For those who dream of an end to fossil fuel consumption, Canada’s National Energy Board has served up its version of reality in projecting energy production over the next 24 years.
Regardless of whether major pipeline projects go ahead and whether climate change measures are implemented, the federal regulator, using a “reference case” or base line projection, forecasts that oil output will increase by 56 percent to 6.1 million barrels per day and natural gas production will grow by 22 percent to 17.9 billion cubic feet per day, driven largely by LNG exports.
Even if the industry is able to lower greenhouse gas emissions per unit of production and renewable production of wind, solar and biomass doubles its share of total energy production from 9 percent, that translates into a 22 percent increase by GHG emissions.
That bolsters a United Nations report on the results of December’s climate change summit in Paris, when participants set a goal of limiting warming increases to 1.5 degrees Celsius.
Amid the back-slapping and laudatory assessments of the Paris conference, the UN suggests the commitments will see GHG emissions rise from 2010 to 2030.
Forecast based on today
The NEB repeatedly stressed that its forecast looks only at what is happening today and how that influences its projections.
It did not take into account world price trends for energy or what policies the Canadian government might introduce to set a national price for carbon, to accelerate the shift in energy mix to renewable or the impact of subsidies for clean technology.
The NEB did not try to guess the outcome of oil pipeline hearings or applications, but cautioned that whatever happens there would be only limited impact on energy demand.
Even if all four of Canada’s major export pipeline projects - Keystone XL, Northern Gateway, Energy East and Trans Mountain - end up on the scrap heap, the board said growth in energy use would be only marginally lower.
It also said that oil markets will continue to be accessed by rail if pipelines are shelved and will continue to exist domestically and offshore.
Although shipments by rail are more expensive than by pipeline, bottom-line profits would not be trimmed enough to lower production significantly, although the use of rail could slice 1.7 percent off Alberta’s gross domestic product.
Demand growth slowing
For those looking for encouragement from the trend line in energy use in Canada, the NEB reported that end-use demand would increase at an average annual rate of 0.7 percent from 2014 to 2040, about half the increase from 1990 to 2013.
Production of crude, based on all three of the NEB’s price cases, could reach 4.8 million bpd by 2040, or 20 percent less than the base line projection, or grow robustly to 6.9 million bpd, 15 percent higher than the reference case.
Natural gas production could range from 16 billion cubic feet per day, 13 percent below the reference case, to 24 bcf per day, 31 percent above the reference case.
The NEB noted that the pace of development of oil pipeline infrastructure is “a notable uncertainty for the Canadian energy system.”
Even under a “constrained” case, with no new export pipelines getting built, the report suggests crude production will remain profitable, growing to 5.6 million bpd by 2040, 8 percent lower than the reference case, with crude-by-rail shipments reaching 1.2 million bpd.
LNG exports in 2019
The reference case assumes LNG exports will start in 2019 at 500 million cubic feet per day, rising to 2.3 bcf per day in 2023, but the NEB notes that there is “considerable uncertainty” around how much LNG Canada might export globally.
A “high case” projection for LNG puts related gas production at 22 bcf per day in 2040, while an absence of any gas needs for LNG would put production at 15 bcf per day.
The NEB said that “given the policy and technical assumptions” of its analysis, fossil fuels will remain the primary source of energy in Canada over the 24 years, growing from 13,444 petajoules in 2013 to 16,233 petajoules in 2040, based on the reference case, with a high demand case for LNG pushing the total to 16,531 petajoules.
In a final observation, the NEB noted the importance of economic growth trends which, during the 2008-09 recession, lowered Canadian consumption by 8 percent.
“Similarly, technological developments beyond those considered in this report could result in markedly different outcomes,” the report said, adding that future laws, policies and programs “could strongly influence long term energy use and GHG emissions.”
