In the dynamic landscape of Canada’s oil and gas sector, doing a strategic assessment of strengths, weaknesses, opportunities, and threats (SWOT) provides a crucial framework for acquisition and divestiture decisions.
As we look back on the past year of industry news, several key factors emerge that, combined, exert significant influence on the direction and outcomes of future A&D endeavors. From climate policies shaping regulatory landscapes to market volatility dictating investment strategies, and from innovations driving efficiency gains to indigenous engagement molding social licenses, every facet demands meticulous consideration.
Amidst these complexities, a comprehensive SWOT analysis can serve as a beacon, illuminating pathways for prudent decision-making and sustainable growth.
This week, we looked at the past year’s top stories affecting our clients to create the following SWOT for A&D:
- Climate Policies and Regulations: Nationally, Canada continued its commitment to climate action, and discussions around policies to reduce greenhouse gas emissions affected the oil and gas sector in 2023. This included debates on carbon pricing, emission reduction targets, and potential regulatory changes impacting the industry’s operations. Continued emphasis on and work with the AER’s Licensee Capability Assessment (LCA) created discussion and confusion around licensee transfers in the industry.
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- THREAT and OPPORTUNITY – Regulations will continue to challenge the industry into 2024 as the industry continues to adapt to changing regulations. Understanding that a federal election is likely in 2025 will continue to push this topic. Using tools to look over the fence for Emissions and Liabilities will still be key in the future. Companies that can navigate this new space will be ahead of the crowd.
- Market Volatility and Prices: Fluctuations in global oil prices influenced the industry for the first halve of 2023 with oil prices peaking at US$90 per barrel in September. Oil companies are likely to face another challenging 2024 as geopolitical events and global energy dynamics continue to push demand and limit supply. Discussions often revolve around how these shifts affected investment decisions, project viability, and the overall economic health of the Canadian oil and gas sector.
- STRENGTH – Geopolitical events are not predicted to drive pricing to COVID level bottoms. Pricing is expected to settle out around US$80 per barrel which is well within most companies’ profitability margins. While drilling in the WCSB is only predicted to increase about 8%, A&D will continue to be a driving force for corporate growth. Data and tools to proactively look for deals will be critical in market competitiveness.
- Investment and Innovation: News covered the industry’s efforts to innovate and invest in technologies aimed at improving efficiency, reducing environmental impacts, and potentially diversifying into cleaner energy sources. Initiatives related to carbon capture, hydrogen development, and advancements in extraction techniques were of particular interest.
- OPPORTUNITY – Developing cleaner technologies and innovations will increase production with lower emissions and environmental impact. Data development and analysis will be key in identifying these next innovations.
- Pipeline Projects: Developments in pipeline projects, such as Line 3 and Trans Mountain, received attention. Discussions often focused on regulatory approvals, environmental concerns, Indigenous consultations, and their impacts on the transportation of Canadian oil and gas products.
- OPPORTUNITY and WEAKNESS– Pipeline projects will continue to contribute to better pricing for the WCSB oil. Continued political pressure to curb pipelines as well as cost overruns and delays in the Trans Mountain could derail foreign capital.
- Indigenous Engagement and Land Rights: Debates on Indigenous engagement, land rights, and consultations concerning oil and gas projects were also in the news. Discussions centered on collaboration, land-use agreements, and the socio-economic impacts on Indigenous communities.
- OPPORTUNITY: Finding quality data to understand Indigenous land rights is still critical to economic success in these areas.
In conclusion, as the Canadian oil and gas sector navigates through the challenges and opportunities of 2024 and beyond, the imperative for astute acquisition and divestiture strategies becomes ever more pronounced. Climate policies and market dynamics continue to exert profound impacts, underscoring the need for adaptability and foresight. Yet, amidst the uncertainties, investments in innovation and indigenous partnerships offer promising avenues for long-term viability and responsible stewardship. With a keen eye on emerging trends and a strategic embrace of SWOT insights, industry players can forge resilient pathways towards success, anchored in robust fundamentals and a steadfast commitment to excellence.
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