By David Detomasi, June 16, 2026
The Carney government is moving quickly to champion Canada’s economic ambition abroad and build its energy superpower status at home. These ambitions are both expansive and expensive.
But building the machinery of an energy superpower—ports, pipelines, mines, nuclear power, expanding the oil and gas sector—will require capital. And lots of it.
This raises questions about where will the money come from. And what political conditions Canada must accept to bring that capital in the door.
Attracting energy sector capital formation means making the risk acceptable and returns sufficient to ensure enough capital flow. The available options all present challenges that require clear thinking and acknowledgement of tradeoffs. Segmenting the capital picture helps.
Working backwards, the first capital providers are customers, the purchasers of Canadian oil and gas. Given current geopolitical and economic realities, their demand seems secure. Those customers want consistency, reliability, and volume at competitive prices.
Second are the oil, gas, and pipeline companies themselves. Today, most of these companies finance operations out of ongoing cash flow, currently elevated due to war-induced premiums. While a peace deal appears to have been reached for now, uncertainty remains. They have technical expertise and capacity to produce and transport more energy. But they are disciplined in their outlays: managing capacity based on cautious long-term price projections.
As yet, those private companies have not “stepped up to the plate” to increase capital outlays or ramp up production. They have their reasons. The risks and expenditures are too great for individual companies to bear alone. And let’s not forget that many of these businesses remain wary that Canada’s newfound energy enthusiasm may fade—having seen that occur in the past.
Third is the domestic investment financial community that might provide either debt financing or investor/pension funds that might purchase energy stocks. Both are constrained not only by their stated risk-adjusted return parameters, but also by stakeholder demands of environmental, social, and governance (ESG) performance that may limit investment in oil and gas.
The Carney government has tried to address these challenges. Regulatory processes are being streamlined to raise investor confidence. Meanwhile, private capital is now backstopped with taxpayer money via the Canada Strong Fund—Canada’s fledgling effort into the sovereign wealth game. And recent tax policy incentives, such as accelerated capital cost allowances and royalty incentives, also help.
But problems remain. The initial $25 billion allocated for the sovereign wealth fund is not nearly enough to build what is envisioned. Let’s keep in mind that it needs to catalyze private capital, not substitute for it. Some estimates suggest it will require the capital in the order of $10 billion every year for the foreseeable future in order to increase Canada’s oil production by 1–2 million barrels per day. Meanwhile, the industrial carbon tax remains, and has tied new pipeline construction to carbon-capture-and-sequestration (CCS) efforts.
These latter requirements may improve palatability to the domestic financial community, but they nevertheless represent costs other producers do not face. That makes Canadian domestic operations more expensive, and there’s scant evidence that consumers are willing to pay more for “cleanly” produced carbon energy.
Another looming choice for the Carney government is attracting, and then managing, an additional source of potential investment capital: the large foreign companies that have the capital depth and the partnership experience to get big projects done. Carney’s pledge to convene a Canadian investment summit in the fall indicates foreign capital is key to Canada’s economic ambition.
Those companies shunned or exited Canada over the past decade, but glimmers of reconsideration are apparent. Shell has returned to the Canadian investment game by purchasing energy company ARC Resources to get access to Canada’s natural gas reserves. Merger and acquisition activity in the natural resource sector remains strong.
But a shadow lies over the spectre of large foreign investment. For one, many companies that might invest are headquartered in the United States or China, and Canada’s current relationships with both are rocky. Consider the impact if those difficulties remain. For example, if tariffs on Canadian autos, steel, and aluminum find no relief in the upcoming CUSMA negotiations, or China continues to be perceived as an economic adversary to Canada, then Canadians may balk at accepting large U.S. or Chinese investment in the energy (or indeed any) sector.
Second, Canadians have historically been leery of the spectre of too much foreign ownership in the resource sector, and often demand extensive review of proposed foreign investment based on national security and sovereignty grounds. If that trend continues, it may slow said investment and further sour foreign investors on Canada.
That’s why stress testing the spectre of large foreign investment now may be a useful exercise to gauge. This could involve determining palatable ownership limits and designating potential partners. That’s a better path forward than cultivating a large investment proposal that then receives public criticism and potential nationalist rejection—a problematic but preventable scenario.
Capital is not homogeneous. Each source has benefits but seeks different conditions in the investment environment. So the message to Ottawa is clear: balancing foreign and domestic investor demand will be a critical and delicate component of Canada’s ongoing energy superpower aspirations.
David Detomasi is a professor at Queen’s University’s Smith School of Business, and a contributor to the Macdonald-Laurier Institute.
