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On the one hand, on the other …
Canada Energy Regulator’s 30-year forecast points to rise in crude oil, natural gas production, until 2040, then moderate decline Gary Park for Petroleum News
Canadians trying to find middle ground in the debate over the future of their fossil fuel industry got both ends of the argument in a report issued by the Canada Energy Regulator in late November.
The federal government agency that reviews and decides on major development and pipeline project applications updated its energy outlook for the next 30 years by forecasting that oil and natural gas output will peak before 2050, the supposed magic target date for the Canadian government’s targeted net-zero carbon emissions.
The CER’s Energy Futures report said Canada’s crude oil production could grow by about 18% to 5.8 million barrels per day over the next 20 years, while natural gas output could rise by 17% to 18 billion cubic feet per day.
However, the report also forecasts declines in crude output of 500,000 bpd through the 2040s to 5.3 million bpd by 2050 and 1.2 bcf/d in gas to 16.8 bcf/day over the same period.
“While fossil fuel consumption declines in the evolving scenario, it still makes up over 60% of Canada’s fuel mix in 2050,” renewable energy is expected to increase by 45% during the next three decades, the CER report said.
The agency said it expects the use of renewables and nuclear energy will grow by 31%, but, if global efforts to reduce greenhouse gas emissions do not develop beyond measures currently in place, fossil fuel consumption will remain relatively stable.
In that scenario, the crude benchmark price is expected to average US$75 a barrel over the 2025-50 period, compared with US$57 if there is a growing global shift towards stronger emissions reduction and greener energy.
Cost, carbon competitive CER Chief Executive Officer Gitane De Silva offered the blunt assessment, contrary to many initial interpretations, that the report “does not state new pipelines should not be built,” adding “the report is a projection not a prediction.”
She said that although Alberta as the stronghold of Canada’s oil and gas output is a resilient province “the future of the (petroleum) industry depends very much on its remaining cost competitive and carbon competitive.”
CER chief economist Darren Christie noted that available pipeline capacity is “well recognized to be something that helps (the transportation system) work efficiently and provides access to different markets.”
That thinking covers about 1.8 million bpd of combined additional shipping space in three pipeline projects - the Trans Mountain expansion, Keystone XL and the replacement of Enbridge’s Line 3.
Alberta Energy Minister Sonya Savage said that in general the CER findings confirm that oil and gas “will continue to dominate the energy mix for decades to come. It makes the case that the oil sands production is increasing and we are going to need additional pipeline capacity. But it also makes the case that emissions from the oil sands need to come down with technology.”
One strong indication of the industry’s support for more pipeline capacity is backing for the Trans Mountain expansion to 890,000 bpd. So far 13 companies have signed 15- and 20-year shipping contracts covering 80% of system’s new volumes, with the balance available on the spot market.
Kevin Birn, an analyst with energy consultant IHS Markit, said that even in the midst of a challenging price scenario, crude supply in Western Canada remains “resilient.”
Opposing views Eager to advance their own view of the report, environment groups hailed the findings as evidence backing their insistence that work on the Trans Mountain expansion should be stopped immediately.
Cam Fenton, a team lead at 350.org, said the report makes it clear that the C$12.6 billion Trans Mountain project and Keystone XL are not necessary, even if Canada introduces net-zero legislation, while Tom Gunton, a resource and environmental planning professor at Vancouver’s Simon Fraser University, said it’s pretty clear that even tougher federal climate policies are coming.
On the flip side, Canadian Prime Minister Justin Trudeau, whose government owns Trans Mountain, renewed his commitment to the expansion, saying in November that Canada’s oil sector should not have to rely on the United States as its sole export market.
“We purchased Trans Mountain and are busy building (the expansion) so that we get access to markets across Asia,” he told a Canadian Broadcasting Corp. program in Calgary.
In addition, he was emphatic that his administration supports construction of Keystone XL, regardless of the barriers Joe Biden is expected to erect after he occupies the White House in January.
The CER gave more attention than previously to emerging technologies that could lower both fossil fuel demand and greenhouse gas emissions, including utility-scale battery storage, electrification of vehicles and buildings, hydrogen-powered applications to transportation and industry, carbon capture and solvent-driven heavy oil production, many of which are being introduced across Canada, especially Alberta which is trying to develop new jobs to offset the loss of thousands of jobs in the oil and gas sector.
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