In its 2019 World Energy Outlook, the International Energy Agency forecasts growing global demand for energy, particularly in Asia and Africa.
What does this mean for Canada? Energy examined host Tracy Larsson and Krista Nelson, manager of technical research at CAPP, delve into the reasons for energy growth, the implications for oil and natural gas, and the role Canada can play as a responsible supplier for a low-carbon future.
Full transcript of podcast:
Tracy: Hello everyone and welcome to Energy Examined. Our podcast explores all kinds of topics across the oil and natural gas industry. Thanks for tuning in. I am Tracy Larsson, your host for this edition of Energy Examined. And today we are going to talk a bit about the future. More specifically, the future of energy demand around the world and what that could look like over the next couple of decades. And to dive into that energy mix, we have Krista Nelson here today to help us out. She is the manager of technical research with CAPP, the Canadian Association of Petroleum Producers. Krista, thank you for being on the podcast today.
Krista: Thank you.
Tracy: When we look at energy needs around the world and kind-of those expectations for the future, we often wait every year for the International Energy Agency and a report that they put out each year.
Krista: Yeah, every September the IEA puts out a report looking at energy in the future – potential energy scenarios in the future. And it’s over 800 pages, so it’s an extremely comprehensive document.
Tracy: Krista, who is the International Energy Agency and why does this report get so much attention?
Krista: The IEA was created in 1974 at the time of the oil crisis and its initial mandate was to ensure its security of oil supply. At the time, it had 17 countries as members. Today, there are 30 countries. Its mission has evolved and it now looks at the full spectrum of energy issues and policies to enhance reliability, affordability, sustainability of energy and that’s all energy. It provides statistics and analysis such as the World Energy Outlook that we’re discussing. This report is also peer-reviewed by international experts and senior government officials from various countries. So, it does have a global input to it.
Tracy: So, for people who haven’t see the report and really, very few people except for you are probably going to read the entire 800-page report, but can you give our listeners an idea of what they might expect to see in here?
Krista: The IEA prepares three scenarios for energy demand in the future. It goes out to 2040 and the first one, well not the first one, but one of the scenarios is, they call the ‘current policies.’ It’s basically status quo. All the policies that are in place today, if there were no changes in how environmental policies were to be or government policies, that’s the way it would be. The other one is called the ‘sustainable development scenario’ and it is a look-ahead to international climate targets. And it does a workback to how they could possibly achieve those targets. The one we look at is called the ‘stated policy scenario’ because it is the most realistic projection of where things are headed. It incorporates already existing and announced policies and intentions.
Tracy: So, we’ve got these three different scenarios and a very lengthy report. Is there an overarching theme or a main theme that they look at?
Krista: Well, this year they had a focus on Africa, but aside from that, when I read the report what interested me was the disparities of the energy system. We’ve got well-supplied oil markets that are hampered by growing geopolitical tensions and uncertainties. We saw that with the bombings of the Saudi oil fields and the supply chain there. There’s all of those that are wanting a fast transition from fossil fuels and into renewables. Yet the reliance on fossil fuels is extremely high. We want energy for all — that’s a mandate that everyone, that globally we’ve stated. Yet there are almost a billion people around the world that do not have access to electricity. You know, here in Canada we’ve got such an abundance of energy and resources and we really take that for granted. Knowing that a billion people don’t have electricity is shocking.
Tracy: So, you mentioned Africa was a focus. What – is there anything you can comment on?
Krista: Africa’s rise in oil consumption out to that period – the 2040 period – is larger than the growth rate in China. Africa’s expected to grow its oil consumption 72 per cent and China 20 per cent. There’s a whole urbanization of African communities and with that urbanization comes the need for electric appliances, vehicles – that’s where the energy demand comes.
Tracy: Okay, so we’ve got energy needs increasing I think every year, right, over the duration of these projections so over the next, up ‘til 2040? What does that end up looking like in terms of the mix of how people are going to fill these energy needs?
Krista: China will remain the largest consumer for energy and again population, it’s an industrialized nation. The largest growth, though, is in India. It’s doubling its current energy demand and it will double its oil import requirements. Oil makes up 28 per cent of energy consumed and natural gas is 25 per cent. You know, we talk about the large growth in renewables, even with a large growth in renewables, oil and gas still will make up 53 per cent of the total energy used around the world by 2040.
Tracy: So, a large growth in renewables, in the big picture, where in these projections, how does it fit in?
Krista: By 2040, using the stated policy scenario, renewables represent only 18 per cent of energy demand worldwide. And, so again, there’s no doubt that renewables are playing an important role, but it also shows that all forms of energy are still needed to address the growing global need. There’s also a significant shift in lower carbon sources of energy becoming available to replace coal. And you’ll see that with natural gas displacing coal in energy transmission.
Tracy: And the demand for natural gas is growing very quickly. What could that look like for the future of natural gas in Canada?
Krista: Canada is in a great position to aid in both reducing GHGs and in meeting large demand for natural gas. As I said earlier, in 2040, natural gas is expected to be 25 per cent of the energy demand mix. So, even under the sustainable development scenario, natural gas demand is 24 percent of that energy demand. So, this is where the Canadian LNG projects can come in. With market access, we can supply those areas with natural gas. The growing demand is for the most part in Asia.
Tracy: You know, I think you’ve brought up an important point about the sustainable development scenario. And I just want to note that oil and natural gas still play a key role in that scenario, and that’s the one where everything is on track, right, to meet those global climate goals?
Krista: Actually, that’s exactly correct. We’re looking at the Paris Accord and again, the sustainable development is a workback, so when you see that oil and gas is still a significant piece of any energy demand scenario, it just shows that, again, with market access, Canadian resources can then supply those demand areas. And we know most of the demand is in Asia. So, you know, by displacing coal, we now help reduce GHGs.
Tracy: You mentioned growing demand in Asia and Africa due to population growth and people just need energy to pull themselves out of poverty and join the middle class. Are there other sources of growing demand?
Krista: Yeah, in addition to the energy demand for those growing economies, there is the continued need for fossil fuels and especially oil. It meets the demand for shipping, aviation and petrochemicals and I think we forget that petrochemicals are responsible for the materials and items such as our smartphones, running shoes, so in many cases the demand for this type of energy cannot be met with anything other than oil and natural gas.
Tracy: For the oil and natural gas industry, there is that knowing that it’ll be a key component, right, of the future energy mix, but that still does not mean for the industry, especially in Canada that everything is status quo because the report really looks at the importance of innovation as well.
Krista: That’s right. With energy demand increasing, innovation and new technologies are what you need to move forward to reaching climate targets. The Canadian energy industry has worked to reduce – okay, for example, oil sands intensity, which is emissions per barrel has fallen 32 per cent since 1990. And Stats Canada has the latest data on environmental protection spending by industry. The oil and gas extraction industry pays 44 per cent of all environmental spending in Canada. That is the lion’s share. And other industries don’t even come close. So, it just shows you that our industry is working hard towards cleaner technologies.
Tracy: Those new technologies we need to remember too, it takes time for those to be adopted and really come into common practice.
Krista: And I don’t think people appreciate how long it takes for new technologies to come to fruition. So, for example, again, in the IEA report it even states that it takes a few decades to move from commercialization of a new technology to obtaining a very small market share. It then takes another decade for full deployment. There’s a host of other possible barriers as well, including investment risk, associated infrastructure, supply issues. You know, they’re looking to get more aluminum for lighter weighted cars, lithium and cobalt for batteries. I read an article in Maclean’s magazine saying that the demand for lithium out to the future is 280 per cent higher than the known resources that we have for lithium. And, we all know that lithium is mined in extremely sensitive areas as well. So, to say we can very easily move towards the electrification of vehicles – there are a host of other issues that will rise with that transition.
Tracy: Right. I think that highlights – that’s kind of like a full circle because then that again highlights the need for more innovation, and new technologies and finding new ways of doing things and improving.
Krista: Right. And I think it’s also important to remember that the Paris goals are not to reduce fossil fuels. It’s to reduce emissions. So, in that, all innovation and technology is important. We’re not looking at just renewables. Canada especially has done a lot of work on carbon neutral oil and gas production. We are a leader in that hydrocarbon clean tech space. And we also have a huge opportunity to develop these technologies and export them to other countries so they can reduce their emissions.
Tracy: Krista, we’ve gone through a lot of information about the global energy mix and what that can look like. Before we sign off, I just want to throw back to you for one last comment if you don’t mind. Just try to sum up for our listeners, what are a couple of your main takeaways from all of this?
Krista: I would say obviously one of the biggest takeaways is the fact that oil and natural gas remain a critical part of the energy mix.
Tracy: Right.
Krista: Developing economies are dependent on these resources to aid in reducing poverty and provide access to clean cooking facilities. Urbanization in these economies puts more demand on heating, electricity, lighting, transportation. And with globalization and urbanization comes wealth and with wealth comes international travel, so now you’re looking at aviation, you’re looking at buying vehicles. So, to help those growing economies meet the energy demand to again, like I said, bring them out of poverty, Canada is poised to be a significant supplier to these growing markets. Again, we’ve got an abundance of oil, we’ve got an abundance of natural gas. We currently have one single market and I think I stated earlier, that are practically self-sufficient on their own, and again, that being the U.S.
Tracy: Right, right, okay. It sounds like therein lies the huge opportunity, right, for the Canadian energy industry in the future. Krista, I think that’s a great place to end our podcast for today. Thank you so much for joining me and talking about this. And to our listeners, thank you as well for tuning in to this edition of Energy Examined.
