Alberta
Oil and gas in the global economy through 2050
From the Canadian Energy Centre
The world will continue to rely on oil and gas for decades to come, according to the International Energy Agency
Recent global conflicts, which have been partly responsible for a global spike in energy prices, have cast their shadow on energy markets around the world. Added to this uncertainty is the ongoing debate among policymakers and public institutions in various jurisdictions about the role of traditional forms of energy in the global economy.
One widely quoted study influencing the debate is the International Energy Agency’s (IEA) World Energy Outlook, the most recent edition of which, World Energy Outlook 2023 (or WEO 2023), was released recently (IEA 2023).
In this CEC Fact Sheet, we examine projections for oil and natural gas production, demand, and investment drawn from the World Energy Outlook 2023 Extended Dataset, using the IEA’s modelled scenario STEPS, or the Stated Policies Scenario. The Extended Dataset provides more detailed data at the global, regional, and country level than that found in the main report.
The IEA’s World Energy Outlook and the various scenarios
Every year the IEA releases its annual energy outlook. The report looks at recent energy supply and demand, and projects the investment outlook for oil and gas over the next three decades. The World Energy Outlook makes use of a scenario approach to examine future energy trends. WEO 2023 models three scenarios: the Net Zero Emissions by 2050 Scenario (NZE), the Announced Pledges Scenario (APS), and the Stated Policies Scenario (STEPS).
STEPS appears to be the most plausible scenario because it is based on the world’s current trajectory, rather than the other scenarios set out in the WEO 2023, including the APS and the NZE. According to the IEA:
The Stated Policies Scenario is based on current policy settings and also considers the implications of industrial policies that support clean energy supply chains as well as measures related to energy and climate. (2023, p. 79; emphasis by author)
and
STEPS looks in detail at what [governments] are actually doing to reach their targets and objectives across the energy economy. Outcomes in the STEPS reflect a detailed sector-by-sector review of the policies and measures that are actually in place or that have been announced; aspirational energy or climate targets are not automatically assumed to be met. (2023, p. 92)
Key results
The key results of STEPS, drawn from the IEA’s Extended Dataset, indicate that the oil and gas industry is not going into decline over the next decade—neither worldwide generally, nor in Canada specifically. In fact, the demand for oil and gas in emerging and developing economies under STEPS will remain robust through 2050.
Oil and natural gas production projections under STEPS
World oil production is projected to increase from 94.8 million barrels per day (mb/d) in 2022 to 97.2 mb/d in 2035, before falling slightly to 94.5 mb/d in 2050 (see Figure 1).
Source: IEA (2023b)
Canadian overall crude oil production is projected to increase from 5.8 mb/d in 2022 to 6.5 mb/d in 2035, before falling to 5.6 mb/d in 2050 (see Figure 2).
Source: IEA (2023b)
Canadian oil sands production is expected to increase from 3.6 mb/d in 2022 to 3.8 mb/d in 2035, and maintain the same production level till 2050 (see Figure 3).
Source: IEA (2023b)
World natural gas production is anticipated to increase from 4,138 billion cubic metres (bcm) in 2022 to 4,173 bcm in 2050 (see Figure 4).
Source: IEA (2023b)
Canadian natural gas production is projected to decrease from 204 bcm in 2022 to 194 bcm in 2050 (see Figure 5).
Source: IEA (2023b)
Oil demand under STEPS
World demand for oil is projected to increase from 96.5 mb/d in 2022 to 97.4 mb/d by 2050 (see Tables 1A and 1B). Demand in Africa for oil is expected to increase from 4.0 mb/d in 2022 to 7.7 mb/d in 2050. Demand for oil in the Asia-Pacific is projected to increase from 32.9 mb/d in 2022 to 35.1 mb/d in 2050. Demand for oil from emerging and developing economies is anticipated to increase from 47.9 mb/d in 2022 to 59.3 mb/d in 2050.
Source: IEA (2023b)
Source: IEA (2023b)
Natural gas demand under STEPS
World demand for natural gas is expected to increase from 4,159 billion cubic metres (bcm) in 2022 to 4,179 bcm in 2050 (see Figures 6 and 7). Demand in Africa for natural gas is projected to increase from 170 bcm in 2020 to 277 bcm in 2050. Demand in the Asia-Pacific for natural gas is anticipated to increase from 900 bcm in 2020 to 1,119 bcm in 2050.
Source: IEA (2023b)
Source: IEA (2023b)
Cumulative oil and gas investment expected to be over $21 trillion
Taking into account projected global demand, between 2023 and 2050 the cumulative global oil and gas investment (upstream, midstream, and downstream) under STEPS is expected to reach nearly U.S.$21.1 trillion (in $2022). Global oil investment alone is expected to be over U.S.$13.1 trillion and natural gas investment is predicted to be over $8.0 trillion (see Figure 8).
Between 2023 and 2050, total oil and gas investment in North America (Canada, the U.S., and Mexico) is expected to be nearly U.S.$5.6 trillion, split between oil at over $3.8 trillion and gas at nearly $1.8 trillion (see Figure 8). Oil and gas investment in the Asia Pacific, over the same period, is estimated at nearly $3.3 trillion, split between oil at over $1.4 trillion and gas at over $1.9 trillion.
Source: IEA (2023b)
Conclusion
The sector-by-sector measures that governments worldwide have put in place and the specific policy initiatives that support clean energy policy, i.e., the Stated Policies Scenario (STEPS), both show oil and gas continuing to play a major role in the global economy through 2050. Key data points on production and demand drawn from the IEA’s WEO 2023 Extended Dataset confirm this trend.
Positioning Canada as a secure and reliable oil and gas supplier can and must be part of the medium- to long-term solution to meeting the oil and gas demands of the U.S., Europe, Asia and other regions as part of a concerted move supporting energy security.
The need for stable energy, which is something that oil and natural gas provide, is critical to a global economy whose population is set to grow by another 2 billion people by 2050. Along with the increasing population comes rising incomes, and with them comes a heightened demand for oil and natural gas, particularly in many emerging and developing economies in Africa, the Asia-Pacific, and Latin America, where countries are seeing urbanization and industrialization grow rapidly.
References (as of February 11, 2024)
International Energy Agency (IEA), 2023(a), World Energy Outlook 2023 <http://tinyurl.com/4nv9xyfj>; International Energy Agency (IEA), 2023(b), World Energy Outlook 2023 Extended Dataset <http://tinyurl.com/3222553b>.
Alberta
Alberta Premier Danielle Smith Discusses Moving Energy Forward at the Global Energy Show in Calgary
From Energy Now
At the energy conference in Calgary, Alberta Premier Danielle Smith pressed the case for building infrastructure to move provincial products to international markets, via a transportation and energy corridor to British Columbia.
“The anchor tenant for this corridor must be a 42-inch pipeline, moving one million incremental barrels of oil to those global markets. And we can’t stop there,” she told the audience.
The premier reiterated her support for new pipelines north to Grays Bay in Nunavut, east to Churchill, Man., and potentially a new version of Energy East.
The discussion comes as Prime Minister Mark Carney and his government are assembling a list of major projects of national interest to fast-track for approval.
Carney has also pledged to establish a major project review office that would issue decisions within two years, instead of five.
Alberta
Punishing Alberta Oil Production: The Divisive Effect of Policies For Carney’s “Decarbonized Oil”
From Energy Now
By Ron Wallace
The federal government has doubled down on its commitment to “responsibly produced oil and gas”. These terms are apparently carefully crafted to maintain federal policies for Net Zero. These policies include a Canadian emissions cap, tanker bans and a clean electricity mandate.
Following meetings in Saskatoon in early June between Prime Minister Mark Carney and Canadian provincial and territorial leaders, the federal government expressed renewed interest in the completion of new oil pipelines to reduce reliance on oil exports to the USA while providing better access to foreign markets. However Carney, while suggesting that there is “real potential” for such projects nonetheless qualified that support as being limited to projects that would “decarbonize” Canadian oil, apparently those that would employ carbon capture technologies. While the meeting did not result in a final list of potential projects, Alberta Premier Danielle Smith said that this approach would constitute a “grand bargain” whereby new pipelines to increase oil exports could help fund decarbonization efforts. But is that true and what are the implications for the Albertan and Canadian economies?
The federal government has doubled down on its commitment to “responsibly produced oil and gas”. These terms are apparently carefully crafted to maintain federal policies for Net Zero. These policies include a Canadian emissions cap, tanker bans and a clean electricity mandate. Many would consider that Canadians, especially Albertans, should be wary of these largely undefined announcements in which Ottawa proposes solely to determine projects that are “in the national interest.”
The federal government has tabled legislation designed to address these challenges with Bill C-5: An Act to enact the Free Trade and Labour Mobility Act and the Building Canada Act (the One Canadian Economy Act). Rather than replacing controversial, and challenged, legislation like the Impact Assessment Act, the Carney government proposes to add more legislation designed to accelerate and streamline regulatory approvals for energy and infrastructure projects. However, only those projects that Ottawa designates as being in the national interest would be approved. While clearer, shorter regulatory timelines and the restoration of the Major Projects Office are also proposed, Bill C-5 is to be superimposed over a crippling regulatory base.
It remains to be seen if this attempt will restore a much-diminished Canadian Can-Do spirit for economic development by encouraging much-needed, indeed essential interprovincial teamwork across shared jurisdictions. While the Act’s proposed single approval process could provide for expedited review timelines, a complex web of regulatory processes will remain in place requiring much enhanced interagency and interprovincial coordination. Given Canada’s much-diminished record for regulatory and policy clarity will this legislation be enough to persuade the corporate and international capital community to consider Canada as a prime investment destination?
As with all complex matters the devil always lurks in the details. Notably, these federal initiatives arrive at a time when the Carney government is facing ever-more pressing geopolitical, energy security and economic concerns. The Organization for Economic Co-operation and Development predicts that Canada’s economy will grow by a dismal one per cent in 2025 and 1.1 per cent in 2026 – this at a time when the global economy is predicted to grow by 2.9 per cent.
It should come as no surprise that Carney’s recent musing about the “real potential” for decarbonized oil pipelines have sparked debate. The undefined term “decarbonized”, is clearly aimed directly at western Canadian oil production as part of Ottawa’s broader strategy to achieve national emissions commitments using costly carbon capture and storage (CCS) projects whose economic viability at scale has been questioned. What might this mean for western Canadian oil producers?
The Alberta Oil sands presently account for about 58% of Canada’s total oil output. Data from December 2023 show Alberta producing a record 4.53 million barrels per day (MMb/d) as major oil export pipelines including Trans Mountain, Keystone and the Enbridge Mainline operate at high levels of capacity. Meanwhile, in 2023 eastern Canada imported on average about 490,000 barrels of crude oil per day (bpd) at a cost estimated at CAD $19.5 billion. These seaborne shipments to major refineries (like New Brunswick’s Irving Refinery in Saint John) rely on imported oil by tanker with crude oil deliveries to New Brunswick averaging around 263,000 barrels per day. In 2023 the estimated total cost to Canada for imported crude oil was $19.5 billion with oil imports arriving from the United States (72.4%), Nigeria (12.9%), and Saudi Arabia (10.7%). Since 1988, marine terminals along the St. Lawrence have seen imports of foreign oil valued at more than $228 billion while the Irving Oil refinery imported $136 billion from 1988 to 2020.
What are the policy and cost implication of Carney’s call for the “decarbonization” of western Canadian produced, oil? It implies that western Canadian “decarbonized” oil would have to be produced and transported to competitive world markets under a material regulatory and financial burden. Meanwhile, eastern Canadian refiners would be allowed to import oil from the USA and offshore jurisdictions free from any comparable regulatory burdens. This policy would penalize, and makes less competitive, Canadian producers while rewarding offshore sources. A federal regulatory requirement to decarbonize western Canadian crude oil production without imposing similar restrictions on imported oil would render the One Canadian Economy Act moot and create two market realities in Canada – one that favours imports and that discourages, or at very least threatens the competitiveness of, Canadian oil export production.
Ron Wallace is a former Member of the National Energy Board.
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