Canada to watch from sidelines of global energy markets: report

Two major trends are unfolding in global oil and gas markets, but Canada seems unable to take advantage of the first one, and is already an unfortunate casualty of the other, says a new report.

First, the world’s energy demand will rise the equivalent of China and India’s current energy consumption over the next three decades — but Canada has limited direct conduits to connect those energyhungry markets to its store of the world’s third-largest oil reserves.

The second development, which has already dented the Canadian oilpatch, is the rise of U.S. tight oil and gas that is taking dollars and focus away from the Western Canadian industry.

The global energy markets are in the midst of “extraordinary times,” writes Fatih Birol, executive director at the International Energy Agency in its annual World Energy Outlook, released in Paris on Tuesday.

The benchmark report notes the energy sector is experiencing disruptive times: renewable energy technologies are nipping at the heels of oil, natural gas and coal; policy-makers are pushing to cut global carbon emissions, juxtaposed with near-insatiable demand from a global population that will hit nine billion within a few decades and the rise of U.S. as the world’s largest oil and gas producer.

Amid these upheavals, Canada will likely remain a minor actor, its global plans dashed partially through self-restraint and rules, and also by its next-door neighbour who is upending global markets and disrupting Canada’s plans to export oil and gas in the process.

The IEA expects Canadian oil production to rise — to 6.2-million barrels per day by 2040 from 4.5 million bpd in 2016, 100,000 bpd more than the IEA’s last report.

But that’s where the good news ends for the Canadian oilpatch. The Paris-based watchdog casts doubt over the state of the sector, especially as a number of high-profile players such as Royal Dutch Shell Plc. and Total SA have reduced their exposure to Alberta.

“While other major companies continue to maintain a presence in oil sands operations, it remains an open question whether the exit of these companies will impact prospects for oil sands development over the longer term,” the IEA said.

Two government initiatives to reduce greenhouse gas emissions, the carbon tax and the GHG emission limits, also “have implications for oil sands,” the IEA warns.

Elsewhere, Canadian shale gas development will be a casualty of rapidly rising U.S. production — delaying plans for offshore exports and curtailing supply to its traditional market south of the border.

The sliver of hope for Canadian oil producers is that the sector is not going to be displaced by renewable energies and the rise of electric vehicles any time soon. Global oil demand is steady at 104 million bpd by 2040, compared to 94 million bpd in 2016, according to the IEA’s most-likely scenario.