Meeting the energy challenge

Nobody in the energy industry has a crystal ball, but there is at least one prediction nobody would take odds against — consumers will keep using energy. More than that, though: according to projections by leading energy thinkers, not only will the world continue to use energy, but its consumption will rise considerably.

According to projections by both the International Energy Agency (IEA) and the Energy Information Administration (EIA), overall energy demand will grow through to 2030. The World Energy Council, for one, predicts that energy supplies must double by 2050 to meet the demands of all households worldwide. While previous growth in consumption had primarily been seen in Western countries, the largest increases in demand are now expected to come from China, India and emerging market economies. And while renewable sources, particularly hydro and wind, will grow in importance, fossil fuels like natural gas will continue to be an essential part of the world’s energy mix as it grows to meet increasing demand. Globally, natural gas made up about 23 per cent of the world’s primary energy sources in 2007.

The Canadian Association of Petroleum Producers (CAPP) represents a membership that includes some of Canada’s largest oil and natural gas producers. As such, it is intimately concerned with the future development of the country’s energy. With the growing use of renewables and the expanding possibilities of unconventional natural gas resources, the future it sees is one with a varied mix of production.

“We think Canada’s energy future is very promising and very diverse,” said Tom Huffaker, CAPP’s Vice President of Policy and Environment. “Obviously the country has a tremendous range of energy resources that includes hydro, nuclear, oil and gas and more. There’s also tremendous unconventional gas reserves in Canada beginning to get developed, and that has tremendous potential for the country’s energy security, and for a cleaner energy supply.”

Those unconventional gas resources represent a significant increase in the amount of available natural gas. According to the Petrel Robertson Resource Assessment Study, compiled for the Canadian Society for Unconventional Gas (CSUG) (5.1 MB PDF), well over half of the country’s natural gas resources (total gas in place), 558 trillion cubic feet (Tcf) of the total remaining 820 Tcf, already lie in the Western Canadian Sedimentary Basin. Estimated resources of natural gas from coal, meanwhile, total 801 Tcf, with 1,111 Tcf of shale gas resources and 1,311 Tcf of tight gas resources.

And, according to Huffaker, these predictions may leave room for even greater optimism. “Even some of the numbers that are out there in the CSUG data are fairly conservative,” he said. “Those numbers do not include every resource basis in Canada, so those tremendously large numbers are not even the whole story.”

But to take full advantage of increasing natural gas resources, industry will need to facilitate greater market penetration. According to Huffaker, the likely areas for increased consumption lie in power generation and in transportation.

Part of natural gas’s potential for increasing demand could lie in carbon-constrained markets. As of January 2010, Canada has committed to reducing emissions by 17 per cent from 2005 levels by 2020. With carbon content 28 per cent lower than oil and 43 per cent lower than coal, natural gas presents immediate benefits in this area. Natural Gas Vehicles for America, for example, estimates that natural gas powered vehicles emit 20 to 30 per cent fewer greenhouse gas emissions than conventional, gasoline-powered vehicles. And natural gas’s use as a less carbon-intensive fuel goes beyond Canadian borders, extending to our largest energy trade partner: the U.S.

“There is certainly a sense that the time is promising for natural gas,” said Huffaker. “We’re not in the business of projecting where U.S. is going on climate change policy, but over time we’re likely going to see a price on carbon, and a price on carbon, depending on how it’s structured, is very likely to favour the use of natural gas in power generation particularly.”

As a representative of both oil and natural gas producers, CAPP is cognizant of the roles that both resources will play in future energy production and consumption. While total energy use might increase in a carbon-constrained world, for example, Huffaker doesn’t see a conflict between the use of oil and natural gas.

“To a very large extent they operate in different spaces,” he said. “Oil is the dominant transportation fuel, whereas at this point natural gas is a niche fuel. On the other hand, oil is not a significant fuel in power generation, while natural gas is increasingly important. There’s not a very direct conflict between the role of the two.”

From CAPP’s perspective, the world’s energy use will be drawn from an increasingly varied set of resources, a trend they describe as “ecumenical.” In order to facilitate that diversification of the energy mix, Huffaker suggests there are a few basic principles that policy-makers should bear in mind.

“It’s very important that government have an awareness of how robust [Canada’s natural gas resource] is and how long it will last,” said Huffaker. “Many of the things we think are important to natural gas are just as important to oil: that the country maintain as competitive a fiscal and regulatory regime as possible and that policy be developed while mindful that energy is important and the economy is important.”

Given the expanding projections of unconventional natural gas reserves in the U.S., the issue of Canadian resources relative to American natural gas will also be of considerable importance. “We think given the magnitude of the gas reserves in the U.S., policy-makers need to be particularly mindful of developing the competitiveness of the Canadian reserves,” said Huffaker. “We have some very high-yield reserves in northeastern BC, and probably in other parts of the country. Obviously they have a competitive challenge, but we think that with the right fiscal and regulatory polices that those can compete,” continued Huffaker. “There’s some sense that Canadian reserves will push more broadly into the Western United Sates over time. And there’s potential for growing demand within Canada, so it doesn’t have to be all market share in the U.S.”

Beyond North America, the IEA predicts non-OECD (Organisation for Economic Co-Operation and Development) like China and India accounting for 80 per cent of the overall increase worldwide to 2030. With global demand on the rise, then, there are broad opportunities in the world’s energy future for natural gas alongside a range of other energy sources.

With energy demand likely to rise and technology opening new frontiers in existing industries like natural gas production, Canada’s energy resources will continue to strengthen the country. In that, natural gas is likely to continue to play a major role in both Canada’s energy production and the world’s energy use.

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