North America presents the full set of strategies for underperforming against oil and gas potential. The continent is richer in natural resources than political judgment.
This observation applies even to the US, now setting oil and gas production records but as susceptible as its neighbors to official misguidedness.
Mexico leads
Among North America’s three main producing countries, Mexico leads in failure to extract full value from petroleum potential. It devoted 76 years to laggard development under the Pemex monopoly, which ended in 2014 only to be reformulated by President Andres Manuel Lopez Obrador (OGJ, July 29, 2019, p. 16). Since taking office last December, Lopez Obrador has halted licensing rounds, confined upstream participation by private companies to service companies, and restored Pemex centrality in the oil and gas industry.
AMLO, as the president is known, also has obstructed pipeline construction by operators from outside Mexico. His government recently forced TC Energy, IEnova, and Mexican partners into international arbitration over the 482-mile Sur de Texas pipeline to carry gas under water from Texas to Central Mexico. The government complained about completion delays, which the builders attribute to slow permitting. TC Energy says construction was complete in June. Because the government hasn’t acknowledged project readiness, deliveries can’t begin.
On display in Mexico, therefore, are two effective repellants to international investment in oil and gas: preeminence of the state and uncertainty from capricious regulation.
AMLO spoiled his country’s oil and gas renaissance with a leftist’s distrust of private enterprise and a Mexican politician’s flair for resource nationalism. Canadian Prime Minister Justin Trudeau is producing comparable results with a personal craving for renown as a leader on climate change.
With policies advanced by Trudeau, the federal and several provincial governments make energy pricey with taxation of fossil energy and discourage investment in oil sands and heavy oil by resisting pipeline construction. Most recently, the federal government added features to environmental review that will impair pipeline projects and blocked oil tanker traffic in northern British Columbia. Constriction of oil sands production—a clear goal—does more than damage the Albertan and Canadian economies. It also hampers development by the oil sands industry of energy-saving and carbon-mitigation technologies applicable around the world.
Canada’s use of pipeline resistance to stifle oil and gas production follows a strategy given prominence by US stonewalling of the Keystone XL pipeline. Former President Barack Obama, who shared Trudeau’s climatological distaste for hydrocarbons, wouldn’t approve the border crossing even though his own administration found it environmentally acceptable—only because it would carry oil. Thanks to the Keystone XL fiasco, Canadian fanatics now treat pipeline opposition as a moral imperative and receive help from their government. With Canadian bottlenecks lately joined by Mexican backsliding, North America increasingly looks like a continent that could have become an interconnected oil and gas power but squandered the potential.
The US now rides alone on an oil and gas production wave, enabled and encouraged by a president who doesn’t share his predecessor’s aversion to hydrocarbons. Donald Trump deserves credit for encouraging resource development. He deserves credit, too, for keeping his country out of the futile and costly Paris Climate Agreement. To sustain progress, though, he needs to retreat from his version of climate extremism.
Climate change is not a hoax, as he has insisted. It happens, and human activity is part—maybe a large part—of the reason. Moderating the human contribution is prudent and essential to the continued use of oil and gas. But that can’t happen in a winner-take-all political fight between overreaction and indifference over climate change.
A climate leader?
Trump could become the climate leader Trudeau and others want to be if he renounced the “hoax” assertion and treated climate change as a real concern to be addressed along with—to repeat, along with—the equally important need for affordable energy.
Then—who knows? North America might become the oil and gas powerhouse geology says it should be.
