Alberta’s oil sands producers have received some timely support from the International Energy Agency, with the industry – and indeed the Canadian government – facing increasing condemnation over the failure to rein in greenhouse gas emissions.
As the United Nations climate summit continues in Warsaw this week, the IEA chief economist Fatih Birol played down the oil sands’ contribution to global warming, and said the long-term challenge is to access the energy-hungry markets of Asia while slowing the growth in emissions.
In an interview from Paris, Mr. Birol also rejected calls for British Columbia to forgo the production and export to Asia of liquified natural gas due to concerns that the province would not meet its own GHG-reduction targets. He said the growing LNG imports in China and elsewhere could reduce the need for coal-fired electricity, leading to a global reductions in carbon dioxide emissions.
The IEA released its world energy outlook last week and said the United States will become the world’s largest crude producer by 2015 and have a sharply declining appetite for both oil and natural gas imports. The U.S. is not expected to become self-sufficient in crude, but Canadian producers will be trying to increase exports into a shrinking American market.
That means they will have to pivot to Asia, Mr. Birol said.
“I expect a growing amount of Canadian energy exports will go to Asia, sooner or later, both in terms of oil and natural gas,” he said in an interview. “And I think once it starts, I would expect an acceleration of the exports will happen in a short period of time.”
The economist said Asian countries such as China and India currently get nearly 90 per cent of their crude from the Middle East, and are looking to Canada to become an important source of secure supplies.
“There is golden opportunity for Asia to diversify from Middle East. Canadian oil will be a security option for the Asia oil consumers, namely China, India and East Asia,” he said.
Nor does Mr. Birol expect the surge in tight, light oil production in the United States to drive down global crude prices over the medium to long-term. He dismissed concerns raised by some experts, including Saudi billionaire Prince al-Waleed bin Talal in The Globe and Mail this past weekend – that the world will soon be awash in crude “The era of cheap oil is over,” he said. “Over the last three years, oil prices have averaged $100 (U.S.) a barrel for Brent [the most widely quoted international crude], and I don’t expect this to go down.”
He said many of the most prolific American fields require a price of at least $80 a barrel to break even.
But as environment ministers gather in Warsaw this week for the annual climate summit, critics both at home and abroad are targeting the oil sands as a major concern and are demanding that production growth be reined in.
The EU parliament has passed a motion reaffirming its intention to impose a regulation that would discourage the use of fuels made from oil sands crude, while in the United States, activists and their supporters among Democrats in Congress are seeking to block construction of the Keystone XL pipeline, arguing it would lead to expansion of oil sands production and hence, increased GHG production.
In its report last week, the IEA concluded there is a looming climate crisis, with the world on track to see temperatures rise by 3.6 degrees Celsius, which would cause more extreme weather, flooding in low-lying coastal areas and severe drought in some areas.
Mr. Birol said the key culprits are the use of coal for electricity, particularly in fast-growing Asia; the $500-billion in global subsidies of oil consumption, which encourage over-use; and the failure to embrace energy efficiency.
“The oil sands definitely makes a contribution to the increase in CO2 emissions,” he said. “But the difference in getting oil from oil sands when compared to conventional oil, it is such a small contribution that it will be definitely wrong to highlight this as a major source of carbon dioxide emissions worldwide.”
However, critics contend the oil sands represent a major source of untapped, carbon-intensive crude reserves that need to stay in the ground. And they accuse the government pursuing damaging policies both at home and on the international stage in order to facilitate growth in the sector.
“It’s an immediate problem for Canada and a huge issue globally if expansion continues,” says activist Tzeporah Berman, who spoke at one of a series of anti-oil sands rallies held across the country on the weekend. Pollution from the oil sands is the single biggest reason Canada will not meet its climate targets, she added. “Globally, oil sands become a huge problem if we allow the dramatic expansion the Harper Conservatives and industry are proposing.”