Russia’s invasion of Ukraine seems to have provided a sort of “social licence” for otherwise cautious investors to drill for more oil and gas as economies around the world turn away from Russian hydrocarbons, says Per Magnus Nysveen, senior partner and head of analysis, Rystad Energy AS.

“I think you will see a different pace of activities going forward,” he told a recent Rystad webinar. He added that severe sanctions on Russia could, at the most, take between 3.5 million and four million bbls/d of crude off the market.

On the Canadian oilfield services front, geopolitical tensions are driving rapid upward pricing in the commodities market, according to Robert Geddes, president and chief operating officer, Ensign Energy Services Inc. He said this changing pricing structure enhances impacts of underinvestment over recent years for the global oil and gas business.

“The Ukraine crisis has influenced everything and the thinking,” Geddes told the Q4 results conference call. “Our phone has basically lit up over the past few weeks on the sales side. Everyone is wanting to grab the rigs that they are familiar with and/or expand the rig fleet.”

He added: “The perfect storm of increased demand, restricted global supply, and the result in the market price response for oil and gas commodities leads us into arguably the best fundamentals for a drilling and well-servicing contractor that I have seen personally in the 30 years that I have been in the business.”

For Calfrac Well Services Ltd., management expects the Russian conflict in Ukraine to have some impact on Q1 2022 performance, chief financial officer Mike Olinek told his company’s Q4 2021 results conference call. However, timing of the Russian invasion should mute the impact.

“The events happened at the end of February,” said Olinek — a time when two-thirds of first quarter activity was already complete. The company’s Russian operations accounted for around 10 per cent of revenues in the final quarter of 2021, amounting to around $28 million. Calfrac has 77,000 horsepower of active pressure pumping capacity, along with four active and three idle coiled-tubing units in Russia.

Out of Russia

The Russia-Ukraine war has Calfrac evaluating options for its Russian division, said Lindsay Link, president and COO. The Russian division generated operating income of $1.6 million during the fourth quarter of 2021. “There is a lot of uncertainty and risk around company operations at this point.”

He added: “[It’s] a very dynamic situation. We expect to have more to discuss about it when we report first-quarter results in early May.”

At Enerflex Ltd., while Russia’s invasion of Ukraine destabilizes the world and business environment in general, the OFS firm does not anticipate any material impacts to its particular sales and revenue streams due to this geopolitical event, suggested Marc Rossiter, president and chief executive officer.

“Really, we stopped doing business in Russia after they invaded Crimea in 2014,” he told his company’s Q4 2021 results conference call. Canadian and U.S. governments had advised against doing business there, he noted, and thus Enerflex has not really tried to develop its business in Russia since that time. “There’s nothing really there for us. It’s just that we’re going to watch very closely the impacts this has on global oil and gas spending.”

In terms of filling the supply gap, Dennis McConaghy, former executive vice-president of corporate development at TransCanada Corporation (which is now TC Energy Corporation) told a Canadian Global Affairs Institute (CGAI) virtual panel discussion that Canada has abundant resources that could be scaled up to help meet a goal of establishing energy security, especially on the liquefied natural gas LNG front.

However, he said, the country would need to thoroughly re-examine its current climate change policies and its head-first plunge to net zero by 2050. McConaghy added that where Canada could make its largest contribution is by ramping up its LNG infrastructure over and above the LNG Canada project that’s currently in the construction phase.

Canada’s opportunity

Meanwhile, AltaGas Ltd. is seeing more interest from foreign markets that desire greater control of their energy destiny in light of the ongoing Russia-Ukraine geopolitical crisis, Randy Crawford, president and CEO, told his firm’s Q4 results conference call. “We’re going to continue to work with these entities for contract off-taking at the plants. These customers are looking to acquire the rights to output, and I expect that to continue.”

He added: “The unfortunate events that have been unfolding in Eastern Europe illuminate the critical value of energy independence and diversity.”

According to Nysveen, current oil and gas needs might support carbon capture while simultaneously reinforcing the case for energy transition. “Maybe this can be a case for more carbon capture going forward, in that we just need more of the fossil fuels still, as a backup, and then carbon capture becomes a more important part of the solution.”