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Canadian Energy Centre

A Matter of Fact: The IEA’s updated net zero scenario is still unrealistic

Published

1 year ago

11 minute read

From the Canadian Energy Centre

By Deborah Jaremko

Canada can lead the world with reliable, affordable energy supply and clean technology as countries work to reduce emissions

The International Energy Agency (IEA) has updated its net zero scenario, pushing for governments to implement more aggressive climate policies on the energy industry.  

The IEA itself acknowledges the scenario is “a pathway, but not the only one” for the energy sector to reduce emissions to net zero by 2050. 

The agency acknowledges the world is not on this trajectory, but the Government of Canada uses the net zero scenario as the basis for policies like its proposed oil and gas emissions cap, which will hurt Canadians without environmental gain.  

“We’re the fourth-largest oil producing country, and we’re the only ones that are saying oil and gas is not here to stay. That’s a huge roadblock for all of us,” Gurpreet Lail, CEO of Enserva, the national trade organization representing energy service and supply companies, told the Globe and Mail during the World Petroleum Congress last week. 

Canada can lead the world with reliable, affordable energy supply and clean technology as countries work to reduce emissions. But the sector needs to be allowed to thrive rather than being phased out while it is needed.  

Here are the facts.  

Fact: The IEA net zero scenario is not a forecast 

The IEA’s updated net zero scenario envisions that the world does not need any new coal, oil and natural gas projects. By 2030, it imagines world oil demand will drop by 23 per cent, natural gas demand by 18 per cent, and coal demand by 44 per cent.  

It’s difficult to see how this could actually come about, given that even with accelerating investment in low carbon energy resources the world’s consumption of oil, gas and coal is as high or higher than it has ever been. And rising.  

The IEA reports both oil and coal demand are at record levels. The agency itself projects the world’s total energy consumption – which increased by 15 per cent over the last decade – will increase by a further 24 per cent by 2050.

On the world’s current trajectory, the IEA says oil, gas and coal will still account for 62 per cent of world energy supply in 2050, compared to 78 per cent in 2021.   

“There’s no evidence that oil demand is going to peak any time soon,” Arjun Murti, former partner with Goldman Sachs, said at the recent Global Business Forum in Banff.

“Oil is not in its sunset phase.” 

Fact: The IEA net zero scenario is unrealistic 

The IEA’s net zero scenario includes components that are unrealistic.  

For example, it says electricity transmission and distribution grids need to expand by around two million kilometres each year to 2030. But it also acknowledges that today, building these grids can take more than a decade, putting that scale and timeline already out of reach.   

The net zero scenario also hinges on a “unified effort in which governments put tensions aside and find ways to work together.” But the IEA also acknowledges the world today is “a complex and low-trust geopolitical environment.”  

Consider that Russia is trying to boost trade with Asia as economic ties with the West shrivel over Moscow’s actions in Ukraine, according to Reuters News. In just one example, state-owned Gazprom plans to start gas deliveries to China through the Power of Siberia pipeline in 2025 and expand that service in 2030 with Power of Siberia-2.    

Russia’s invasion of Ukraine accentuated the world’s reversal away from the concept of globalization, where everyone benefits from the global economy, leading energy analyst and Pulitzer Prize-winning author Daniel Yergin said on a recent ARC Energy Ideas podcast.  

“The era of globalization was what I call the WTO consensus: we’re all in this global economy together. In China, hundreds of millions of people come out of poverty. India enters the global economy, standards of living go up and you get really impressive economic performance,” Yergin said.  

“Well, that era is ending and it’s heading pretty fast now as we move into this new era of great power competition, which hopefully does not become great power confrontation.” 

Energy is at the heart of the “new map,” as Yergin calls it. 

Responsibly produced, reliable energy from Canada can benefit world energy security while helping reduce emissions. That is why it is essential the sector is not phased out through government policy. 

Fact: Canadian energy and clean technology can help reduce world emissions 

One of the fastest and most effective ways to reduce emissions is to switch from coal-fired power to power generated from natural gas, traded globally as LNG.    

Consider that between 2005 and 2019, emissions from the U.S power sector dropped by 32 per cent because of coal-to-gas switching, according to the U.S. Energy Information Administration.   

Natural gas from the LNG Canada project alone could reduce emissions in Asia by up to 90 million tonnes annually, or the equivalent of shutting down up to 60 Asian coal plants, the project says.  

That’s a reduction of more than the entire emissions of the province of British Columbia, which were 64 million tonnes in 2022.    

Expanding Canada’s LNG exports to Asia could reduce emissions by 188 million tonnes per year, or the annual equivalent of taking all internal combustion engine vehicles off Canadian roads, according to a 2022 study by Wood Mackenzie.   

One of the reasons LNG from Canada has a lower emissions intensity than LNG from other jurisdictions is the success producers have seen reducing methane emissions. It’s an opportunity for technology exports. 

The IEA views cutting methane emissions from oil and gas as a critical component of achieving climate targets.  

The latest data shows that oil and gas producers in Alberta decreased methane emissions by 44 per cent between 2014 and 2021, a 10 per cent drop from 2020. The sector is expected to surpass the target of reducing methane emissions by 45 per cent by 2025.   

“I don’t know of any other jurisdiction that is as far forward in terms of its methane management as Canada,” says Allan Fogwill, chief operating officer of Petroleum Technology Alliance Canada.  

“There’s nothing to suggest we couldn’t have similar impacts in the United States, the Middle East, or former Soviet countries that also are involved in oil and natural gas production.” 

Fact: Canada’s carbon capture and storage leadership can benefit the world 

The IEA says “rapid progress” is required to deploy more carbon capture, utilization and storage (CCUS) projects to reduce emissions.  

This is another area where Canada’s energy sector can take the lead.  

Since 2000, CCS projects in Saskatchewan and Alberta have removed more than 47 million tonnes of emissions, or the equivalent of taking more than 10 million cars off the road. This work has helped inform development of major CCS projects globally including Northern Lights in Norway.  

Canada has five of the world’s 30 commercial CCS facilities, accounting for about 15 per cent of global CCS capacity even though Canada generates less than two per cent of global CO2 emissions, according to the Global CCS Knowledge Centre.  

Among CCS projects under development in Canada is one of the largest in the world, proposed by the Pathways Alliance of oil sands producers.  

The first phase of the Pathways CCS project will connect 14 oil sands facilities to a CO2 storage hub in northern Alberta. The target is to reduce emissions from operations by 22 megatonnes by 2030 on the way to net zero in 2050. 

Fact: Oil and gas still needed in IEA net zero scenario 

Even in the IEA’s net zero scenario, in 2050 about 14 per cent of world energy needs are still supplied by oil and gas.   

This includes non-combustion uses like petrochemical feedstock and asphalt, which crude from Canada’s oil sands is particularly well suited to supply. Researchers with Queen’s University recently found that asphalt from Alberta’s oil sands can extend pavement lifespan by 30 to 50 per cent.    

The world needs more Canadian oil and gas, not less.   

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Alberta

For second year in a row, Alberta oil and gas companies spend more than required on cleanup

Published on November 7, 2024

By

From the Canadian Energy Center

By Grady Semmens

$923 million spent cleaning up inactive wells, sites and pipelines in 2023

As a business owner, Ryan Smith values few things more than predictability when it comes to the oil and gas market and the demand for his company’s services.

That’s why knowing that next year in Alberta, the regulator requires at least $750 million worth of work cleaning up inactive oil and gas wells and other legacy energy infrastructure is tremendously helpful for the CEO of Calgary-based 360 Engineering & Environmental Consulting.

“Having a minimum spend in place for the province makes the market more predictable and consistent, which in turn helps our clients and our business plan for the future, which is a good thing,” says Smith, whose company has completed more than 5,000 site closure activities in Canada and internationally since 2015.

“Site closure has really emerged as a growth market over the last decade, especially in Western Canada where the regulatory systems for oil and gas are more advanced than anywhere else we are exposed to. It is an integral part of the energy lifecycle, and if it is done well it adds a lot of value to the industry.”

The Alberta Energy Regulator (AER) introduced an industry-wide minimum “closure” spending requirement in 2022, part of Alberta’s Inventory Reduction Program to accelerate the remediation of inactive oil and gas wells, facilities and pipelines across the province.

The mandatory quota determines the minimum level of work a company must conduct primarily to decommission and reclaim a proportion of its inactive inventory.

Inactive wells are defined as those that have not been used for six months or a year, depending on what they are being used for. When a company decides that they will not reactivate an inactive well they decommission it through a process called abandonment.

A well is considered successfully abandoned after it is cleaned, plugged with cement, cut to a minimum of one meter below the surface and covered with a vented cap. After abandonment comes remediation and reclamation, where the land around the well is returned to the equivalent of its original state.

The first two years under the new rules saw Alberta’s energy industry significantly exceed the minimum closure requirements.

In 2022, companies spent more than $696 million, about 65 per cent more than the initial threshold of $422 million. The AER increased the minimum spend to $700 million in 2023, which producers surpassed by 22 per cent with total expenditures of $923 million.

The 2024 minimum remains at $700 million, while in July the regulator announced that the minimum spend for 2025 was raised to $750 million.

This closure work does not include remediation of oil sands mining sites, which is handled under the Mine Financial Security Program, nor does it include the closure of orphan wells (wells without a legal owner) managed by the industry-funded Orphan Well Association.

Gurpreet Lail, CEO of Enserva, an industry association representing energy service companies, suppliers and manufacturers, says there was an initial rush of closure work when the quotas were first put in place, but activity has since become more even as companies develop long-term closure plans.

“A lot of the low-lying fruit has been taken care of, so now companies are working on more complex closure files that take more time and more money,” Lail says.

Facility owners say that Alberta’s rules provide direction for planning closure and remediation work, which in the past may have been put on hold due to the ups and downs of the oil and gas market.

“When commodity prices are up, everyone is focused on drilling more wells and when prices are down, budgets are strained for doing work that doesn’t bring in revenue. Having a minimum spend makes sure closure work happens every year and ensures there is longer-term progress,” says Deborah Borthwick, asset retirement coordinator for Birchcliff Energy, an oil and natural gas producer focused in Alberta.

Over the last few years, Birchcliff has budgeted more than $3 million for annual facility closure work, far above its required minimum spend.

The company completed 11 well abandonments and decommissioned 23 facilities and pipelines in 2022, according to its latest environmental, social and governance report.

Borthwick says having the closure quota for 2025 already set has allowed it to plan ahead and line up the necessary service companies well in advance for next year’s remediation work.

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Alberta

Heavy-duty truckers welcome new ‘natural gas highway’ in Alberta

Published on October 31, 2024

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Clean Energy Fuels CEO Andrew Littlefair, Tourmaline CEO Mike Rose, and Mullen Group chairman Murray Mullen attend the opening of a new Clean Energy/Tourmaline compressed natural gas (CNG) fuelling station in Calgary on Oct. 22, 2024. Photo courtesy Tourmaline

From the Canadian Energy Centre

By Deborah Jaremko

New compressed natural gas fueling stations in Grande Prairie and Calgary join new stop in Edmonton

Heavy-duty truckers hauling everything from restaurant supplies to specialized oilfield services along one of Western Canada’s busiest corridors now have more access to a fuel that can help reduce emissions and save costs.

Two new fuelling stations serving compressed natural gas (CNG) rather than diesel in Grande Prairie and Calgary, along with a stop that opened in Edmonton last year, create the first phase of what proponents call a “natural gas highway”.

“Compressed natural gas is viable, it’s competitive and it’s good for the environment,” said Murray Mullen, chair of Mullen Group, which operates more than 4,300 trucks and thousands of pieces of equipment supporting Western Canada’s energy industry.

Right now, the company is running 19 CNG units and plans to deploy another 15 as they become available.

“They’re running the highways right now and they’re performing exceptionally well,” Mullen said on Oct. 22 during the ribbon-cutting ceremony opening the new station on the northern edge of Calgary along Highway 2.

“Our people love them, our customers love them and I think it’s going to be the way for the future to be honest,” he said.

Heavy-duty trucks at Tourmaline and Clean Energy’s new Calgary compressed natural gas fuelling station. Photo courtesy Tourmaline

According to Natural Resources Canada, natural gas burns more cleanly than gasoline or diesel fuel, producing fewer toxic pollutants and greenhouse gas emissions that contribute to climate change.

The two new CNG stops are part of a $70 million partnership announced last year between major Canadian natural gas producer Tourmaline and California-based Clean Energy Fuels.

Their deal would see up to 20 new CNG stations built in Western Canada over the next five years, daily filling up to 3,000 natural gas-fueled trucks.

One of North America’s biggest trucking suppliers to businesses including McDonald’s, Pizza Hut, Subway and Popeye’s says the new stations will help as it expands its fleet of CNG-powered vehicles across Canada.

Amy Senter, global vice-president of sustainability with Illinois-based Martin Brower, said in a statement that using more CNG is critical to the company achieving its emissions reduction targets.

For Tourmaline, delivering CNG to heavy-duty truckers builds on its multi-year program to displace diesel in its operations, primarily by switching drilling equipment to run on natural gas.

Between 2018 and 2022, the company displaced the equivalent of 36 Olympic-sized swimming pools worth of diesel that didn’t get used, or the equivalent emissions of about 58,000 passenger vehicles.

Tourmaline CEO Mike Rose speaks to reporters during the opening of a new Tourmaline/Clean Energy compressed natural gas fuelling station in Calgary on Oct. 22, 2024. Photo courtesy Tourmaline

Tourmaline CEO Mike Rose noted that the trucking sector switching fuel from diesel to natural gas is gaining momentum, notably in Asia.

A “small but growing” share of China’s trucking fleet moving to natural gas helped drive an 11 percent reduction in overall diesel consumption this June compared to the previous year, according to the latest data from the U.S. Energy Information Administration.

“China’s talking about 30 percent of the trucks sold going forward are to be CNG trucks, and it’s all about reducing emissions,” Rose said.

“It’s one global atmosphere. We’re going to reduce them here; they’re going to reduce them there and everybody’s a net winner.”

Switching from diesel to CNG is “extremely cost competitive” for trucking fleets, said Clean Energy CEO Andrew Littlefair.

“It will really move the big rigs that we need in Western Canada for the long distance and heavy loads,” he said.

Tourmaline and Clean Energy aim to have seven CNG fuelling stations operating by the end of 2025. Construction is set to begin in Kamloops, B.C., followed by Fort McMurray and Fort St. John.

“You’ll have that Western Canadian corridor, and then we’ll grow it from there,” Littlefair said.

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