Notes for Presentation
by
the Honourable Joe Oliver
Minister of Natural Resources
to address the
IHS-CERAWeek 2014:
33rd Annual Executive Conference
The Future of Canadian Crude and LNG
Houston, Texas
March 4, 2014
Check against delivery
Thank you very much, Jackie [Jackie Forrest, IHS CERA Senior Director], and thank you all for a warm Texas welcome. And thank you again for inviting me to be part of this annual global gathering of leaders.
My friends, energy and prosperity are one and the same.
Without abundant and available, affordable energy, we are limited. There are over one billion people without access to electricity. Over a billion more are in a position of energy insecurity. We know that no country can emerge from poverty without access to affordable energy.
Energy is the engine of economic growth. It fuels cars; it gets us to work; it fires the factories which manufacture our goods; it creates the jobs, it lets us put food on the table, and, when it’s responsibly developed, as it is in the United States and Canada, it ignites long-term prosperity.
Increasingly, energy dominates the global political conversation. Demand worldwide will rise by 35 percent between now and 2035. But of course that masks a paradigm shift.
This century, the global economy will be defined by emerging economies, which will represent 90 percent of that energy demand to 2035. The world’s middle class could grow from less than two billion in 2009 to five billion in 2030. And 90 percent of that growth will also come from non-OECD countries. China, alone, will consume almost 70 percent more energy than the United States by 2030. And India will become the largest single source of global oil demand growth after 2020. Energy consumption in Indonesia, Brazil and the Middle East will not be far behind.
So a seismic shift in the global energy demand is underway. And a fundamental shift is also happening in world supply — with North America at the forefront.
In this age of unconventionals, the United States and Canada find themselves awash in an unprecedented energy wealth few could have imagined even a decade ago.
Thanks to previously inaccessible deposits like the Marcellus and Barnett, U.S. output of natural gas is set to reach almost 800 billion cubic metres by 2018, 17 percent higher than last year’s total.
Canada, too, is expected to increase its natural gas production. We have 1,300 trillion cubic feet — over 200 years of domestic supply at current production rates. The problem is that Canadian natural gas can only be sold in North America. So to capture the world price, and respond to the disappearing American market, we need to liquefy our gas and transport LNG abroad.
Eleven projects are in the regulatory approval process, and they have a combined export capacity of 165 million tonnes of LNG annually.
Canada must find new markets to replace our shrinking exports to the United States, our sole customer. LNG is crucial for Canada, because that customer is so rapidly moving toward natural gas self-sufficiency and will soon be a competitor.
With respect to oil, the Bakken formation in Montana and North Dakota alone is giving rise to a surge in U.S. oil production.
Although the U.S. is set to be the world’s largest oil producer by 2016, it will still need to import — and there are different estimates — over 7 million barrels a day until 2035 at least. Canada cannot assume that it will be the sole source of this oil; therefore, we must diversify our markets, and that is precisely what we are doing.
We have 173 billion barrels of proven oil reserves — the third-largest proven in the world. With advances in technology, Canada’s oil sands could yield over 300 billion barrels.
That would give us the biggest reserves in the world — more than Saudi Arabia, more than Venezuela, more than any other supplier.
Proposed oil pipeline projects south, west and east will — subject to regulatory review and approval — help Canada achieve its goal of supplying responsible energy to the world.
These projects include the anticipated completion of the Keystone XL pipeline here in the United States, Enbridge’s Northern Gateway Pipeline and Kinder Morgan’s Trans Mountain Pipeline to Canada’s Pacific coast, and TransCanada’s Energy East Pipeline, 1.1 million barrels a day to our Atlantic coast.
It is a critical strategic imperative that we move our resources to tidewater to access the burgeoning markets that demand our energy. That is why we have streamlined our regulatory process for major project reviews.
Today, investors can look to Canada and expect a timely and predictable review process.
My government has also made Canada one of the best countries in the world in which to invest.
Our fiscal responsibility and aggressive debt reduction have placed Canada in the best possible position to weather the global recession.
We built a strong financial sector. For six straight years, the World Economic Forum has rated our banking system the soundest in the world.
We placed second in Bloomberg’s recent world ranking of business-friendly nations. KPMG has concluded that Canada’s total business costs are the lowest in the G7 — more than 40 percent lower than here in the United States.
And we are on track to achieve a balanced federal budget in 2015. Fiscal discipline matters. A balanced budget gives our government the fiscal room to implement new tax-cutting measures. It allows us to maintain the Canadian business-friendly advantage, which has been the core of post-recession job growth.
A big part of that job growth comes from the energy sector, and a huge part of that is our oil sands. So here are a few facts.
Canada’s oil sands are expected to contribute $2.1 trillion to the Canadian economy over the next 25 years — $8.4 billion per year; over 500,000 Canadian jobs. Almost $185 billion has already been invested in the oil sands by major international energy companies.
But Canadians expect resource development to be undertaken responsibly, and that means world-class environmental protection and real efforts to reduce greenhouse gas emissions.
We have an open system that reports the carbon emissions of our crude oil production. The oil sands represent 0.1 percent — or one one-thousandth — of worldwide GHG emissions. That makes clear that climate change activists opposed to oil sands development have targeted the wrong source of energy. Coal fired electricity in the US contributes 33 times as many greenhouse gas emissions as the oil sands. CO2 emissions from coal use in China are about 125 times larger than all the emissions from the oil sands today. Speaking of which, Canadian regulations prohibit the construction of traditional coal plants and are phasing out existing ones.
Even though those GHG emissions are, on a relative basis, minuscule, we have an obligation as global citizens to do our part to protect the environment. And we are.
Industry has taken up the challenge, undertaking research and developing innovative technologies that are dramatically reducing the sector’s environmental impacts.
Emissions per barrel have been reduced by 26 percent between 1990 and 2011. And the amount of water used in oil sands mining decreased 7.4 percent even though oil production increased 65 percent between 2002 and 2011.
Thanks to horizontal drilling technologies and the increasing use of in-situ production, industry now recycles more than 90 percent of the water it uses.
Technological innovations are also improving the way tailings ponds are managed so vegetation can be replanted and land reclaimed more quickly.
Breakthroughs like Syncrude’s $1.9-billion centrifuge and a new non-thermal oil sands process known as SHORE are enabling industry to exceed oil sands tailings reduction requirements — if not eliminate tailing ponds altogether.
Credit rests with Canada’s Oil Sands Innovation Alliance. COSIA is a partnership of 13 Canadian companies that have shared 560 innovations worth $900 million to date.
This is a unique alliance, the only such collaborative effort in the world. It has member companies operating on 185 joint projects, many of them transforming unconventionals into conventional energy.
That’s no exaggeration. Diluted bitumen produced from Imperial Oil’s Kearl project will have about the same life-cycle greenhouse-gas emissions as many other crude oils refined in the United States. The company has reduced its energy needs through a revolutionary froth treatment process that eliminates the need for an upgrader and by installing energy-saving cogeneration systems.
Shell Quest, the first Canadian project to store CO2 in saline formation, will reduce emissions at its Scotford oil sands upgrader by a third starting in 2015–16.
My government’s track record on environmental protection is clear. Measures taken through our plan for Responsible Resource Development have strengthened environmental protection and enhanced consultations with Canada’s Aboriginal Peoples in the project review and development process.
We have increased the number of National Energy Board inspections of oil and gas pipelines and doubled comprehensive audits to identify potential safety issues. This will help us to stop incidents before they occur, although our safety record is very strong: more than 99.999 percent of oil is delivered safely by pipelines.
We have introduced tough new requirements for the transport of our energy products by rail, pipelines and offshore shipping. We want to be sure that, no matter how energy is transported, it is done safely and responsibly and meets world-class standards.
Research is examining ways to improve Canada’s world-class tanker safety system. And new laws make operators more financially accountable for their environmental practices. If an incident occurs, the polluter will pay.
There is more work to be done, and we are working closely with our colleagues in the United States to continue this progress.
Energy Secretary Moniz and I are discussing a strategic energy partnership to strengthen energy security, improve environmental protection and generate new economic benefits on both sides of the border.
My officials at Natural Resources Canada are working closely with the U.S. Department of Energy to explore the responsible development of unconventional oil and gas, build safe and modern energy infrastructure, examine smart grids, enhance energy efficiency and advance global leadership.
Now you would not expect me to neglect to mention a potential contributor to our shared objective of energy self-sufficiency, and that’s Keystone XL.
The advantages of Keystone to America are very strong in terms of jobs, economic growth, revenue to governments and national security. And the environmental issues have been dealt with, definitively.
This has been the most exhaustively studied pipeline project ever proposed in the United States and perhaps the world — five exhaustive, voluminous, independent, scientific Environmental Impact Statements by the State Department.
The final January report confirmed what we have been saying all along: Keystone XL would have no significant net impact on the environment, the condition the President identified for his national interest determination.
It also found that Keystone will help displace Venezuelan oil in favour of Canadian oil. Venezuela has no emissions regulations and threatened to cut off oil exports to the United States five times. These facts help explain why 74 percent of Americans approve of this pipeline.
The State Department report also pointed out that approving or denying Keystone will have no effect on oil sands development or on demand for oil here in the U.S. Activists opposed to any and all fossil fuel development should take note.
As Daniel Yergin wrote in a Financial Times article last November: “The U.S. will continue to be an oil importer for a long time... and the U.S.’s imported oil will increasingly come from the western hemisphere, especially Canada, which already supplies almost 30% of total U.S. oil imports.”
Quite simply, oil will continue to be part of the world energy mix well into the future. Explosive growth in this continent’s homegrown energy supply means the long-elusive goal of North American energy independence is within reach, with positive geopolitical implications.
Of course, to achieve energy independence, we need continental energy projects like Keystone, projects that bring jobs, lower energy prices and energy security.
Canadian oil sands are already making Americans better off. The one million barrels of crude imported annually from the oil sands support 54,000 jobs here in the U.S.
The State Department’s latest Environmental Impact Statement estimates Keystone XL spending would support the employment of 42,000 more Americans during construction. Keystone would generate $2 billion in earnings here in the U.S.
And without this pipeline, alternative methods of transportation will still be used, especially rail. These will, according to the State Department, increase greenhouse gas emissions by 28–42 percent. So the net greenhouse gas emissions savings of building Keystone XL would be the equivalent of removing over 270,000 cars from our roads.
Based on the facts and the science, the case for Keystone XL is overwhelming. We hope that when the agency review is completed, the President will say yes to job creation, to economic growth, to energy security and to a cleaner environment.
Ladies and gentlemen, Canada is emerging as a 21st-century energy superpower — a premier world supplier for decades to come.
An estimated $650 billion of new investment in Canadian resources is expected over the next decade. Few countries in the world are undertaking projects of that size and at that pace.
Canada is well positioned to be a major exporter of oil and gas, which we intend to develop responsibly for the benefit of our citizens and to contribute to the energy needs of a growing world.
So Canada stands out as an attractive destination for capital investment: a country with the energy the world needs, the stability investors demand and the opportunities smart business people embrace.
Thank you very much.
