Suncor Energy CEO Rick George delivered some thoughtful messages in his talk last week to the Canadian Club of Toronto.

But, in looking at the challenges and opportunities ahead for Canada’s energy industry, George skipped over one vitally important area.

Why is it that when captains of the oilpatch talk about energy, they typically focus almost exclusively on demand – as in developing more projects to satisfy the world’s insatiable demand for energy?

What ever happened to the other side of the equation?

I’m talking about energy conservation, improved energy efficiency and demand-side management – as in ways to reduce or at least curb the demand for oil, natural gas, oilsands and coal?

George barely mentioned demand-side management: Only one sentence in a six-page talk. The gap that exists between current production and future demand “can and must be mitigated with improved conservation and better energy efficiency,” he said.

Then he went right back to the “must-meet-demand” mantra. “We’ll need to develop the energy equivalent of multiple oilsands industries in a lot less time, in order to meet future demand.”

And what of the environmental and social impacts of these fast-tracked new multiple oilsands industry equivalents in Alberta?

An increasing number of landowners are wary of – if not outright opposed to – intensifying energy development.

“We can’t go back to a time when we put economic growth before environmental responsibility, here or in the developing world,” George acknowledged.

Well, then, the surest and fastest way to reduce the impact of energy development here and in other countries is for all of us, including petroleum multinationals, to find more effective ways to reduce demand for energy.

Yet we’re doing just the opposite. Total energy consumption in Canada rose by three per cent in 2003 over the previous year, according to the most recent figures from Statistics Canada. Alberta’s annual energy consumption jumped 5.7 per cent – the highest of all provinces.

I’m not advocating we turn off the tap on fossil fuels. Of course we’ll still need oil, gas, oilsands and coal in a prudent mix of energy supplies.

But, to pick up on one of the wiser observations George made in his talk, new and alternative energies need the same kind of regulatory and financial incentives that have spurred $30 billion in investment in Alberta’s oilsands since 1997.

“The federal and Alberta governments worked with industry to bring oilsands into the mainstream with fiscal policies that recognized the unique challenges and characteristics of developing this resource,” he noted.

Alberta, Canada and the rest of the world need bold political leaders to implement far-sighted policies and incentives to help build a clean and renewable energy industry, and also to help conserve and reduce energy use.

But George and other industry leaders also need to put more of their money – especially at $50-plus-a-barrel oil – where their mouths are.

Granted, Suncor has built two wind-power projects in Canada – one in southern Alberta and another in Saskatchewan, and is proposing a 75-megawatt wind farm in Ontario.

But Suncor and other oil and gas companies, if they really believe their rhetoric that energy and environment must go hand in hand, shouldn’t wait for government incentives to lead the way to a cleaner, more diversified energy future. They have ample cash flow now to make more than token or tentative investments in new and alternative energy development.

Oil and gas companies also need to look beyond simply satisfying a global demand for energy that is expected to increase from the current 82 million barrels of crude oil per day (b/d) to more than 120 million b/d within 25 years.

They need to invest a lot more in new environmental technologies and programs that will help them and the consumers of their products to improve energy efficiency, conserve energy and reduce demand. In a world of finite and dwindling fossil fuels, they can’t afford not to.

Profit Gushers

Lest you think the oilpatch can’t afford to diversify out of fossil fuels, companies are enjoying record third-quarter earnings.

Imperial Oil Ltd., which has yet to erect one wind turbine in Canada, reported a record-high third-quarter profit of $539 million or $1.52 per share. That compared with a profit of $375 million or $1.01 per share in the same quarter last year.

Shell Canada Ltd. also had its most profitable third quarter ever. It reported profits of $451 million or $1.64 per share, up 94 per cent from $232 million or 84 cents per share in last year’s third quarter.

Husky Energy Inc.’s third-quarter profit rose 15 per cent, despite a hedging program that trimmed $115 million from the bottom line.

The company reported income of $286 million for the quarter or 70 cents per share, up from $249 million or 56 cents per share in the same quarter last year.

To its credit, Husky is diversifying into alternative fuels by investing up to $95 million to build a 130- million-litre-a-year ethanol production plant – the largest in Canada – in Lloydminster.

Nexen Inc. also reported an increase in profit for the third quarter this year, to $220 million or $1.69 per share, compared with $171 million or $1.35 per share a year earlier.

Nexen is a good environmental performer. But it is one of many major oil and gas firms – EnCana Corp. and Petro-Canada Inc. being a couple of others – which could lead the way to a cleaner energy future, if only they spent some of their record profits developing energy other than fossil fuels.

So has First Calgary Petroleums Ltd. put the for- sale sign in the ground? It’s looking more and more like it, although the junior energy company isn’t saying one way or the other.

In fact, First Calgary last week denied newspaper reports in the U.K. that it has appointed bankers to sell the company.

However, the firm did confirm that it has established a committee among its board members “to consider strategic alternatives regarding the future development of the company.”

First Calgary, which has found natural gas in Algeria but has yet to bring it into commercial production, has a market value estimated at $2.69 billion.

According to news reports, the company has proven and probable reserves of seven trillion cubic feet of gas – equivalent to about 1.2-billion barrels of oil.

But getting that gas to market will be a challenge. Existing gas pipelines and export terminals in the region are near capacity.

First Calgary will either need to attract an equity partner or sell the business, either to a European giant like Royal Dutch/Shell Group or Total SA of France or to producers such as Petro-Canada or Anadarko Petroleum, which already have assets in Algeria.

Compton’s Hot Spot

Compton Petroleum Corp. will finally get its chance to persuade Calgarians that it can safely drill six critical sour-gas wells just over a kilometre from the southeast city limits.

The Alberta Energy and Utilities Board (EUB) has scheduled a public hearing on the company’s drilling plans for Jan. 11, 2005, in the Safari Lodge at the Calgary Zoo.

The hearing had originally been set for March 30, 2004, in a hall near Okotoks, but the EUB postponed it at the company’s request.

Compton says drilling the six wells, each of which would contain about 35-per-cent poisonous hydrogen sulphide, would enable it to deplete the gas reservoir more quickly and then leave the area.

The EUB will also consider Compton’s request to reduce the emergency planning zone for the wells – the area in which people could be evacuated in the event of a blowout – from a 12- to 15-kilometre radius to four kilometres.

Meanwhile, a key recommendation made in December 2000 by the provincial advisory committee on public safety and sour gas was that the EUB, in co-operation with stakeholders, develop a standard model for assessing the risk to people exposed to H2S in an emergency planning zone.

Nearly four years later, the EUB has yet to finalize the new model, amid concerns by some stakeholders, including regional health authorities, about the H2S levels that the EUB used to determine risk.

Let’s hope, for the sake of anxious southeast Calgary residents, they get it sorted out before next January’s hearing starts.

(Mark Lowey can be reached at mark@businessedge.ca)