‘A huge opportunity’: Cenovus Executive Chair Alex Pourbaix on how championing decarbonization can set Canada apart

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This episode of Hub Dialogues features host Rudyard Griffiths in discussion with Alex Pourbaix, the former President and CEO of Cenovus and current executive chair. They discuss the challenges and opportunities inherent in trying to get to net zero, why eliminating oil and gas is not the answer, and how Canada can become a technological leader in decarbonization.

You can listen to this episode of Hub Dialogues on Acast, Amazon, Apple, Google, or Spotify.

RUDYARD GRIFFITHS: Alex, welcome to Hub Dialogues.

ALEX POURBAIX: Thanks very much. Glad to be here.

RUDYARD GRIFFITHS: Looking forward to this conversation as we go around the horn at Pathways, talking to different people in the organization and associated with it who’ve had different roles and have different responsibilities. And it’s really important to include you now in this conversation as a former CEO of one of the major oil sands producers in the country and someone who was really there at the origins of Pathways. Maybe, Alex, we could begin our conversation by just having you take us back to the moment that the industry, your partners, your fellow CEOs, thought up this idea that eventually became Pathways. What was the rationale? What was the thinking behind it? What was the spark that created the organization that we know today?

ALEX POURBAIX: Well, it’s a really good question, Rudyard, and I think it goes back probably almost three years ago now. As I think all the CEOs of the Pathways partners were, we were all doing our own activities to improve the environmental performance of the countries and reduce CO2 emissions. And I had and continued to have a pretty regular discussions with a number of the CEOs, but at the time, I think it was Murray Edwards, a famous Canadian businessman and the executive chair of CNRL, And Murray and I would talk regularly—and I think at that time it was with Mark Little, the then CEO of Suncor—and we were just having a chat, and we were talking about how much work we were doing.

And I think we all, at the same time, independently came to the realization that, as much as we were making progress on our own, that if we combined the efforts of the companies, we would really accelerate our path to reduce emissions. And we felt we could be much more effective advocating for the industry and our efforts. So it was really, as I said, probably pretty close to three years ago. Murray made a great comment, and he said, “Look, the only way this is going to work is if the CEOs remain completely engaged, and I want to have a 7:00 AM meeting every Friday morning that everyone has to commit to come to.” And so here we are three years later, and we have not missed one of those 7:00 AM meetings. I mean, if you’re on a plane, I guess you miss it, but those meetings take place every Friday morning at 7:00 AM, and every CEO attends. So I think it’s been really effective from that perspective.

RUDYARD GRIFFITHS: At the core of Pathways is a very ambitious goal for net-zero emissions from operations by 2050. Was there debate, Alex, about that goal? Because when you set a goal, the expectations build behind that, and there are going to be arguments about the credibility of the goal. Is it achievable? What was your thinking around setting that particular objective, which is ambitious and which I think arguably has driven a lot of the energy around Pathways because you are trying to do something really big, pretty difficult, and pretty important for the country?

ALEX POURBAIX: Well, you’re exactly right. And I would tell you there was actually a great deal of discussion about what were the objectives of Pathways. Were we going to have targets? Was our target going to be net zero? And in the early days, some members had already adopted a net-zero target and others had not. And at the end, we just decided we could not be more serious about driving emissions out of our business. And it is a, I think the term is a big, hairy, audacious goal. But our view was like, we need to demonstrate to people how serious we are about this. And it is audacious, and it is a very demanding goal, but we actually think we needed to—I think as a group, we ultimately came to the view that we all needed to be in it together. And that net zero by 2050,although there’s going to be a lot of work to do to get there, we think there are pathways, hence the name, but there are multiple pathways for us to get there. R&D continues apace, and the costs are going to come down, and I think over the next 30 years we’re going to see a lot of innovation in driving GHGs out of the production of oil and gas. So that was really where ahead was at. And we are into this continuing with that. It’s not just some sort of vague goal. We are actively developing business plans that we hope will get us there.

RUDYARD GRIFFITHS: In a very recent part of your career, you were the CEO, the president of Cenovus, not only a significant Canadian energy producer but on the world stage has a presence important to thinking about the future of energy itself and hydrocarbons as a key component of our meeting, our future energy demand. Alex, how do you see this transition of the industry and the oil patch to a net-zero target from operations by 2052, Canada’s competitive advantage vis-à-vis other producers around the world? Are they pursuing similar strategies? Is there a competition here, or is this really an opportunity—potentially a once in an industry’s lifetime opportunity—to truly differentiate from a majority of the other major hydrocarbon producers globally?

ALEX POURBAIX: If you look around the world, there are a few countries that are material producers of oil and gas that have similar commitments. I think Norway would be an answer, but Norway would be about the biggest of them. I mean, Canada produces, give or take, about five or six percent of the world’s oil. So there is no country on earth that is pursuing targets even remotely as ambitious as Canada is. So this is really a uniquely Canadian issue.

RUDYARD GRIFFITHS: And what could that mean before potentially even achieving the goal if there is a sense amongst the consumers of hydrocarbons that there is this source in Canada that is moving towards a credible timeline to achieve net zero from operations by that mid-century mark? How do you see that, Alex, feeding back on global perceptions of Canadian energy opportunities, possibly for increased foreign direct investment in Canada’s energy sector? I guess what I’m getting at is, is there a virtuous circle here, a spinoff, a flywheel that’s bigger than just that important objective of net zero? Are there other things that could come as a result of this that would benefit the Canadian economy and benefit our ability to produce cleaner energy for the world as a whole?

ALEX POURBAIX: I think the first thing I would say is that everyone uses this term “energy transition.” And I think one of the great worries that I have—and this would go to Canadians, Americans, you name it—I think the average person really has no idea of the challenge of decarbonizing modern society. I described it the other day as a moon shot, and a very august energy historian who was on the panel with me said, he said, “No, I disagree. It’s like a Mars shot, not a moon shot.” I think most Canadians have this view that, “Well, we’ll build some wind turbines, we’ll build some renewables, maybe we have a little bit of battery backup or storage, and we’re off to the races.” I mean, nothing could be further from the truth. So oil and gas represent somewhere in the range of about 86 percent, if I recall, of all energy consumed on the planet. And it is going to be an unbelievable challenge to reduce.

And as a result, I have a different view. I don’t think we’re going to see a transition massively away from oil and gas because the other alternatives really struggle to deliver the same kind of cost, the same kind of reliability, as oil and gas. So I really think we’re going to see a diversification, we’re going to see more—I think we’ll see more renewables, we’ll see battery technology. I think if we are even remotely serious about moving to net zero, we’re going to have to adopt nuclear generation in a very meaningful way. It’s the only technology that I’m aware of that can replace gas, for example, or coal in power generation and deliver the same kind of reliability.

I remind people in Canada, we live in a country that is very, very cold eight months of the year, and we can’t afford a power source that is not reliable. Lives depend on it, hospitals depend on it, you name it. So I mean, I think we’re going to see, as I said, much more of a diversification. And I think what we’re going to see is oil and gas continue to play a really meaningful role, but you’re going to increasingly see over time the decarbonization of oil and gas. And the theory behind—to go to your question about what could this mean to the industry, to the Canadian economy—at Pathways, we’ve really taken a view that if you look at the Canadian oil and gas industry, we are world leaders in just about every metric, whether it is rule of law regulation, tough, transparent regulation, how our industry treats and works with Indigenous communities, human rights. None of these are issues that most of the world’s major oil-producing nations actually care about, much less champion.

In our view, the one knock on Canadian oil is that it is, relative to some other crudes in the world, it has higher GHG intensity per barrel than some other oil in the world. And I would argue that is actually much misstated also. But our view at Pathways was that if we can solve that carbon problem by decarbonizing the barrel, then it actually doesn’t matter whether in 50 years the world is consuming 50 million barrels a day or 150 million barrels a day. I think we can stay with great honesty that we are the sustainable barrel of oil in the world, and Canada should gain that market share and we create a durable industry, an upstream industry for the country. So that’s really the thought behind it. But the other point I would make would be if you look at the U.S.—and I think a lot of listeners would recall that several months ago, President Biden came out with a legislation called the Inflation Reduction Act.

Key in that Inflation Reduction Act was significant funding by the U.S. federal government for carbon capture and sequestration, clean tech. And what you’re seeing there is the U.S. watched where the ball was going, saw that it was going towards clean tech, it was going towards decarbonizing oil and gas. And I think they made a very conscious decision that they wanted to create through the IRA and make the U.S. the world’s leader in low-carbon industries. And there is a huge opportunity in Canada. If we’re able to perfect carbon capture and sequestration on the scale we’re talking about, if we’re able to perfect the use of solvents in SAGD production facilities, we actually have a chance to make Canada a technological leader in decarbonization. And with all of the benefits that would accrue to our economy, our labour force industry, so that’s really where we’re driving with this.

RUDYARD GRIFFITHS: Great insights. And I think that idea of market share is just so important that yes, the world could end up using, and maybe it should end up using, fewer barrels of oil in the future as renewables and other sources of energy come online. But if Canada can, as you say, claim to be able to produce and demonstrate effectively that lower carbon barrel, then we can sustain volumes at current outputs; that’s good for royalties and all those other things that spin off the oil sands that pay for our hospitals, that flow from the province to the federal government, and so on and so on. So I think that’s an encouraging and rightly optimistic view that we should try to embrace because we need sources of wealth in this country in order to sustain the generous social safety net that we all agree is part of what makes us Canadian, binds us together in a sense of shared common enterprise.

I want to again just build on your experience, as I’m privileged to talk to someone like yourself who’s run a large energy company, and talk a little bit about what you’re seeing happening out of this horrible war that’s continuing in Europe, the largest land war on the European continent since World War II, with big disruptions in energy. We’re seeing, Alex, as you know, new energy alliances that are emerging seemingly between Russia and China, between Saudi Arabia and China, between India and Russia. What is your sense of Canada’s opportunity in this moment? And again, especially dealing with Europe, which has very strong commitments to greening its economy and lowering the carbon intensity of a continent that now includes, in a single economic and political unit, over half a billion people. Connect those threads for us and talk a little bit just about the energy instability of this moment that we’re in and Canada’s, again, potential unique competitive advantage that we enjoy.

ALEX POURBAIX: Sure. And I’d be happy to. Look, really, what we’ve seen happen in Western Europe and in Ukraine over the last two or three years, I think it is tragic. The situation in Ukraine is incredibly tragic, but I think what it also does is it has really caused people I think in a very serious wa, to think about this so-called energy transition and how reliant right now regional country economies are on predictable, reliable supplies of oil and gas. I think it’s very interesting. I think pretty much everyone thought last winter we were heading towards a complete energy crisis in Western Europe that was really only avoided by not only some superhuman efforts by the European countries to find sources of oil and gas but also really a very, very mild winter in most of western Europe.

I think otherwise we would’ve seen a truly tragic outcome. And what it’s done, I think you now—particularly countries—are starting to realize that you cannot decarbonize until you have the replacement technology or the new technology in place. I think there was a bit of an element where countries were misleading themselves that they were becoming less reliant on oil and gas when, in fact, they didn’t have the replacement technology in place at scale. And what we’re seeing now is—you’ve seen Canada as a great example; you’ve seen the governments of Japan, you’ve seen the government of Germany, come to Canada literally almost begging for LNG supplies, liquefied natural gas supplies. And I think Canada has to be very, very cognizant of this.

We are blessed as a country with massive supplies of both oil and gas, and coal for that matter, in a world in which the reliability and the availability of those commodities are not what it was because of, for example, what’s happening with Russia and Ukraine. And I think Canada has an opportunity to be almost the warehouse of the world that we can produce oil, gas, liquified natural gas and help these other countries reduce their exposure to less reliable suppliers. And I think LNG is a great example that if you think about LNG going from Canada to Asia, pretty much every shipload of that LNG is going to be used for producing power and offsetting what would otherwise be coal-fired generations.

So even though we may see our emissions go up a little bit because we’re producing more products, ultimately, we’re trying to solve that with Pathways. On the other side of it, there are massive benefits for CO2 reduction by keeping those other countries off of coal-fired generation. So I think energy security has become one of the number one global issues. Canada has the fourth-largest reserves of oil in the world, 50 percent of all reserves available for investment by the private sector. I mean, I think we owe a duty to the world to make sure that we continue that supply.

One point I would say, Rudyard, is, if Canada took its production to zero tomorrow, the world would still consume exactly the same amount of oil it was consuming the day before. The only difference is it would be supplied by Russia, Saudi Arabia, you pick the supplier. So what is going to reduce emissions is companies like us and the Pathways companies actually reducing the emissions related to the production of their product and ultimately end users consuming less product. Taking an incredibly hard-headed approach of shutting in Canadian production, and I’m not proposing that anyone is, but I think a lot of people think, “Well, we should just stop producing this.” The impact on global energy, reliability and availability and price would be devastating.

RUDYARD GRIFFITHS: Yeah. And also, in this new world that’s much more bifurcated and that seems to be breaking apart into geopolitical blocs, we’ve got to understand who would pick up that production. What they would use that production for? It’s unfortunate that Russia seems to have been able to continue largely its war effort because it is selling so much oil to these mainly former BRICS countries. Alex, what is your sense about what you hear from other major energy companies in Europe? You mentioned Norway, but we know that Europe also has very ambitious plans towards decarbonization. Many of those plans are shared with their energy sector, major companies like BP and others coming forward to announce significant investments in renewables and to change the mix of energy production within their enterprises.

Some people are hypothesizing that Canada needs to be careful in the future about the potential for fault lines to emerge between those economies that are significantly reducing their emissions in operations and production and on the overall net basis, with countries like Canada, which are export-led, that where a lot of our economy GDP is a reflection of the exports that we send around the world. How important is it, Alex, for us to really get serious about things like what Pathways is doing because this could be our passport in the future to trading with other countries who are going to start taking a harder line on their respective partners’ policies regarding emissions and the carbon intensity of the products that they produce?

ALEX POURBAIX: Yeah. And I mean, it’s certainly something that was on our minds when we set up Pathways. And as I said, our goal at Pathways is literally to move the production from Canada’s oil sands to the lowest-emission oil produced in the world. And we think that really should demonstrably solve that challenge and that risk that you talked about. But you just mentioned a little earlier about how Russia has been able to maintain their revenues largely through the sale of oil. And what I find is governments in the world, they talk a tough message, but it’s interesting if you need oil and if you need gas, at the end of the day, rather than have their economies go dark they tend to be able to hold their nose and buy from any number of producers that couldn’t care less about the environment, human rights, you name it.

But I think from our perspective, we really think we are—well, I hope we’re creating a better mouse drop for global consumers where they can demonstrably see what we are doing to decarbonize our industry. I would say one other thing: it’s interesting we’re having this discussion today, and I noticed in the paper this morning that Shell just announced that they are stepping back from their commitment to green energy and now going back to continuing to increase their production of oil and gas. I think that is a microcosm of one producer realizing that it is going to be way more challenging and take a much longer time than I think a lot of people have any idea to reduce the necessity for oil and gas. It is going to take a long time. And I think a lot of companies and a lot of countries are starting to realize that. I think that’s why you’re seeing—I think BP has announced a similar initiative where they’re just throttling back the ambition to coincide with the actual ability to decarbonize.

RUDYARD GRIFFITHS: Final question, Alex. At The Hub, we love public policy—loving what you’re just talking about here, but the importance of permitting the need to have the framework in place to do ambitious things. These are huge, multi-billion-dollar projects, as you mentioned. Are there things that we should be thinking about, Alex, in terms of incentivizing capital to join this project, to find ways to get new capital flows into the industry to help affect these goals so that—producers are there, you’re going to play a major role, but we’ve got all kinds of other schemes going on in the country to try to get capital into parts of the economy where we think that decarbonization can happen. Is that part of what you’d like to see too?

ALEX POURBAIX: We’ve always been leery of seeking special treatment or handouts. And I actually think there’s a lot of capital on the sidelines that would be more than willing to invest in the Canadian energy sector, but they’re prevented from doing that because of their worry of the uncertainty as to how the federal government is going to treat emissions and what their policy is going to be on emission reduction. And I actually think, if we’re able to reach an agreement between the federal government and the province, and our industry about our pace of decarbonization, the fiscal framework, and some certainty about how we’re going to make sure these permits are decided on in a timely basis, I actually think there are all kinds of capital that would be willing to invest if that uncertainty was taken out of the equation.

RUDYARD GRIFFITHS: It’s a great insight, Alex, and makes me optimistic that we can do big things, but we need, as you say, the runway, the framework, to realize that potential and those goals. So to get a view from you as someone who’s sat in the so-called cockpit, the pilot’s chair of one of the big energy companies in Canada is a privilege indeed. I’ve certainly learned a lot from our dialogue today, and I know our listeners have too. So thank you so much, Alex, for coming on the program.

ALEX POURBAIX: Oh, look, Rudyard, I really appreciate it. I enjoyed the discussion, and I hope I always try to come away from any discussion with a thing or two to think about, and hopefully I’ve provided that for your listeners.

RUDYARD GRIFFITHS: Absolutely.

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