There’s a natural experiment about how innovation works unfolding in the oilpatch.

In 2021, Calgary generated two notable carbon capture announcements. 

The big bitumen producers launched the Oil Sands Pathways to Net Zero initiative, featuring a massive infrastructure project that would cost $16.5 billion, but make emissions from their vast fields carbon neutral by 2050.

Meanwhile, instead of a plan and a promise, Advantage Energy, a lesser known producer of light oil and natural gas, announced a breakthrough. In-house research and development had turned up results so encouraging that Advantage created a separate company devoted exclusively to carbon capture. It called the spinoff Entropy, and said it would deploy the technology at its Glacier gas plant near Grande Prairie, Alta., over two phases at a cost of about $76 million. 

Fast forward five years. 

The Pathways partners have completed “significant engineering, subsurface evaluation and environmental field work,” but it will be years before they know if their moonshot works, assuming they ever build it. The project has become a bargaining chip in negotiations with Prime Minister Mark Carney and Alberta Premier Danielle Smith over ramping up heavy oil production to fill a new West Coast pipeline. 

It’s fair to wonder if enthusiasm for Pathways has waned over the years. The top executives from its longest-standing members—Canadian Natural Resources Limited, Suncor Energy, Cenovus Energy, MEG Energy, Imperial Oil and ConocoPhillips Canada—have all been replaced since they announced the venture. 

Imperial, a Canadian subsidiary of U.S. oil giant ExxonMobil, said last year that it plans to cut 20 per cent of its staff and mostly vacate Calgary by 2027. Cenovus absorbed MEG, giving the oilsands the look of a comfortable oligopoly rather than a team of rivals. In February, the Pathways collective changed its name to the Oil Sands Alliance, relegating the original raison d’etre of their collaboration to the status of “project.” What started as an interesting team-up has slowly morphed into yet another lobbying outfit. 

Entropy is still Entropy, albeit with some additional owners. In 2022, Brookfield Asset Management invested $300 million, and in 2023 the Canada Growth Fund added $200 million. Advantage’s ownership stake has been diluted, but the technology it developed is on the verge of being deployed at commercial scale. The company is on track to attach a carbon capture and underground storage system to a turbine at Glacier this summer. Entropy says it will be the first in the world to do so, an achievement that would lend some credibility to Carney’s claim that Canada can be both a conventional and a clean energy superpower. 

“It’s really hard to differentiate yourself as an oil and gas company,” Sanjay Bishnoi, the longtime energy executive who was named Entropy’s CEO in 2024, said in an interview at CERAWeek in Houston last month. “The Advantage team had the foresight of saying, ‘This is a good way for us to differentiate ourselves’ and have a cleantech angle within a traditional energy company.” 

That wasn’t the only motivation. Like the behemoths that mine the oilsands, Advantage was confronting the possibility that global policymakers were on the verge of seriously restricting the use of fossil fuels. If it wanted to grow, it might have to step out of its comfort zone and discover a way to reduce emissions. 

“It was bold,” said Bishnoi. “Not a lot of people were thinking that way. Most people were saying, ‘How do we just beat this politically?’ The Advantage team had the foresight to say, ‘No, we’re going to see if we can create a new product out of it.’”

The longer you do something, the harder it becomes to pivot to another way of doing it, especially if you are particularly good at doing that thing. Economists call it path dependency. CNRL, Suncor and Cenovus have mastered the process of separating oil from dirt in northern Alberta. They can break even at an oil price of around US$40 per barrel, and they are veritable cash machines for their shareholders when the price is at US$60. 

Net income as a percentage of revenue for oil and gas extractors was 10 per cent or higher for five consecutive years through 2025, according to Statistics Canada data. The average over the previous 10 years was negative nine per cent. The leaders of the oilsands companies might reasonably conclude that their great innovation was taming the boom-bust cycle. 

Still, with that kind of financial success, the incentive to try new things naturally begins to wane, while the impulse to protect what you have gets stronger. That’s why established companies spend so much money on lobbyists. 

Bishnoi is a supporter of Pathways. He said there are “really smart people” working on it. Still, he questions the logic of taking such a big swing. There’s nowhere to sequester emissions near the mines, so the Pathways project envisions a pipeline system stretching more than 400 kilometres to ship the carbon to a storage hub. It could work, but it’s an expensive way to go about things. That’s why the project is at a “stalemate,” said Bishnoi, who was an engineer before he jumped to management.

“Really, the onus is on companies like us to go figure out the small stuff, so when they figure that out, we’ve got the roadmap,” said Bishnoi. “We can transfer a lot of that knowledge and maybe, hopefully, participate in projects ourselves.”  

That’s how creative destruction is supposed to work. New entrants come with new ideas, forcing incumbents to catch up. Early evidence from the oilpatch suggests that expecting the oilsands companies to disrupt themselves was misguided. If you want disruption, get behind disruptors. 

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.