Although hundreds of companies book billions of dollars of energy reserves on their balance sheets, the volatility of prices, the regulatory churn, and the swift currents of technological change, produce inefficient levels of investment in these capital-intensive corporations.
We race to claim and develop energy reserves using increasingly sophisticated technologies to extract less accessible reserves of carbon. The massive investment required to turn remote, sub-oceanic and dirty resources into profits requires companies to service enormous debt.
In Canada, we have been shocked to see the opportunities for growth and potential profits from unconventional energy sources evaporate before our eyes. Perhaps this story is worth telling in a larger arena: what can we do to hedge the risks to companies and governments of energy bubbles?
In the last few years in North America, companies have scrambled to drill into the Arctic, reopen the Gulf of Mexico to deep water rigs, frack shale beds throughout the continent, and mine the top 200 feet of much of northern Alberta. They have developed coal gasification technologies and other synthetic liquid fuel processes. None of it is cheap: the capital costs, research and development expenses, environmental compliance outlays and exploration expenditures are enormous.
guardian
