Over a 30-year career in the patch, CAPP's Greg
Stringham has experienced more than his share of volatility
Given the boom/bust nature of the oil patch, during tough times old-timers
trot out the joke about how to make a small fortune in oil and gas. The punch
line? “You have to start with a big fortune.”
The career of CAPP vice president Greg
Stringham, who retires as this issue goes to press, illustrates that story
well. During his 30-year in the oil industry – first with the ERCB, and for
the last 20 years with CAPP – the 55-year-old has seen four royalty reviews,
numerous pipeline battles and three industry downturns. “Nothing in this
industry stays the same very long,” he says. “If it does, you’re flying
backwards.”
Stringham – he has a degree in chemical
engineering and an MA in business management – studied at the University of
Alberta. By taking core business courses as electives while he studied
engineering, he earned the two degrees in five years.
After joining CAPP he quickly became a
senior voice for the industry, and his work took him to high places. “Being
in this job has been a wonderful experience. CAPP has had so many great
leaders that I’ve been able to learn from. I’ve worked with government, I’ve
worked with ambassadors, I’ve met with Congressmen, I’ve met with all the
Prime Ministers. Where else,” he asks, “could you find a job that would
provide you with that much opportunity?”
“CAPP is the epicentre of the industry,”
he says. “In this organization you are constantly shaking, rocking and
rolling. You are in the midst of the most important things that are happening
in the industry.” Organized to be an association for its member companies,
CAPP is all about committee meetings. “It is our member companies that come
up with the ideas,” he says. Staff members help them get things done. “We
have a board of directors and ten executive policy groups, and literally
hundreds of subcommittees. Once the directors tell us ‘This is the way to
go,’ then we can really get things done.”
He adds that the key is to make a
difference in the priority issues CAPP identifies. “When I first started
here, pipelines were an issue. We had more gas than we could deal with, and
not enough pipelines to get the stuff to market.” He pauses to reflect, but
only briefly. “Isn’t it amazing how some things change and some things stay
the same?”
Indeed, in some ways, he leaves the
industry as it was when he began. Hydrocarbon prices are in the tank, there’s
another royalty review in the offing, and the industry struggles for new pipe
to take more production to market. “When I started here oil prices were just
over $20 a barrel and natural gas was about a dollar a GJ,” he says. “I’ve
seen oil go all the way up to [WTI’s all-time peak of US$145 per barrel in
2008] and now it sits at about $30. Gas was $14 during Katrina; now it’s
about $2. The only constant is change.”
Prices began to seriously drop last year,
and the process has sometimes felt like a freefall. This development reduced
new development in the oil sands. It led to extensive lay-offs in both the
petroleum industry and the service sector. And it greatly reduced tax and
royalty revenue for Canadian governments. To some degree consumers have
benefitted from cheaper fuels, but those benefits hardly offset the
collateral damage caused by the crash.
According to CAPP, 100,000 workers
directly and indirectly tied to the oil-and-gas sector lost their jobs last
year, with the blue-collar workforce sustaining a disproportionate share of
the pain. While this may be the third bust he has experienced during his
oil patch career, it’s different from the others because Canada’s petroleum
industry has fundamentally changed, Stringham says.
“Just about the time I got started [at
CAPP], the oilsands kicked in.” That has added a lot of stability to the
provincial economy, since production operations are much like manufacturing
operations. “It’s not like Saudi Arabia, where they can turn production on
and off. Even though we’re suffering right now and it’s a hard time for the
industry, the momentum would be much different if we didn’t have the oilsands
as a stabilizing influence.” Without them, “we would be in a much deeper
trough right now.”
When Stringham started working at CAPP,
oilsands production totalled about 400,000 barrels a day. “Today we’re
producing about 2.4 million barrels. And even though prices are down, we’re going
to increase oilsands production by 700,000 barrels per day over the next four
years.”
A remote province: When he joined, the industry association was overwhelmingly
Canada-focused. “During the 20 years I’ve been here, we have developed a
North American focus.” That, too, is changing.
“Increasingly, we are becoming an
international player. We are aware of the impact of the globe, which is
hitting us on all sides. The pace at which things are happening is speeding
up – things are moving faster and faster. Not just from pricing, but from the
perspective of demand, public perception of what’s going on, the need for us
to draw from our resources – whether it be labour or steel, for example.”
With these words, the pace of his commentary picks up perceptibly.
Going back to his earliest years in the
industry, Stringham mentions the bust of 1986, when oil cratered at $10 a
barrel – partly in response to high inflation and high interest rates.
“People were abandoning their houses,” he says. So inflated had prices become
that owners would sell them for a dollar, leaving their mortgages unsecured
and banks taking the hit.
While its severity was similar to what we
are experiencing today, it seems incongruous when he describes that era as fundamentally
different from the one we are in today. “Back then the industry was really
focused in Alberta. There was a little activity in Saskatchewan and British
Columbia, and some on the East Coast, but for the most part, people only felt
the impact of low oil prices here in Alberta.”
By contrast, today’s crash is echoing
across Canada. “Premiers across the country are talking about how much it is
affecting their economies, and jobs,” he says. “People who came to Alberta to
work, lost their jobs and have gone back East can’t find employment there.”
That’s fundamentally different from what happened during the crashes of ’86
and ’98 – two localized crashes. The change reflects the growing importance
of energy within the Canadian economy, he says. Today every province benefits
when the industry is healthy, and every province hurts when it’s ailing.
Technology: “Technology is making it possible for us to provide that resource
not only to Canadians, but also to the world,” he says. Canada has become a
world leader in petroleum production because of both its growing
technological know-how and its top-of-class resources. “We have the
third-largest petroleum resources in the world,” and “our technology and our
ingenuity are the keys to our ability to sell our resources around the
world.” This seems a bit far-fetched, since oilsands production doesn’t yet
have access to tidewater.
I raise the question, and he bites. “It
is astonishing how reluctant Canada was to turn from our comfort zone in
North America to trading with other countries,” he says, and he’s soon on a
roll. Increasingly, though, “we realize the importance of trading on the
global stage. We have talked about our role in the global economy for a long
time, but it only really came to life in the last couple of years,” he says.
“We were too comfortable in our North American zone, which has been the
biggest export market and consumer of Canadian oil for decades.”
Over the last five years, though, tight
oil has changed that. During that period America increased its tight oil
production by 4 million barrels per day. The US has thus become Canada’s
“biggest competitor, in addition to being our biggest market,” and bountiful
tight oil has displacing some demand for Canadian supply.
That, of course, is the reason Canada
must begin shipping its oil around the globe. For many of us, it feels as
though tidewater pipelines will never become reality, but Stringham takes the
longer view. “I’m very positive that export pipelines are going to be
approved, and we’re going to need many of them,” he says. He believes Canada
will soon construct pipelines going both east and west, to enable Canada to
reach global markets in all directions. “Canada is one of the few countries
in the world that really has the capacity to increase its production. That’s
mostly from the oil sands,” he says.
True, but oil reserves in every corner of
the globe are on the rise. They have increased 52 per cent since 1994,
compared to a 31 per cent rise in consumption. That mathematical
imbalance has contributed to lower prices.
Environmental concerns are why approval
has been slower than in the past, “but it is going to happen. Part of the
reason is that Canadian environmental standards are world-class – I have
travelled around the world, and I can confirm that – but it is government
that has to make the decision whether we want to continue to be North
American or whether we want to be a global player.” Our future is global, he
says, but to get there the industry needs access to tidewater.
During his tenure at the association, the
“most wonderful technology” to emerge was steam-assisted gravity drainage
(SAGD), which then was just experimental. “That has been an amazing
breakthrough,” he says. Before SAGD “you would have to build either a big
cyclic-steam project like Imperial Cold Lake, or construct a big mining
project like Syncrude. All of a sudden a small company could come in, and
they could get into this business. And that technology developed just as oil
prices began to rise.” SAGD is now a core dynamic behind Canada’s top ranking
on the world stage.
Sustainability: CAPP is well aware that production technologies are increasing
the available reserves of hydrocarbons, according to Stringham. “We also
understand that the environment is the opposite side of the coin. Technology
unlocks the resource, but technology is also the key to sustainable
production.” New technologies are reducing oil production’s impact on
wetlands and aquifers, and even the industry’s impact on soil, land and
forest.
“What about the atmosphere?” I ask. He
says the industry needs to control emissions – CO2, and methane
even more – on the production side as best it can. This includes continually
improving and installing better emissions reduction technology on industrial
structures. However, he agrees, most greenhouse gases rising into the
atmosphere come out of transportation-related tailpipes and jets, from
residential furnaces, and from the many forms of industrial consumption.
Stringham has had a good run, but he’s a
lot younger than the traditional retirement age. So, what are his plans? “I
have no plans for the future,” he says. “I’m really retiring. I want to take
a little while to figure out what I’m going to do next. I wanted to give CAPP
my full attention while we figured out things like climate change and the
royalty review. Now it’s time to move on.”
This article appears in the March issue of Oilweek.