Canada’s crude oil, gas consumption peaking, output set to rise on strong exports

TORONTO (ICIS)–Canada’s domestic consumption of fossil fuels may have peaked in 2019 and could decline in coming years assuming efforts to reduce greenhouse gas (GHG) emissions are maintained, the country’s energy regulator said this week.

In its long-term 2050 supply/demand projection, Canada Energy Regulator (CER) said however that oil and gas production is expected to keep rising on the back of strong exports.

By 2030, CER projects the country’s fossil fuel consumption down 12% from 2019, and as much as 35% down by 2035.

Meanwhile, renewables and nuclear energy consumption will grow by 31% by 2050.

However, while fossil fuel consumption is projected to decline, it will still make up more than 60% of Canada’s fuel mix in 2050, according to CER’s scenarios

“Achieving net-zero GHG emissions by 2050 will require an accelerated pace of transition away from fossil fuels,” it said.

CORONAVIRUS WEIGHS ON 2020
CER estimates Canada’s energy use down 6% in 2020, year on year, as the coronavirus pandemic reduced economic and private activity.

Meanwhile, Canada’s 2020 crude oil production is expected down by 7%, or 335,000 bbl/day year on year, in response to lower crude oil prices.

In the spring, when the first wave of the pandemic hit, western Canadian producers shut in oil production due to low prices, eventually cutting almost 1m bbl/day of supply by mid-May 2020.

Production increased in the latter half of 2020 along with rising prices.

Canada’s 2020 natural gas production, however, should remain relatively stable year on year as western Canadian natural gas prices are higher than last year, said CER.

LONG-TERM PRODUCTION
Despite long-term lower domestic consumption, Canada’s oil and gas production will continue to rise driven by strong exports.

Canadian crude oil production should increase steadily until peaking in 2039 at 5.8m bbl/day, while natural gas production could peak at 18.4bn cubic feet/day (Bcf/day) by 2040, under CER’s projections and scenarios.

This compares with 2019 crude oil production of 4.9m bbl/day and gas production of 15.7 Bcf/day.

As for the natural gas liquids (NGL) – extracted from gas and used as petrochemical feedstock – CER said that demand should increase in the medium term as NGL use in Alberta’s petrochemicals industry increases and as propane and butanes exports rise.

NGL AND PETROCHEMICALS
There was potential for ethane and propane recovery to increase further, “if there is an increase in petrochemical capacity”, driven by incentives for petrochemical investments in Alberta, the agency added.

Meanwhile, Canada’s pipeline infrastructure and planned expansion projects – in particular Trans Mountain and Keystone XL – will be able to accommodate all of Canada’s future production growth, CER said.

In related news, the International Energy Agency (IEA) said in a report last month that energy demand in advanced economies is on a declining trend through 2030.

However, globally demand will increase, driven by emerging market and developing economies, led by India.

Front page picture: Suncor refinery in Edmonton, Alberta
Source: Suncor

Focus article by Stefan Baumgarten