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New realities

New findings show that Canada will be a major energy exporter as the country taps into its unconventional oil resources. This new reality will not diminish demand for oil in the future but rather enable the world to develop pragmatic and sustainable alternatives, say some.

According to a new report from Canada’s independent regulator, the National Energy Board (NEB) entitled “Canada’s Energy Future: Energy Supply and Demand Projects to 2035”, the nation’s energy supply will grow to record levels to 2035 with a good chunk of that energy stemming from booming oil sands production. The NEB said that it held consultations across Canada seeking the views of Canadian energy experts and other interested stakeholders before conducting its own analysis exercise.

The findings are interesting and show that Canada will be a major energy export player. There are four key findings with alternatives for high and low energy prices and varying economic growth, say the NEB from its research. However, based on a “most likely” scenario, the NEB says that firstly that, although fossil fuels will continue to dominate, it expects emerging fuels and technologies, such as bio fuels, to gain market share. It envisages the sector to grow from its current 1.1% to 3.3% in the nation’s transportation energy consumption and for the share of renewable electricity generation to rise to 67% from 62% in 2035. Secondly, the NEB foresees that because of the emergence of unconventional energy plays such as, oil sands, shale gas and tight gas, the energy supply will surge to record levels and new power generating capacity will be built to meet a steadily increasing demand.

Moreover, total end-use energy demand in Canada is expected to fall to 1.3% up to 2035, down from 1.4% for the 1990-2008 period. This, says the NEB, is down to slowing population growth, higher energy prices, lower economic growth and enhanced efficiency and conservation programmes. However, while residential, commercial and transportation sectors will slow, the NEB expects this to be partially offset by strong industrial demand growth and points out that in 2010 the industrial sector accounted for almost 50% of Canadian energy demand.

Finally, and by no means least, for this is the point that has been grabbing the headlines, the NEB expects Canadian net crude oil available for export to triple by 2035 and much of that will come from its oil sands. Conversely, the NEB expects the amount of natural gas to decline to 2020 when additional domestic demand should restore the status quo. Exports of natural gas with weak prices due to the abundance of shale gas south of the border are not likely to be viable anytime soon. Nevertheless, natural gas in the form of LNG heading to Asian Pacific markets in any great quantity could change the game somewhat.

Changing viewpoints

Whatever is said about the oil sands operations in Canada, or anywhere else for that matter, oil is oil and the demand for the commodity is not going to diminish in the near future. The resource will be gathered, it is just up to companies and governments to do so in the best way that they can while taking account of and dealing with the environmental footprint as they go. What is interesting is that North America and its relatively newly-found unconventional energy sources seem to be changing the viewpoint of producers in the Middle East.

Speaking at a conference at the King Abdullah Petroleum Studies and Research Centre in Saudi Arabia recently, Saudi Aramco’s president and CEO, Khalid A Al-Faklih presented some fascinating insights as he discussed “new realities”, one of which is, “The increasing abundance of oil and gas supplies, largely due to significant technological advances which are unlocking additional resources,” said Al-Faklih. “Today, talk of oil and gas scarcity has disappeared from both the energy press and the general media, to be replaced by news of increasingly plentiful supplies. In addition to abundant conventional petroleum reserves, vast resources of unconventional hydrocarbons have now been targeted for development around the world, and can be produced feasibly and economically.”

Al-Faklih went on to say that only five years ago energy observers were talking about the need for the US to build LNG import terminals. That is no longer the case, “Now, by contrast, the challenge is finding an outlet for the new production of shale gas, and downward pressure on natural gas prices,” said Al-Faklih. “The positive impact of increased shale gas supplies on American petrochemicals manufacturing is already apparent, and given the vast shale gas resources and ramped-up production in the US, there are even plans to convert existing LNG import terminals into export facilities,” Al-Faklih said. “To get some sense of the scale of these changes, consider that the estimates of unconventional gas in place around the world are in the range of 35,000tnft3, compared to currently proven conventional gas reserves of 64,000tncft3.” Al-Faklih said that although the world consumed almost 30bbl of oil in 2010 industry was not only able to replace that consumption but find an additional 7bnbbl in reserves even with rising demand from China and India. “The massive heavy oil potential in both North and South America is drawing greater attention, and the future development of kerogen-based oil shales remains an enormous target,” said Al-Faklih.

Cause for optimism

Turning to renewables Al-Faklih said that progress had not been as quick as had been expected partly because of technical difficulties and also that proven energy technologies were performing rather well cost-wise. “When the economics of hydrocarbon sources shift, this impacts the fortunes of alternatives, so as prices for natural gas in the US halved with the advent of shale gas supplies, the comparative economics of alternative renewables weakened significantly,” said Al-Faklih. “This could easily have been foreseen, and in fact at Saudi Aramco we voiced concern a few years ago over the formation of ‘green bubbles’,” Al-Faklih said. However, the Saudi Aramco CEO said that the company believed that energy alternatives “Can and will make a greater contribution to global energy supplies than they do at present, and we welcome that growth. But the expansion of renewables and alternative energy technologies should be rational and gradual, and tied to their economic, environmental and technical performance.” And, it is to the somewhat unexpected boon in both new conventional and unconventional oil and gas that Al-Faklih has belief, “Because of these additional oil and gas resources, the world now has the time it needs to develop alternatives in a pragmatic and sustainable fashion, rather than rushing headlong toward an unproven and more expensive energy mix—and that is a cause for optimism,” said Al-Faklih.

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