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Attendees to the Global Energy Show explore the trade fair in Calgary, on June 7.Jeff McIntosh/The Canadian Press

Cenovus Energy Inc. CVE-T boss Alex Pourbaix sure hopes oil doesn’t get to $200 per barrel.

He thinks the fact that current prices are hovering around $120 per barrel is bad enough for Canada’s energy sector. And if that approaches $150, he says there’s a very good chance of a steady decline in demand.

Oil prices have for months been at multiyear highs, driven by a combination of rising demand as countries dial back pandemic restrictions, and Russia’s invasion of Ukraine, which has reduced production by a significant global player. Prices ticked up again this week, when the EU agreed to ban Russian oil. Markets are also jumpy that a supply crunch will only get worse as China, a huge importer of oil, loosens its own virus measures.

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Mr. Pourbaix made his comments at the Global Energy Show in Calgary on Tuesday, the day after Goldman Sachs increased its forecasts for the price of Brent oil (a global benchmark) by US$10 to US$135 a barrel into the first half of next year.

The challenge with oil and gas is there’s no switch that will immediately add five or six million barrels to plug a supply gap to help ease prices.

“It takes tens or hundreds of billions of dollars to make those investments, so I’m a little bit worried that it is going to take a while for the industry to respond to this,” Mr. Pourbaix said.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, on Thursday agreed to boost output by 648,000 barrels per day (bpd) in July and August rather than 432,000 bpd as previously agreed. But that did little to move prices down.

“The experts tell me that as oil approaches $150 a barrel, you would start to see some demand destruction,” Mr. Pourbaix said.

“I think typically that shows up as people taking less vacations, people driving less and making those kinds of personal choices.”

And while Mr. Pourbaix readily admits he doesn’t know what consumption levels will be over the next 50 years, he believes the Canadian oil sector’s decarbonization goals put it in a good position to supply the market as the world demands cleaner energy.

“What happened over the last several years is there was a lot of ambition that we could really move this transition along very fast. I think we’re finding out that this is a many, many decades transition and it’s probably going to look more like diversification than it is like transition.”

Canada’s largest oil sands producers have set a goal of bringing their greenhouse-gas emissions to net-zero by 2050. The first step is a planned pipeline system to transport the carbon captured during oil production to storage space near Cold Lake, in northern Alberta.

Over the next 30 years, Mr. Pourbaix said, he also expects to see a combination of longer-life wells, a more intense focus on capturing fugitive methane emissions, and implementing carbon capture at the large oil sands sites.

Then there’s small modular nuclear reactors.

“If we’re able to commercialize small modular reactors, you can see a scenario where you could completely decarbonize the upstream in Alberta,” he said.

And while he believes more work is still to be done with Ottawa on the regulatory front to make the system more predictable, he said co-operation on files such as the carbon capture tax credit have been positive for the sector.

He’s also upbeat about the availability of pipelines, particularly now that Enbridge Line 3 is online.

Combined with the expected completion of the controversial Trans Mountain pipeline expansion, which the federal government bought in 2018, “we probably have a decade at least where pipelines are not going to be the issue they’ve been in the past.”

“For much of the past 15 years our industry has really been challenged by egress out of the province because of a lack of pipeline takeaway,” he said, but “that has been significantly improved upon.”

With a report from Reuters

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