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Piling on: IEA adds to Canadian upstream anti-fossil fuel problems
Gary Park for Petroleum News
Canadian petroleum producers have been getting increasingly dumped on for their environmental performance despite success in curbing greenhouse gas emissions and setting aggressive net-zero targets.
The word in Calgary office towers is that lenders are rapidly divesting themselves of stakes in upstream operators and refusing to answer the call for help from small companies which have been pushed to the brink of oblivion.
Compounding the industry troubles, insurance companies, under mounting pressure from environmentalists and First Nations, are turning down applications to renew policies of pipeline builders such Trans Mountain and Coastal GasLink and to provide coverage for expansion and greenfield projects.
The culmination of these efforts to put the industry in a chokehold culminated in mid-May when the International Energy Agency called for an end to spending on new developments to boost oil and natural gas supplies.
An IEA study laid out 400 “milestone” recommendations it said the world would need to pass if it hoped to achieve net-zero greenhouse gas emissions by 2050 and make a dramatic shift from reliance on fossil fuels to a global economy dominated by renewable resources.
The Paris-based IEA - rated by Alberta Energy Minister Sonya Savage as an organization dominated by “activists” - said the path to net-zero requires rapid exploitation of renewables, the establishment of carbon capture, utilization and storage projects and increased use of hydrogen.
Some recovery projected But Alberta Premier Jason Kenney noted the IEA study still concedes that global consumption of oil will soon recover to 72 million barrels per day (down from a pre-pandemic peak of 100 million bpd) and remain at that level for several decades.
“That oil has got to come from somewhere and it has to come from new development,” he said.
“The (IEA is) suggesting that will come from OPEC rather than from western countries. I think that is the worst possible outcome.”
Wrapping himself in a patriotic flag, Kenney said he wants “the best, last barrel of oil to come from Alberta.”
What causes some serious head scratching is the IEA’s apparent about face on its World Energy Report last fall which predicted oil demand could rebound to 100 million bpd within five years, then stabilize at 104 million bpd in 2040.
Less than a year later, the IEA’s new blueprint now targets 72 million BPD by 2030 and 24 million bpd by 2050, with prices sagging to US$24 a barrel in 2050.
Allan Fogwill, chief executive officer of the Canadian Energy Research Institute, questioned whether it is realistic for the IEA to expect everyone will scramble aboard its freshly repainted wagon.
At best, he said the IEA had laid out a pathway “for some of the decisions they have to make.”
Jackie Forrest, executive director of the ARC Energy Research Institute, said one of the toughest challenges for the IEA will be to persuade governments and consumers to accept the need for a “real change” in demand habits.
The industry is more inclined to accept a projection last year by the federal government’s Canada Energy Regulator which estimated oil production in Canada will rise by 18% to 5.8 million bpd by 2039, before declining modestly over the following decade.
New technologies, efficiencies What frustrates industry leaders in Canada is the refusal by global policymakers to acknowledge the deployment of new technologies and efficiencies that the Canadian Energy Center estimates lowered greenhouse gas emissions per C$1 billion of Gross Domestic Product by 30% over the 2000-18 period.
IHS Markit has calculated there could be GHG reductio ns in Canada of up to 27% in steam-assisted operations in the oil sands and 20% in mined oil sands.
Among the latest goals set in Alberta, the province’s two leading utilities - TransAlta and Atco - are accelerating their efforts to eliminate coal-fired power plants.
TransAlta is on track to end the use of coal at its five Alberta plants which can generate almost 4,000 megawatts.
Under its new Chief Executive Officer John Kousinioris, the company has approved a new wind farm in Alberta and is examining the potential of a carbon capture and storage strategy as part of its “rapid energy transition as it tries to anticipate where things are going.”
Meanwhile, Atco has teamed up with oil sands giant Suncor Energy in a “multibillion-dollar project” to produce more than 300,000 metric tons a year of hydrogen and capture more than 90% of the carbon dioxide produced from the energy required to make hydrogen.
Suncor Chief Executive Officer Mark Little said Canada is poised to become a “big player in clean hydrogen globally and I think (this partnership) is the first big step forward.”
Among those in the industry scouring the horizon for signs of hope, some has surfaced from the federal government’s Canada Pension Plant Investment Board, which has C$475 billion of assets under management.
It established a Sustainable Energy Group in April to invest C$18 billion in renewable conventional energy and new technology, while Bloomberg estimates UD$15 trillion will need to be invested in new power capacity over the next 30 years, a lift for the natural gas sector among others.
In addition, the Norwegian-based research firm Rystad Energy estimates that upstream investment is not about to collapse.
It rates the top spending levels for 2021 at US$88 billion in the United States, US$41 billion in Russia and US$38 billion in China, with those three jurisdictions driving more spending growth over the years to 2025, while Saudi Arabia, Brazil and Angola are expected to post the biggest absolute gains this year. Canada is expected to come in at sixth place this year at US$16.8 billion.
Rystad forecasts Norway, the United States and Canada will lead supply growth among non-OPEC producers, respectively adding 900,000 bpd, 700,000 bpd and 300,000 bpd over the 2019-25 period.
- GARY PARK
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