The Last Barrel Standing: A Capital Markets Viewpoint on Canadian Oil Sands’ Sustainability Advantage BY JARED DZIUBA, CFA, BMO CAPITAL MARKETS OCTOBER 2021 CANADA’S OIL SANDS BUSINESS WILL BE A SURVIVOR.
Practicing ESG Since Before It was a Thing.
Within the context of an accelerating energy transition, our Capital Markets view is that Canada’s oil sands sector can position itself well for the future given:
Canada is regularly recognized as a leader in environmental, social and governance practices among the world’s largest oil reserve holders, according to independent evaluations including the Yale/Columbia Environmental Performance Index (EPI), Social Progress Imperative’s Social Progress Index, and World Bank’s Worldwide Governance Indicators. We highlight the sizeable gap in Governance quality between Canada and the rest of the oil-producing world as a critical distinction, as regulatory and corporate oversight is logically a root enabler of successful environmental and social stewardship.
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its strong ESG leadership track record,
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clear evolving technology pathways to net zero,
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the inherently low decline, relatively low sustaining capital nature of extraction processes, and
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unique existing and developing opportunities to divert bitumen from fuel end use, to non-combusted products.
If we are correct, the Canadian oil sands could stand as one of few oil sources outside of OPEC to sustain production, and potentially gain market share, in the global ‘friendly oil’ supply opportunity that we envision as inevitable for the coming decades. While this statement may conjure disbelief from some readers, let’s consider the elements that support the ‘staying power’ advantage of our oil sands.
Although contrary to the common narrative, these country ratings are reflective of Canada’s largest sectors, including oil and gas production. Indeed, Canada’s leading oil companies also achieve top ESG scores relative to global competitors according to consensus third-party ratings (CSRHub, Bloomberg SRI and MSCI), and these are consistent with our own internal Capital Markets assessment of the sector’s ESG trends.
“Canada is regularly recognized as a leader in environmental, social and governance practices among the world’s largest oil reserve holders.”
Exhibit 1: Canada #1 in ESG Categories vs Top Reserve Holders
