Budget 2024

April 16 budget must prioritize growth 

In light of the COVID-19 emergency, we’ve temporarily suspended our regularly scheduled series of conversations with Canadian CEOs. But we’re not going away. Instead, we’re going to pivot to the health emergency itself. We’re going to explore the impact on companies and workers across the country. And we’re going to find out how business leaders are responding to crisis.

Mark Little,  President & CEO of Suncor Energy talks about the oil and gas crisis in Alberta in light of the COVID-19 pandemic, the work his company is doing to keep workers and northern communities safe, and how all this might lead to more collaboration between business and governments.

Transcript

Goldy Hyder:
I’m Goldy Hyder of the Business Council of Canada, and you’re listening to Speaking of Business. During the COVID-19 pandemic, we’ve put our regular podcast on hold to bring you this special series. We’re speaking with business leaders across the country to find out how their companies and their people are being affected by this unprecedented situation and how they as leaders in particular, are responding to this challenge.

Goldy Hyder:
Now, over the last few days, we’ve heard from a number of CEOs who responded in unique ways from donating money to healthcare workers to addressing the mental health needs of Canadians to helping local businesses survive the economic slowdown. Today, we head to Alberta to speak with Mark Little, president and CEO of Suncor Energy. Welcome Mark.

Mark Little:
Thanks Goldy for having me.

Goldy Hyder:
The oil patch has experienced MANY, and that’s bolded with capital M-A-N-Y, challenges even before the COVID-19 crisis took hold. And I just want to start there and talk to you about that. How are employees doing in the midst of this crisis as the pile on of challenges continues for the sector?

Mark Little:
As you can imagine, it’s a huge challenge, but before we jump into that, I just wanted to make sure I had a chance to acknowledge the essential workers across the country, everything from our healthcare workers to the people working in the grocery stores to the truck drivers and all the other essential aspects of our society. It is just inspiring to see them working together to help us get through this and it’s great to see. In the oil patch, our work that we’re doing every day is considered an essential service so that we can provide the gasoline and distillate and electricity and such that people are using in their homes every single day. And so in our organization, probably about 40% of our people are working from home daily while the other 60% of the people are going to work and running our facilities every day to make sure that all of the energy is available so that we can continue to sustain our economy.

Goldy Hyder:
Mark, you mentioned that you have some employees that are deemed essential, many of whom are working in remote areas. Can you just take us through what you’re doing to keep them safe and healthy?

Mark Little:
Well, there’s a huge amount that we’re doing to try and keep our employees safe, particularly running these critical facilities. We’re wanting to ensure that our workers, when they are entering the workplace, some of them are even going into camps. So there’s a whole bunch of steps we’ve taken to do that.

Mark Little:
One is obviously around cleaning, both reinforcing the normal behaviors, keeping their hands clean, coughing and sneezing into their elbow, not touching their face, keeping distance. And so we’ve had to reorganize some of the work to allow people to keep their distance from others and those sorts of things. And then we’re doing things like taking their temperature before they get on a plane to head to the camp. And then we’ve had to move our cafeterias and stuff away from self-serve to full service and we’ve been able to close and had to close our common areas and our gyms.

Mark Little:
And all of these types of things have been required for us to continue to operate. And now we’re starting to change the shift schedule. So if somebody worked a seven day shift where they went up North and worked in the facility, now some of them are shifting to 14 day shifts and some to 21 day shifts. Just the more we move people around, the higher the risk is that somebody is going to get infected. So there’s a lot that we’re doing to keep the workforce safe so that we can keep providing this energy.

Goldy Hyder:
Now, you recently responded to a call from the federal government to get N95 masks to some of the Northern communities. Can you just take us through how that happened and what you’re doing about it?

Mark Little:
Well, one of the things we realized, Goldy, is we buy some of the items that are now in short supply, so N95 masks and protective equipment and such for various work that we do on some of our facilities. And so we started talking to our suppliers about is there a role that we as a company could play in helping to increase the supply of some of these items? And I had been chatting with some of the people from the World Health Organization and the World Economic Forum and such, and you realize that their whole focus was to get people to use less masks and drive down demand. And our view was, “Okay, well, we can’t help too much with that.”

Mark Little:
We really have an opportunity to increase supply. So we started working and realized that some of our suppliers and such had access to large quantities of things like the N95 masks, which the federal government needed. And so we realized the requirement for it was very, very urgent. And so the typical process of going through the supply chain for the federal government to buy it, it just was way easier for us to just buy it, fly it up, drop it off in these remote communities so that it could get there as a stop-gap measure until the federal government can show up with their big supply chain purchases.

Goldy Hyder:
Now, Mark, I wanted to share the story of when you and I last spoke and how you’re responding as another example. We had discussed the fact that you’re in the lubricant business and it might allow you to get into doing some progress on the sanitizer issue. We talked about the fact that you might need to change your circuit boards and we were able to connect you to the head of the digital supercluster. Is this an opportunity for government and business to really see the benefits of collaborating on innovation?

Mark Little:
I think you’re right Goldy. And one of the things that I find quite inspiring is, so we’ve talked about what Suncor did with these masks, but as you know, there’s some great examples of companies in all sorts of industries across the country coming together to try and figure out how can they help, whether they’re making masks and converting some of their lines or whether they’re working on getting sanitizer, those sorts of things. We’ve looked at, can we take our ethanol plants and feed it into sanitizers and be able to make more hand sanitizer?

Mark Little:
That opportunity doesn’t look like it’s going to work out for a variety of reasons, but I think this is just a great opportunity for us in the midst of this crisis for Canadian businesses to stand up. It’s inspiring to see how many companies are doing this and I think it’s an opportunity for us to continue to work together to care for Canadians because, yes, the government has a role and the government’s doing a lot of different things, whether it’s provincially or federally, but Canadian businesses can carry a significant load and make a big contribution. And it’s exciting and humbling to be able to provide.

Goldy Hyder:
Well, I can’t imagine that we don’t come out of this crisis with some changes in our own behaviors and in the way in which our economy and our businesses function. And one of them has got to be the importance of controlling the supply of your own PPEs for the healthcare workers in terms of the professional equipment that they need. Really, I couldn’t believe how exposed we are to others in being able to supply that. So I’m hoping that’s one of the positive developments out of this very unfortunate situation.

Goldy Hyder:
Now, speaking of unfortunate situations, I want to come back to where I started in terms of the oil and gas sector having faced a double, some cases triple whammy, if you will. When the barrel is worth more than the contents, you’re in a very difficult place. I’m wondering in this precipitous fall, which many think will far out last the impact of the virus, what effect is that having on the sector and what effect is that having on companies like Suncor?

Mark Little:
Maybe I can just talk about this as really in two pieces because for pure producers, and what I mean by that is companies that their entire focus is producing oil, this is incredibly tough times. And in Canada, we’re almost back to where we were in Q4 of 2018 essentially, because there the crude price, at least for bitumen, got down to about zero. The only difference now is globally, the entire industry is facing the same challenge and in the vast majority of places. And I would say without a doubt, no one’s really making money in this environment and a lot of people are well below their cost structure on the revenue side. So the companies are under massive duress right out of the gate. And I think that this is primarily, although we talk a lot about Russian and Saudi behavior in oversupplying, global demand in April is likely going to be off somewhere between 10 and 50 million barrels a day.

Mark Little:
So 10% to 15% of global demand is gone on a temporary basis and the Russia-Saudi dispute has maybe added 3 to 4 million barrels a day of additional production. So whether the Saudi-Russia dispute was going on or not, we still would be oversupplied by 10 to 15 million barrels a day. Inventories are rapidly filling up both in the product side as well as in crude oil, but one advantage we have at Suncor is the fact that we are running refineries. We convert it into diesel and gasoline for your car and jet fuel and those sorts of things. With demand going off, we’re still running these facilities. We’re running them at a reduced rate. So we’re more advantaged than a pure producer, but everybody globally is struggling and pure producers globally and in the US, we’re seeing the same thing. Shale producers, some of them have already gone bankrupt in this and some of the service companies as well. So this is going to be a hugely challenging time as it is for the airline industry, the hotel industry, entertainment, all those sorts of things as well.

Goldy Hyder:
Well, I don’t know if you saw this, but three hours ago, the president sent out a tweet saying he spoke to his “friend” MbS, the Crown Prince of Saudi Arabia, who spoke with president Putin of Russia and he said, “I expect and hope that they will be cutting back approximately 10 million barrels.” I found that interesting because earlier on when we were having these conversations, it appeared that the president seemed okay with the idea of low oil prices. Seems like he may have changed his mind on that.

Mark Little:
Yeah, it’s really interesting to think that a tweet can change the current price by 20 to 25%.

Goldy Hyder:
Welcome to the new world.

Mark Little:
Yeah, exactly. It’s a crazy time for sure. But I think the issue with it is anybody can talk about having a debate, but the vast majority of the income for the Saudi Arabian economy comes from oil and gas and essentially they’re getting nothing from what’s going on today. In Russia, it’s a lower percentage of their economy, but it’s still a very critical part of their economy and they aren’t making any money on this. And the ultimate, whether they were having this dispute or not, inventories in short order globally are going to fill up. And is it a month or two months? I don’t know.

Mark Little:
But once that happens, supply and demand have to balance right away because you can’t produce if there’s no place to put it and there’s no ships or no tanks to put it in, you can’t produce if it’s not getting consumed. So this is going to come to a halt. At some point in time, the world will balance the supply and demand and then we’ll pace demand. And right now demand is way off and we’re hoping that once we can get through this health crisis, people can get out of their homes and stop self-isolating and we can get back to the world that we know although as you pointed out, I don’t think it’s ever going to be the same as it was. There’s going to be different precautions and such that we take.

Goldy Hyder:
Having said that, I assume you will agree that the announcement by TC Energy to proceed with Keystone, now the government’s continued interest in seeing TMX and Coastal Gas Link built. Those are all indications of when things do return to whatever the new normal looks like, the reality is the demand for oil and gas is going to continue.

Mark Little:
That’s right. And part of it is if you go back and look at oil and gas as a percentage of the entire energy system, hydrocarbons have sat at about 80% literally for three or four decades despite all the investment that we’ve made in wind and solar and all the great advances in technology, partly because globally, we have 7.5 billion people and we’ve been lifting people out of poverty around the globe. And when they do that, people need energy to be able to cook food better, get medicine, grow foods, those sorts of things.

Mark Little:
And so what we’re finding is energy demand continues to increase globally, oil demand is still going up, coal demand is starting to come off a little bit. So yes, we need to reduce the carbon and figure out how we’re going to deal with all the carbon issues, but there is no place where we think we can provide the energy for society without having hydrocarbon as a part of it literally for decades to come. So what we need to figure out is how are we going to deal with the CO2 emissions and such associated with that until new energies and new systems can be put in place.

Goldy Hyder:
Mark, let’s conclude by looking ahead, I know you to be an eternal optimist. I suspect that’s the case for the answer to the question what does a post COVID world look like for you and for Suncor?

Mark Little:
One of the things I’m reminded of deeply is Suncor is Suncor because of the world’s financial crisis. And during the world financial crisis, Petro-Canada at the time came together with Suncor and we merged to make us the company we are today, which is now a global company with the vast majority of our emphasis in the country. And I think because of that, I look back and think like, “Okay, that was a very, very difficult time, but we’re stronger.”

Mark Little:
And I see that and I think there’s an enormous opportunity independent of the industry or the specific company. This will be incredibly challenging, but I see lots of opportunity for us to get stronger as we go through it just even from the examples that you’ve talked about on this podcast, Goldy, about collaboration and people working on opportunities together. And I think it’s a great opportunity for Canadian business to work together differently to make our economy stronger, to make our company stronger, and to have more of a global impact. That’s what I’m thinking about and spending a lot of time thinking about as we go through this, and we’re finding lots of cohorts that are doing the same thing.

Mark Little:
So I think that’s the exciting part of it. There’s always challenges, but that actually will make us stronger as we go forward. So thanks for the opportunity today to chat with you.

Goldy Hyder:
Well, thanks so much Mark for sharing your time with us today, but also your hopes and vision for how we come out of all of this, both through COVID and also the oil and gas crisis that the province is facing. Let me just say, as an Albertan, you never short the spirit of Alberta and the resilience of Albertans and I thank you and your colleagues and others for the leadership that you’re providing the sector and the country at a very critical time.

Mark Little:
Thanks Goldy. Appreciate it.

Goldy Hyder:
Mark Little is president and CEO of Suncor Energy. For more conversations with Canadian business leaders about the COVID crisis, search Speaking of Business wherever you find podcasts or simply go to our website, speakingofbiz.ca. That’s biz with a Z. Until next time, I’m Goldy Hyder. Thank you so much for joining us.