Mining News

Canada to ramp up oil and gas output to 300,000 barrels per day to help address energy crisis

Canada will ramp up its output of oil and natural gas, to the tune of 300,000 barrels per day, to help address the immediate energy crisis in Europe caused by Russia’s war in Ukraine, Canadian Natural Resources Minister Jonathan Wilkinson said Wednesday in an address to the Greater Vancouver Board of Trade (GVBOT).

But that doesn’t mean taking action on climate change and decarbonization needs to take a back seat, he said, and there are “enormous” opportunities for Canada’s resource and energy industries in the energy transition.

But there are also some significant barriers to overcome — and quickly — if Canada is to capitalize on the new opportunities, capture market share and meet climate action targets.

Canada will need significantly more power generation and transmission to meet electrification objectives, more mines to produce critical minerals, more participation from First Nations and it will need to develop a new hydrogen industry.

And all of that will require a quicker regulatory process.

“It simply cannot take us 10 years to develop a new mine in this country, going forward,” Wilkinson said. “We have to think about ways to do this better.”

To address these challenges, Wilkinson today announced his government is launching regional energy and resource tables, to be held in every province and territory in Canada. The first will be formed in B.C., Manitoba and Newfoundland-Labrador, as those provinces have now signed agreements to participate in the process.

“The goal of these tables…will be to collaboratively identify the most significant three or four areas of economic opportunity in each province or territory,” Wilkinson said.

The tables will involve the federal and provincial governments, as well as indigenous leaders, industry and labour.

The energy transition provides new opportunities for Canadian resources companies, especially mining and exploration, but also oil and gas.

Wilkinson said there will be no one-size-fits all approach to the energy transition across Canada.

“Regionally, each province has a relatively unique mix of their own natural resources, so the economic opportunities available to them, and therefore the approaches to a clean energy transition, will be different across this country.

“In Alberta, significant opportunities will involve hydrogen derived from natural gas, CCUS (carbon capture, utilization and storage), critical minerals, renewable energy and biofuels,” Wilkinson said. “In Quebec, the list would likely focus more on hydrogen from electrolysis, electricity exports, critical minerals and battery development and production.

“What we need is a plan that is based on comparative advantage.”

The world is currently in the throes of an energy crisis, which had been looming before Russia invaded Ukraine. The result has been higher energy prices worldwide, and European countries facing serious shortages of all forms of energy. Wilkinson said Canada has responded to European calls for help by agreeing to accelerate oil and gas production.

“We announced a plan to increase oil and gas outputs by 300,000 barrels per day by the end of the year, expanding production and optimizing pipelines – essentially bringing forward production that had been planned for the future, but bringing it forward in time,” Wilkinson said.

He added Canada is also looking at enhancing the export of other Canadian commodities like potash and uranium that Europe has historically imported from Russia.

“Europe has also asked us to look at how Canada could potentially assist with liquid natural gas and hydrogen, and that would be from Eastern Canada,” Wilkinson said.

The energy crisis has led to two extreme competing views of Canada’s role in producing fossil fuels.

While one side argues that energy transition policies should be parked in order to focus on the more urgent energy crisis, the other side argues that Canada should not be increasing fossil fuel production due to the climate crisis.

“I would suggest to you that neither of those extreme positions is thoughtful, nor is it tenable,” Wilkinson said. “Of course we need to respond to the urgent needs of our European friends and allies. And of course we need to ensure that we stay focused on the existential threat that is climate change.”

Wilkinson said there’s considerable confusion over fossil fuels within the context of the energy transition to low carbon energy forms. The notion that all fossil fuels can be phased out entirely neglects the fact that hydrocarbons will still be needed for decades to come for non-combustion purposes.

“In virtually all forecasts going forward, global demand for oil is projected to be relatively flat through 2030 before we start to see a decline in the consumption of oil and gas,” Wilkinson said.

“While the volume of oil consumed globally will eventually decline significantly, even in the International Energy Agency’s 1.5 degrees Celsius scenario, the world will still use about 25 million barrels of oil – about a quarter of the oil we consume today – in 2050.”

But much of that oil will be used for non-combustion uses – petrochemicals, lubricants, solvents, etc. He added the IEA also forecasts the demand for natural gas will be about half what it is today in 2050. One use of natural gas in the future will be for making hydrogen, because not all hydrogen will be “green” – i.e. made from water and electricity.

“The cause of climate change is not fossil fuels themselves,” Wilkinson said. “It is the carbon emissions associated with the production and combustion…of fossil fuels. Beyond the need for very significant increases in renewables and other forms of non-emitting energy, the reality is that there will continue to be a role for some level of carbon-based fuels post 2050.”

One of the challenges the regional energy and resource tables will tackle is the need for more power transmission lines within and between provinces and regions.

“This is a fundamentally important issue in the context of the energy transition,” Wilkinson said.

In conjunction with the new energy and resource tables, the federal government also plans to launch a Pan-Canadian Grid Council — a technical advisory group mandated to remove barriers to providing “clean” electricity to all regions of Canada by 2035.

“The longer term challenge for all provinces is the doubling or tripling of electrical generation capacity that’s going to be required to electrify a range of applications, including the elements of transportation,” Wilkinson said.

“We’re actually going to have to make rapid progress in order to actually achieve some of our climate goals.”

But Canada is not known for doing anything quickly when it comes to energy and natural resources. A big part of the problem is the environmental regulatory process, and other permitting processes.

Wilkinson said he believes that, by working with the provinces, these processes can be streamlined, without rewriting legislation.

“I think there’s opportunities for us to think about how we do things concurrently, rather than consecutively, in terms of the regulatory and permitting processes. I think there’s also opportunities for us to ensure that we can provide more certainty around timelines.

“I’m not talking about going back and redoing legislation, but there are ways in which I think we can actually create greater amounts of certainty that the timelines we say we’re going to meet, that we actually are going to meet.”

(This article first appeared in Business in Vancouver)

Share this article