“Canada has no energy plan beyond pedal-to-the-metal export of its
non-renewable energy assets.”
That’s the bottom line of a recent opinion piece in Calgary
Herald by David Hughes, an earth scientist and research associate with
the Canadian Centre for Policy Alternatives.
Canada needs a long-term energy plan to wean itself from fossil fuels and
move to renewable energy, Hughes writes.
While Canada will continue to rely on oil and gas in the foreseeable
future, the country is currently exporting its oil at rock bottom prices, and
continues to push for a pipeline—the Trans Mountain Pipeline Expansion—to
export it to Asian markets. However, Canadian oil won’t fetch much higher
prices in the world’s fastest-growing oil market Asia, as the federal
government and Alberta province hope, Hughes argues.
The costs for sending Alberta’s heavy oil to the U.S. Gulf Coast are lower
than the transportation costs to sell said oil to Asia via an expanded Trans
Mountain pipeline and then oil tankers. Alberta’s oil can sell in the United
States for $2-$5 per barrel more than it would sell in Asia, according to
Hughes.
Two pipelines to the United States with double the capacity of Trans
Mountain are currently under development. These two new pipelines would ease
pipeline takeaway constraints before 2022, the earliest possible completion
date for the Trans Mountain expansion, if it goes ahead, Hughes says.
Therefore, the current push to save the Trans Mountain Expansion Project
and sell off the Alberta oil as fast as possible “makes little sense,” he
wrote.
It’s the capacity constraints that have been severely
depressing the price of Western
Canadian Select (WCS)—the benchmark price of oil from Canada’s oil sands
delivered at Hardisty, Alberta—which has been selling for as low as $20 a
barrel in recent weeks.
Trans Mountain has faced numerous hurdles for years, including staunch
opposition in British Columbia, but the biggest blow to the project came two
months ago.
In August, a Federal Court of Appeal quashed
the federal government’s approval of the expansion
project, saying that the NEB’s review of the project was fraught
with flaws that made it unsuitable as a basis for the government’s approval.
The court ruled that the NEB failed to adequately consider how increased
tanker traffic off British Columbia’s coasts would affect the environment and
First Nations people in the region.
Canada’s federal government instructed
in September the National Energy Board (NEB) to review the project again,
this time also taking into account the impact of the expected higher oil
tanker traffic off the British Columbia coast.
The short-term plan to sell off Canada’s heavy oil to Asia is one of the
reasons why the country needs a long-term strategy to rely more on renewable
energy to curb emissions and to meet Paris climate goals, Hughes argues.
Another reason is the fact that conventional oil and gas production in Canada
peaked years ago—oil in 1973 and gas in 2001—so significant production growth
now comes only from emission-heavy oil sands and fracking, he said.
In addition, royalties from oil and gas production have slumped by 44
percent in the past decade and a half, despite the fact that liquids
production jumped by 77 percent between 2000 and 2017, Hughes writes, citing
data from the Canadian Association of Petroleum Producers (CAPP). Related:
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“It’s time to look at the big picture and develop a viable energy plan
that will meet Canada’s long-term energy needs and emissions reduction
targets,” Hughes said.
According to Natural Resources Canada, renewable energy sources currently
provide around
17 percent of Canada’s total primary energy supply, with wind and solar
energy the fastest growing sources of electricity in Canada. Of the total
renewable energy—including energy consumed for electricity and heat
production and biofuels in the transportation sector—hydropower accounts for
67.5 percent, followed by solid biomass with 22.6 percent, and wind power
with 5.4 percent.
Planning for the energy transition and global peak oil demand—whenever
this comes—is a commendable effort and many countries have such plans with
targets in place. In a decade or two, it could make sense for Canada, too.
But currently, the oil and natural gas industry is a key part of the Canadian
economy. The industry contributed US$83.1 billion (C$109 billion) in direct
real gross domestic product last year, or 6.25
percent of Canada’s GDP, according to CAPP.
By Tsvetana Paraskova for Oilprice.com
