Country report: Canada

Materials World magazine
1 Jul 2018

Canada faces difficult choices as it balances energy security and emission reduction targets with its oil-friendly expeditions. Khai Trung Le reports.

In many demographics, Canada represents something of an equitable USA – embodying the spirit of the frontier and manifest destiny, but with a more even-handed and socially progressive society. Canada, unlike the USA, is a signatory to the Paris Agreement, is a world leader in hydroelectricity, and Prime Minister Justin Trudeau a prolific orator in support for renewable sources.

However, Canada’s attitude to energy could be considered less progressive than its rhetoric. Canada’s per capita energy consumption is five times the global average – around 29% higher than the USA, and almost three times that of the European Union. The country is a prime consumer and producer of fossil fuels – oil and gas (O&G) comprise 57% of consumption, although coal and nuclear stand at 5% and 7% respectively. All of this has a toll – Canada emits more carbon per capita than the USA and Saudi Arabia.

Although Trudeau has spoken extensively on a green agenda, which some welcomed following a decade of a fossil fuel-friendly Conservative government, by January 2017 he had approved two oil pipelines and a major gas facility. His tenure has been met with continual protest action, including standing against pipeline expansions planned through First Nation territories in Alberta and British Columbia. How progressive Canadian energy really is remains to be seen.

Report card

In late May 2018, the Canadian Centre for Policy Alternatives published the report, Canada’s Energy Outlook, written by J David Hughes, one of North America’s foremost earth scientists, including a 32-year stint with the Geological Survey of Canada.

The report is, for the most part, critical of Canada’s energy plans. It pinpoints the imbalance between the country’s high standard of living underpinned by a fossil fuel-heavy and energy-hungry diet, the need for emission reductions, and the ambitious targets the government has set itself – a 30% reduction in emissions from 2005 levels by 2030, and 80% by 2050. ‘Given the current status of Canada’s energy supply, these are very aggressive targets,’ the report notes.

Canada does sport a highly desirable renewable accomplishment – 59% of all electricity generation in the country originates from hydropower, providing around 374TWh in 2015. However, the Canadian government has acknowledged an increase of 107% will be needed to meet its ambitious emissions reduction targets, as did Hughes. ‘Developing this much additional hydropower in just 33 years would require up to 118 new dams the size of Site C (a proposed 1,100MW hydro dam on the Peace River) at a cost of up to US$739bln,’ he writes.

Tarred and feathered

Hughes was also disparaging of Canada’s devotion to oil, citing quality issues. ‘Although on paper, Canada has the third-largest resource of oil in the world, in practice 97.4% of proven reserves are low-quality oilsands that are energy-and emissions-intensive to extract and costly to refine. Some 80% of the remaining recoverable resources are too deep for mining and thus require even more energy- and emissions-intensive in situ methods to extract,’ he writes.

Industry is naturally drawn to extracting the highest quality and more economic resources first, and the report argues Canada’s remaining oil will cost more to extract than current operations. The energy return on investment (EROI) for mined bitumen is 8:1 – one barrel of oil must be spent to find eight more – but steamed bitumen production is reportedly around 4:1. Hughes claims it is closer to 2:1 when factoring transport and refinement to the point of use. ‘When EROI approaches a breakeven point, it makes no energetic sense to pursue further extraction,’ the report states.

However, oil interests have fought back, citing optimism as the per-barrel price recently increased from US$50 to US$80. BlackPearl Resources, Canada, previously shut down 10 wells in Q1 2018, decrying the expense of maintenance during lower oil prices. These have been reopened to capitalise on the rebounding value. Similarly, Matt Munro, Canada Market Manager for recruiter Petroplan, UK, claimed the sector’s job postings by June 2018 had more than doubled compared to the previous 12 months, and look set to remain high. Salaries also rose 13.8% from February 2017 to 2018.

Kinder surprise

Truedeau has also come under fire for his decision in May 2018 to nationalise the Kinder Morgan pipeline for US$3.45bln, which runs from the Alberta tar sands to British Columbia tidewater. As such, the government will take over the existing Trans Mountain assets and aims to commence construction on the new pipeline in August.

Professor Matti Siemiatycki, an infrastructure finance specialist at the University of Toronto, Canada, told the Guardian, ‘It’s a chess move that allows the project to proceed and positions it as a national interest. [But] now the government bears the risk. The pipeline expansion presumes there’s going to be a high demand for oil going forward for decades – but there’s significant risk that that may not prevail because of changing technologies and demand.’

Several First Nation communities have also argued that they were improperly consulted on the review process, and began both legal action and site protests.

Trudeau has been bullish in the face of criticism, telling oil executives at the 2017 CERAWeek energy conference in Texas, USA, ‘No country would find 173 billion barrels of oil in the ground and just leave it there.’ His speech received a standing ovation.

What many see as the kindly, amiable cousin to the USA may just be a façade as Canada looks to capitalise on its vast O&G opportunities, no matter the cost to its environmental ambitions, according to Hughes. ‘Even the most aggressive scenarios in Canada’s mid-century strategy don’t see wind growing to more than 24% of total generation and solar to more than 6%, which would require an 18-fold increase in wind and a 32-fold increase in solar from current levels.’