shovel-ready project with a proponent already in place, with an environmental assessment already done, we could see that project speed up.

The beauty of an investment tax credit for this government, it would be a quick win-win because there’s no upfront money required with it. The investment tax credit would only come into effect when the project is up and running and the government would get return on investment for that investment tax credit. Again, we did an economic analysis that showed that for this investment tax credit, federal government would receive a twelve-fold return when you look at corporate income tax, personal income tax, consumer spending tax. So this really is no risk and massive rewards.

Peter Tertzakian:

I should point out, I mean Canada and Newfoundland and Labrador was a leader in the technical aspect of this. I mean, I remember even when I worked on the project, the challenges of icebergs and offshore drilling and the inclement weather that is often encountered in those areas. That technology, of course, has really improved over the years, but really it’s an incredible achievement to be able to drill in those offshore waters. Let’s turn to White Rose, because that has been producing but there’s extensions to the oil field. Tell us about how those are progressing.

Charlene Johnson:

Well, the White Rose project had first oil in 2005, and at the time they expected to produce for 10 years. Well, here we are 10 years after that and we’ve already more than doubled the amount of expected produced oil. So when that came on stream in 2005, they expected to produce 210 million barrels of oil. That’s now over 500 million with more to come with the extension at the West White Rose Project. So like any of these four producing fields that we have, the difficult part is getting into the basin in the first place, the upfront capital cost. But once you’re in that basin, the probability of success of discovering more oil increases because the oil is already there. We’ve seen with all of our projects offshore that there’s been tremendous upside once you’re in there and up and running.

Jackie Forrest:

Right. Well, actually coming back to Bay du Nord, that’s another thing I heard while I was at the conference, is that if we can get this one project in this new basin, it will result in other developers coming in here. So outside of all those economic benefits you talked about Charlene, and I’m for giving the investment tax credit, there’s that broader impact that other developers will come just as they did after Hibernia. But yeah, this White Rose was really interesting. We heard from Cenovus Energy’s Jeff Jeworski, he provided pictures. I actually learned a lot.

I watched a YouTube video about Hibernia and how they took the big concrete base out and then they had to put the top side on top and land this thing in a very specific spot in this ocean with wave levels that can be like 80 feet at times. But they’re doing something similar with this White Rose extension, and they took out the huge concrete structure the week that we were there and he had photos of it being pulled out by these tugs. They’re going to eventually get it out into the exact place, land it on the ocean bed floor, and then they’re going to marry the top sides. So really technically a challenging, really amazing, very expensive project too. I think, is it in the range of 4 billion or something like that, in terms of the expense for a project like that? The oil production on the East Coast has gone down, it’s down about 40% from its peak about more than 10 years ago, and this is really going to give a boost to the production from the East Coast as well.

Peter Tertzakian:

Well, it’s also going to give a boost to the onshore service industry because as you know, you were just there, Jackie, and I been to St. John’s many times, but if you look in the harbor, there are all the service vessels and all the equipment. I mean, this is a livelihood of many people in that area, and so to have these extensions really is an extension of the community’s economy.

Charlene Johnson:

It’s the largest multiplier effect of any industry that we have. You mentioned the concrete gravity structure, that was built about an hour and a half outside of St. John’s, so in rural Newfoundland and Labrador. At peak, there were 2100 people working on that project. It’s an engineering marvel built right in our backyard. The ingenuity is incredible.

Jackie Forrest:

Right. Well, and the weight of that thing and figuring a way to get it out there safely, it’s pretty incredible. I learned a lot about Hibernia, the first project in, as you said, Peter, 1997, but I did hear many times how critical it was to provide jobs after the cod fishery was shut down. I heard that from so many different people. Maybe you can talk a little bit about that. It was really great, we had an update from Kerry Moreland from ExxonMobile, the president of ExxonMobile Canada, but they’re still finding more potential oil around the Hibernia project and that she thinks that although the project was only meant for 20 years, that it could be going for a good time longer because they continue to drill longer away from the platform and find more oil. So maybe just talk about the importance of that to the economy in 1997, and it’s still very important to the economy.

Charlene Johnson:

Yeah, well, in 1992 with the cod moratorium and so many people lost their jobs at the time, and I remember I was in grade 11 and the real state of despair. Businesses were shutting in, people were without work. Then just a year later, construction on Hibernia, first oil in 1997. A lot of those people involved in that fishery ended up being the workers on the supply vessels and it really injected new optimism and new hope into Newfoundland and Labrador, so the timing was perfect. I often refer to Hibernia as the gift that keeps on giving. Originally it was meant to be 600 million barrels, we’re over close 2 billion barrels. It did have a rough beginning, but the investment has proved to be very worthwhile and it’s the project that kick-started the industry here. Now we have four producing fields offshore. We just celebrated 25 years of the project in November of 2022, so a big milestone and we have never looked back.

Peter Tertzakian:

Well, that’s the oil and gas story. Let’s move on, because Newfoundland has a lot of natural resources all the way from oil, gas, critical minerals, but also a lot of wind and renewable energy. Actually, Jackie, we had a guest a couple years ago on the Green Hydrogen Project, Frank Davis from Pattern Energy, and I know there was some panels at the conference on green hydrogen. What’s going on there now?

Charlene Johnson:

Yeah, so we had updates from six potential wind, hydrogen, or hydrogen derivative projects present at conference. It was an opportunity to get the update as to where the projects are, what are some of the challenges that they’re facing, and what the timelines may be. When this originally first kicked off, there was a lot of enthusiasm, a lot of engagement with the community. There’s still tremendous interest and enthusiasm for these projects. I was just in Rotterdam recently for the World Hydrogen Show, our booth was a beehive of activity, a lot of eyes on Newfoundland and Labrador because we do have a lot of wind that is very strong and blows very consistently. I often joke, it’s one of the things I always curse because I hate the wind, but now we can monetize it, so I certainly like it. We have a lot of fresh water as well, and of course our proximity to Europe where a lot of this demand is coming from really strategically places us, well-positions us here in Newfoundland Labrador. Our grid is already 92% green energy, so that makes it very attractive for green hydrogen.

So they’re all moving along. It’s a little quieter now and I think the companies just really have their heads down, trying to secure off-take agreements, and that has become a little bit more challenging, but we’re still seeing a lot of investment. Again, these projects are all in rural Newfoundland and Labrador, so tremendous when it comes to an economic driver for rural Newfoundland and Labrador. We also heard from North Atlantic Refinery, NARL, they just bought the second-largest refinery in France, which happens to use hydrogen as one of their sources for energy. So the synergies there, I think that really helped kickstart the wind hydrogen industry here because now, I’m sure they’re still looking for off-take, but now they can provide to themselves. So they already have a built-in customer if that sale goes through. Still some hurdles to get over, still some challenges, but we remain very optimistic about what’s to come for these projects.

Jackie Forrest:

Now, I will just say, listening to the panel, talking to a lot of people there, definitely Newfoundland has some real advantages when it comes to, first of all, your wind, by the way, all the trees are bent over that I saw because the wind is so strong, your close proximity to Europe, which I think is pretty important, and the fact you have these deep ports everywhere that can make it easier to ship. I think the idea is serving the European market, you should have an advantage. Of course, we talked a little bit about it at the conference, the Americans are now looking to roll back. The big beautiful bill is not complete yet, but it looks like the hydrogen subsidies the Americans were offering, which were very generous and we couldn’t compete with them, if those go away, maybe a Newfoundland actually looks relatively better than the Americans because we have the investment tax credit and they wouldn’t have any subsidy.

I go back to that MOU signing with Germany and Canada in 2022 and the idea that we would do this very quickly. I think that was a bit naive. These are very complex projects and getting that off-take, getting the clients that want to sign up for 10, 20 years to pay for this really quite expensive fuel is taking longer. But it is interesting, the developers are grinding down the costs. That’s one thing they talked about, where they’re using this time to figure out how can we make this more economic? It is an expensive energy, but make it a lower cost one. There’s the potential for some of these projects maybe to develop the window only for now and maybe provide that to the grid. There may be an opportunity for that if there’s a call from Newfoundland and Labrador Hydro to procure wind. I thought that was interesting as well because they’re really just massive wind farms, and of course they have the green hydrogen, but you could go ahead with one part of it, which is the wind farm. Any thoughts on that, Charlene?

Charlene Johnson:

We understand from Newfoundland Labrador Hydro that they will go out with the request for proposals for about 400 megawatts of wind. So again, that is an opportunity to kickstart the wind industry here.

Peter Tertzakian:

So when we had that podcast with Frank Davis a couple of years ago, maybe it was almost three years ago, we were skeptical about the timeline at that time, Jackie, if you recall. What is the timeline now that you’re hearing from the conference in terms of what may be realistic for bringing hydrogen via ammonia to Europe?

Charlene Johnson:

I think we’re still a couple of years away yet, and final investment decisions have been pushed out a little bit. I think anywhere within the next three to five years we will see at least a couple of these projects providing hydrogen or derivatives to Europe. They’re all at different phases. One has been through the environmental assessment, several others are going through it now, and there’s one or two yet to file, but I understand it’s coming soon. So they’re developing at the pace that works for them, but realistically, in a couple of years I think we’ll see some first projects.

Jackie Forrest:

Charlene, I have to say, I was skeptical coming to the conference. But after meeting the developers and talking to them, I agree with you, I think we’ll see at least one or two projects actually come to life, especially because in Europe there are requirements for these types of fuels. They are expensive, but as long as those policies in Europe stay in place, there will be a demand for some amount of these fuels. To me, especially with this change with the US, Newfoundland seems really well positioned. If you’re going to have to get this fuel, it’s going to be expensive, but I think Newfoundland’s probably going to be able to give you a more competitive price than most other suppliers.

Charlene Johnson:

There’s so many parallels with the oil industry. It only takes one project to kick start an industry. I think once you have that first one up and running, like Hibernia did for our oil industry, the same will happen with the wind hydrogen industry here.

Peter Tertzakian:

Let’s move to policy and regulatory issues, particularly policy and regulatory reform or policy and regulatory encouragement. What did the conference talk about in terms of that and what’s needed to really get things kickstarted? I’d say things like hydrogen continue to need incentives, potentially the Bay du Nord and others. Pretty much everything these days in energy and energy transition is dependent upon policy and regulations. We’ve talked to ad nauseam, Jackie, you and I, about the policy density and complexity here, particularly in Western Canada on the oil industry. What’s the state of play in Newfoundland and Labrador?

Charlene Johnson:

What really needs to happen is the uncertainty needs to go away. For the last five or six years, the headlines that investors are reading when they open up their morning news is really, frankly, Canada is not open for investment in oil and gas. It started with Bill C-69, then emissions cap was first talked about in 2021. We have Nova Scotia right next door to us that had awarded a bid in an offshore exploration bid round, then between the province and the federal government they canceled that bid. We’ve seen the celebration of divesting of exploration parcels off the coast of BC, the federal minister at the time celebrating that. Those parcels were there for 30 or 40 years, they were never going to be developed, so celebrating things like that just sends all the wrong signals and all the wrong headlines to investors.

So what needs to happen is we need to have different headlines coming out of Canada. We have seen firsthand here what the emissions cap has done to drive capital investment out of this country. The last three out of four bid rounds offshore Newfoundland and Labrador, and this is where companies bid on parcels to explore to see if there’s oil, we’ve had the last three out of four turn up $0 in bids. This really corresponds to the time that the emissions cap was first talked about. Compare that to the years previous, there was $4 billion in bids over six years offshore.

So to go from $4 billion worth of interest, and that’s just for the right to go explore and look for oil, to go from that to a big goose egg, we have seen how uncertainty has eroded investment here. So this is the first time in 21 years that we do not have a rig offshore exploring for oil. There’s 80 to 100 wells being explored around the world in 2025, and we have zero. That is a direct result of uncertainty in the regulations in Canada. But we remain optimistic. We are seeing positive signals coming from Prime Minister Carney. I really think those headlines are hopefully starting to change, but we need some of these nation-building projects. We need Bay du Nord to get over the line to send the right headline to investors around the world.

Peter Tertzakian:

Well, it’s not only Bay du Nord, but a lot of the rigs that are working around the world and would indeed be working in Newfoundland and Labrador are there to maintain production. Because if you don’t continue to grow, the production drops, then your royalties and taxes drop. Then you said it’s a major contributor to the provincial economy there, so then it creates a huge deficit.

Jackie Forrest:

I’ll just add, Peter, our listeners know we’re not fans of the oil and gas emissions cap, and I totally agree, Charlene, it is sending the wrong signal. If we’re going to go ahead with these nation-building projects, which include potentially LNG export terminals, then how can we constrain the supply side. The same thing, how can we bring on a new offshore platform if we’re constraining the supply side?

The thing I learned, which I kind of already knew, but I saw the numbers, is how low carbon our offshore already is. So you’re saying that you’ve got to get even lower carbon than everybody else because you’re already almost the lowest carbon? It seems like a very high cost burden to put on an industry when you’re already some of the lowest emissions barrels in the offshore and require that to be even lower, and of course creates all the distortions in terms of winners and losers. We could go on and on about it.

But I did want to mention, there was an article in the Toronto Star over the weekend, which I will put a link to in the show notes, that the headline of the article is Potentially Carney Will Change the Emissions Cap, say Insiders. A lot of anonymous sources in there. I hope that that conversation is going on because I think that policy, which isn’t even a rule right now, but just a message saying that it isn’t going to happen, I think will be a strong signal to investors.

Charlene Johnson:

If it doesn’t change, we won’t see a change in investments. It takes $200 million to explore one well offshore Newfoundland and Labrador, and then you’re looking at a fast track 15 years to get to first oil and a cost of about 12 to $15 billion. Why are you going to look for oil in the first place if you can’t get a return on investment? Because this emissions cap will act as a production cap, you can’t get the return on investment out, you’re not going to put that upfront money in to look for oil in the first place. So it absolutely has to change. We have heard those signals too during the campaign that Prime Minister Carney would be open to continuing consultations with the industry. I really feel like we’ve participated in enough consultations that they know where we stand on it, but we are welcome to having more conversations in the future, and really this should sit with the provinces.

Jackie Forrest:

Yeah. One message in the article, which we’ve said many times, is if they go ahead with the Pathways carbon capture storage project and the methane rules, you actually accomplish the same thing. So the article, the anonymous sources talked about, actually, it’s not really doing anything. If we just make those other policies work, we don’t need it. So I’m glad that hearing from these anonymous sources that are insiders, that they get that point.

Peter Tertzakian:

Yeah. Well, I would say it’s not just the emissions cap. As we’ve discussed a lot on our podcast, Jackie, it’s a holistic review of all the carbon policies and the harmonization and just making them simpler to understand. Many people say, “Get rid of everything.” Let’s just get some sense of simplicity and effectiveness, and then the whole issue of the carbon markets, get them functioning properly. It’s just a rework of the entire carbon policy and regulatory system that’s needed. It’s not just the emissions cap, I would argue, that is inhibiting investments. So talk about policy as it relates to the clean energy projects. Do you feel that there’s stability and certainty around those policies?

Charlene Johnson:

Yeah, the feedback from our members is that those are really good investment tax credits that are there for the development of wind hydrogen projects. Would they want more? I mean, I’m sure that would be welcome if the Prime Minister is considering that to help kickstart these and get over some of the challenges with getting these off-take agreements. But overall, very positive feedback on those investment tax credits. Again, as you said, Jackie, we’re now even more attractive that the US is getting rid of what was very competitive, very hard to compete with in the past, the investment tax credits in the US.

Peter Tertzakian:

Charlene, is there anything else you want to talk about?

Charlene Johnson:

Yeah, I was just going to say on the emissions cap, it’s really these policies, while well-intentioned, can create carbon leakage, and that is the unintended consequence. Our offshore contributes 0.18% of global greenhouse gas emissions, that’s less than one quarter of 1%, but it brings in 20% of our GDP. It’s been upwards of 32% of our GDP at peak. So as long as the world needs oil, and even if by 2050 we’re at 50 million barrels a day down from 100 million barrels a day, that is still a huge demand for oil. It should come from Canada, where we focus on safety, environment, our governance structures are strong. Here in Newfoundland Labrador, we have that lower carbon per barrel oil, which Wood Mackenzie refers to as advantage barrels.

Peter Tertzakian:

Well, Charlene Johnson, CEO of Energy Newfoundland and Labrador, thank you very much for your insights. It sounds like it was a great conference. Jackie, I know you’ve been raving about it ever since you got back. I spoke at that conference, actually, probably about 10 years ago. I can’t remember. I lose track of time. But I would also put in the plug for tourism in Newfoundland and Labrador. Been there many times, spent a month driving around, went all the way up north to L’Anse aux Meadows and it was just a fabulous place. So if you’re looking for somewhere to go this summer, I encourage you to go to Newfoundland and Labrador.

Well, we talked about so many things, from oil and gas, to hydro, to renewable energy, wind, hydrogen. It’s a very exciting place. I think Newfoundland and Labrador has a lot to look forward to as we think about our nation-building here in this country and putting Canada on the map as the energy superpower, as our prime minister says. So again, Charlene, thanks very much, and good luck to everyone in Newfoundland and Labrador.

Charlene Johnson:

Thank you for that endorsement, Peter and Jackie. We really are, as some have said, at a hinge moment. I think next year’s conference will have some excellent updates to share as to what has moved along over the next 12 months.

Jackie Forrest:

Well, and congratulations on the excellent conference, and yes, I think next year will even be more exciting because we’re really at a time of new optimism. You could definitely fill that in the room, in the province and Canada, for both clean energies and oil and gas. So thanks so much, Charlene, and thank you to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

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June 9, 2025 Charts

June 9, 2025 Charts

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