OILSANDS CO2 ‘LOW’
Official counters critics
As an energy adviser to some of the world’s most developed economies, Fatih Birol worries about critical issues including security of energy and the impact of fossil fuels on the climate. One issue he does not spend any time worrying about, however, is carbon emissions from the oilsands.
“There is a lot of discussion on oilsands projects in Canada and the United States and other parts of the world, but to be frank, the additional CO2 emissions coming from the oilsands is extremely low,” Birol, chief economist at the International Energy Agency and one of the world’s foremost energy economists, said in an interview.
As such, Birol argues that climate change issues should not serve as barriers to stunt the growth of oilsands projects.
The Paris-based agency, created 40 years ago by developed countries to counter the rising power of OPEC oil producers, advises its 28-member countries including Canada, the United States and Germany on energy security, environmental protection and economic development. The IEA’s annual World Energy Outlook report for global energy demand and supply is widely considered the industry’s global benchmark.
The IEA forecasts that in the next 25 years oilsands production in Canada will increase by more than three million barrels per day, “but the emissions of this additional production is equal to only 23 hours of emissions of China — not even one day,” Birol said in a phone interview from Ottawa.
The IEA is an advocate of battling climate change and subscribes to the Intergovernmental Panel on Climate Change’s target that the world must not emit more than about 1,000 gigatons of carbon dioxide from 2014 onward so as to limit temperature increase beyond two degrees Celsius.
Birol acknowledges that while there is tremendous difference of opinion on the course of action regarding climate change between the industry and environmental movement, “I hope all these reactions are based on scientific facts and sound analysis.”
The economist doesn’t believe that a carbon tax is the only way forward, noting that countries have taken different approaches to managing carbon emissions, with some focusing on energy efficiencies.
“In some areas, climate change issues are (tackled) through energy policies, renewable policies, carbon capture or nuclear-energy options.”
The IEA believes the world’s energy supply will be almost equally divided between oil, gas, coal and alternative resources by 2040.
However, the agency warns that “policy choices and market developments that bring the share of fossil fuels in primary energy demand down to just under threequarters in 2040 are not enough to stem the rise in energy-related carbon dioxide emissions.”
The challenge between reining in environmental impacts and fuelling the global economy will continue to play out over the next few decades. Despite the best efforts of developed countries to reduce their carbon footprint, the world’s emerging economies are offsetting the decline. For each barrel of oil eliminated from consumption in OECD countries, two additional barrels of oil are expected to be consumed in the developing world, the IEA estimates.
As a result the world will be looking to a diverse set of oil suppliers to quench its thirst for crude. While the U.S. tight oil production will lead the North American charge over the next decade, the Canadian oilsands is set to emerge “as the engine of North American supply,” according to the latest World Energy Outlook published this month.
Indeed, Canada and Brazil will be the two major non- OPEC countries expanding production beyond the 2020s, while Russian, Chinese, U.S. and Kazkahstani production declines. U.S. production will likely fall to 10 million barrels per day by 2040, from 10.3 million bpd last year, as the country exhausts its shale reserves.
Meanwhile, Canada’s total oil production is expected to rise 2.3 per cent annually to reach 7.4 million bpd by 2040 from four million today. The oilsands will be among the fastest-growing unconventional production in the world, growing 3.7 per cent annually during the period.
Flagship Canadian pipelines projects proposed to the east, west and south are facing a mix of regulatory and environmental hurdles, but Birol believes the economics of oil are so lucrative “that I believe sooner or later there will be solutions to transportation problems.”
However, the IEA’s most recent report warned that expanding Canadian production depends on new transportation capacity, “which is proving far from straightforward.”
The pipeline delays are casting doubt over free-market oil production at a time of rising global energy security, a subject Birol believes will be foremost on the minds of global policy-makers in the next few years.
“Canada, in terms of being a reliable supplier, providing diversification and being a triple-A market economy, can play a very positive role in terms of global energy security for Europe and for the rest of the world.”
Canadian production may gain even more importance as the Middle East, which the IEA widely expects to deliver the largest increases in production over the next three decades, is plunged in a series of wars and conflicts. Some of the most geologically promising jurisdictions of Iraq, Iran and Libya, for example, are facing existential threats, while others like Algeria and Venezuela face crippling political paralysis.
“The apparent breathing space provided by the rise in non- OPEC output over the next decade is in many respects illusory, given the long-lead times of new upstream projects.”