The Importance of Energy Resources to Canadian Prosperity

The good news is that Canada has the ability to produce sufficient amounts of ethical oil and gas to offset losses from Russia and other unethical producers while still meeting a target of zero emissions by 2050. That statement might raise the eyebrows of skeptics, but with the right public policy changes, Canada could make it happen, according to an RBC report titled “The New Climate Bargain: How Canada Can Manage Energy & Environmental Security.”  Canada’s oil and gas industry has one of the world’s most stringent emission standards, positioning Canada as a leader in producing fossil fuels as cleanly as possible.

Global oil and natural gas demand is increasing, not decreasing, driven by population growth and emerging economies in India and Asia. Global oil demand is expected to reach 104 million barrels per day in 2040, while natural gas demand increases to 505 billion cubic feet per day. Canadian oil is one of the country’s most abundant natural resources. With recoverable reserves estimated at more than 173 billion barrels, Canada has the third largest oil reserves in the world and is the world’s fourth largest oil exporter. Many experts agree that Canada’s national prosperity is closely intertwined with oil exports. 

In addition, Canada’s oil and gas sector invests more than $1 billion per year in research and development to make production more environmentally friendly. Canada’s investments in cleaner oil production have outpaced the rest of the world over the last 10 years, and have consistently reduced the emissions per barrel. If Canada does not increase production and exports of oil and gas, global demand will be met by other countries including Saudi Arabia and Russia, which are far less transparent and not as committed to environmental, social, governance (ESG) leadership; many of whom have poor human rights record and are not supportive of open and free democratic societies.

Interestingly, the Canadian government has not lost sight of this natural resource. In response to recent geopolitical events, the Canadian government has called for more oil and gas production to help ease the global crisis in the short run, while maintaining a firm commitment to competitive and decarbonized oil and gas in the long run. The research shows both goals are within reach.

The main hurdle to that achievement is sufficient government spending and political support, according to the report’s key findings, which include:

• Canada’s oil and gas sector can support near-term energy security while advancing climate action, but will need regulatory certainty and support at all levels of government.
• Oil sands and conventional producers could raise production by up to 500,000 barrels per day from 2021 levels.
• Cutting emissions 40% from current levels in the oil sands by 2030 will likely require $45 billion to $65 billion in capital spending between 2024 and 2030, peaking at about $9 billion per year mid-decade.

In addition to Canada’s abundance of oil resources, it also has significant natural gas and uranium resources and capabilities. These energy resources and evolving “green” energy sources like: nuclear, geothermal, tidal, water, wind and solar play a critical role in decarbonizing the Canadian and global economies.

For example, Canadian natural gas shipped as supercooled LNG can be used to replace coal-fired power generation in emerging economies in Asia and India, significantly reducing greenhouse gas emissions.

Power generated in China with LNG from Canada would result in emissions reductions of 34 to 62 per cent compared to coal, according to a study published in the June 2020 edition of the Journal for Cleaner Production. As of 2020 there were 350 new coal-fired power plants under construction in the world, including 184 in China. The LNG Canada project alone could reduce emissions in China by the equivalent of shutting down 20 to 40 coal-fired plants.

As a country when it comes to natural gas:

• Canada is the world’s 4th largest producer and 5th largest exporter of natural gas.
• 1/3 of Canada’s energy needs are met by natural gas.
• 20% of gas demand in the U.S. is met by Canadian natural gas.
• As one of the cleanest burning fossil fuels it is also in high demand globally. Global demand for natural gas is forecasted to increase 45% by 2040.

In both the oil and natural gas sector, Canada’s ESG performance is ranked highest among the world’s top reserve holders, according to BMO Capital Markets’ analysis of the Yale Environmental Performance Index, the Social Progress Imperative, and World Bank Worldwide Governance Indicators. So as the world seeks to decarbonize, there should be no question about the potential for Canada to grow its LNG presence.

Canada must therefore resurrect projects on the East and West coasts. It is a moral imperative: from decreasing emissions by supporting countries seeking to decrease dependence on coal, to sending LNG to Europe and ensuring a permanent separation from dependence on Russian natural gas.

Now consider nuclear energy. Nuclear energy provides Canada with clean, cheap and safe energy. Nuclear power is a source of energy that does not emit greenhouse gases. There are six nuclear power stations in Canada, which have a combined capacity of 14,071 megawatts. Ontario’s Bruce generating station is the largest operating nuclear power plant in the world.

Nuclear power generation accounted for approximately 15% of Canada’s electricity in 2018, with 19 reactors mostly in Ontario providing 13.5 GWe of power capacity. Canada had plans to expand its nuclear capacity over the next decade by building two more new reactors, but these have been deferred due to government inaction.

In contrast, the United States has the most operational nuclear reactors on the planet – 96. Together they have a capacity of 97,565 MW, and nuclear energy made up about 20% of the country’s electricity generation. In 2018, nuclear electricity comprised nearly 50 percent of U.S. emission-free energy generation. France is home to 58 nuclear reactors, which produce about 75% of the country’s electricity.

What makes Canada so relevant when it comes to nuclear energy is the abundance of uranium Canada has under its feet. Uranium is the primary raw material energy source for nuclear power. After raw uranium is mined and milled, it is processed to make fuel for nuclear reactors to generate electricity. In 2019, 75% of Canada’s uranium production was exported for use in nuclear power throughout the world. As it is with oil and natural gas, Canada also has an abundance of uranium:

• Canada is the second largest producer and fourth exporter of uranium in the world, with 13% of global production in 2019.
• Canada has developed a unique nuclear reactor technology, CANDU; there are 18 CANDU reactors in Ontario, 1 in New Brunswick and 10 in operation outside of Canada.
• Under Canada’s nuclear non-proliferation policy, Canadian uranium can be used only for peaceful purposes.
• Canada is the world’s 2nd largest producer and 3rd largest low-cost resource base.
• Most of Canada’s uranium production is from high-grade deposits in Saskatchewan with uranium concentrations of up to 100 times the world average.

Two new global energy outlooks released amid major shortages in Asia and Europe underscore the reality that it will take decades for the world to shift to low carbon energy. Rash government policies that cut off traditional energy supply will have unintended and costly consequences. Targeting supply at a time when we are experiencing: i) record inflation not seen in decades, ii) persistent supply chain vulnerabilities, and iii) geopolitical conflicts is a poorly timed and very dangerous endeavour.

The world’s population is growing rapidly and the demand for energy isn’t slowing down anytime soon. Canada has the good fortune of being blessed with an abundance, a treasure trove, of energy resources and capabilities. Realizing and commercializing these resources at or above global ESG standards will establish Canada as a global leader in the production of ethical energy. 

With strong leadership and collaboration by both the public and private sectors, Canada’s energy resources can be a significant contributor to Canadian opportunities and prosperity for years to come.