How Canadian E&Ps are using Portfolio to Navigate the Energy Transition Landscape

March 6, 2024

Ramona Hill

Last week, the Canadian government proposed another layer for the regulatory trifle that governs GHG emissions from our Oil and Gas industry.

We have a carbon tax, the TIER program in Alberta, and new proposed programs to reduce Methane emissions and cap total emissions from Upstream production. Downstream companies have the Clean Fuel Standard to navigate. Electricity will need to fully decarbonize in just over a decade.

In addition to the sticks, there are carrots in place (or coming) to help support decarbonization initiatives. Tax credits and rebates are promising to shift the economic balance to favor CCS, Hydrogen production, and the development of emerging technologies. The price on carbon underpins many of these investment decisions.

Navigating this landscape is particularly tough for companies not only because the policies are numerous, complex, and overlapping, they risk being tossed out with a change of government in the next few years. Commodity prices have not stopped fluctuating either. Firms need to understand the optimal plan under their current assumptions, how that plan would perform in a changed environment, and what they would do differently under those circumstances. Where there is uncertainty, they must incorporate that into the analysis and view the range of possible outcomes.

The problem with traditional planning methods is that teams must make the decisions and assumptions first, then model, analyze results, and iterate. This is time consuming, error prone, and leaves folks wondering if they found the optimum plan at the end of it anyway. Rinse and repeat with different assumptions plus a range of sensitivities, and it becomes painful at best, and simply ineffective at worst.

Quorum’s Strategy & Portfolio Software takes a novel approach using linear optimization to quickly guide to the best set of investment decisions for the given constraints. It supports probabilistic analysis to calculate the range of possible outcomes so that firms can quantify and manage risk, finding clarity through the noise. And it displays the results in helpful dashboards or business analytics tools.