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Ever since Alberta Premier Jason Kenney returned to the province to forge a union between competing conservative factions and sweep to power in the 2019 election, there has been one topic near and dear to his heart: convincing the world to transition from “dictator oil” to what he dubs the more responsibly produced Alberta alternative.
He announced the team that would be helping him establish the Canadian Energy Centre, more commonly known as the “war room,” Kenney called the fight for the industry’s image a “Moral cause.”
So it’s no surprise Kenney and the province’s oil and gas boosters wasted no time in using the invasion of Ukraine as an opportunity to call for more Canadian oil and gas production to replace Russian supply — a move proponents claim would starve Vladimir Putin’s war machine.
That war machine is fed handsomely by the country’s energy dominance. According to the International Energy Agency Russia is number one. world’s largest exporter of oil to global markets — and nearly two thirds of the country’s oil exports go to Europe, a region which also Russia can be relied uponFor a third of its gas supplies by 2021.
Kenney isn’t alone in his calls to reduce dependence on Russia’s oil and gas. Since the first day of the conflict, a chorus of voices in the U.S. and across the world have called for increased investment in oil and gas in light of the invasion — a chorus cheered as timely by some and jeered as opportunistic by others.
Beyond the bluster, there’s a complex debate about the future of energy supplies and energy security. Everyone is trying to figure out how to move forward in a world that suddenly lost the second-largest global supplier of fossil fuels. There are also growing calls for a radical acceleration of the shift away oil and gas, and to not lose sight of the climate crisis.
But, before all that, there is always the question of supply or demand.
Could Canada really fill the void created by Russian oil,
As Russian forces continue to advance into Ukraine, Russia finds itself increasingly cut off from the rest of the world, including from a primary source of its wealth and power — oil and gas.
In 2021, revenues will come from this sector This account accounted for 36% of Russia’s national budget.
Countries are busy imposing sanctions and customers are fleeing Russia’s energy products while seeking out new suppliers. Russian investments are being abandoned by energy companies.
It is this dynamic that Kenney and backers of Canada’s energy sector seek to exploit.
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To make a significant dent in the global market, Canada, and Alberta in particular, would have to quickly ramp up production and seek increased North American transport capacity — in the form of pipelines or rail.
Richard Masson, a fellow at the University of Calgary’s School of Public Policy and current chief commercial office for Fractal Systems — a company that works on bitumen transportation solutions — thinks Canada could increase production to help fill at least some of that void.
He said that the option of directing that supply directly to Europe is not feasible, but that increasing supply on international markets and getting it to Gulf Coast refineries might be.
“If I look at what forecasters think … they would expect production to grow by 100,000 barrels a day per year, till 2030, on average,” he said. “So 3.3 million this year, 3.4 million next year.”
Masson believes Alberta could squeeze more from existing projects through efficiency. However, to increase capacity significantly it would require investments that would take between two and four years. That’s a long-term option that comes with its own set of pitfalls in a world transitioning away from fossil fuels.
He stated that the supply could travel via existing pipelines down to Gulf Coast and could replace some Russian heavy crude imports.
The possibility of filling some of this void could help to lessen the impact of rising oil prices and gas prices. Already soaringPrices were high before Russia invaded and will likely remain high as supplies are limited. High prices will have a negative impact on developing nations and those with little money in the advanced world.
Canada’s gas supply would need to be increased. This would present greater challenges. Canada’s Conservative party, calling for the construction of more pipelines to carry gas east to help feed Europe — but ignoring how long it would take to approve a project, let alone build one. There is only one. liquefied natural gas export facility under construction in Canada, on the West Coast, and it likely won’t be operating at full capacity until 2026.
But increasing production and supply of oil, whether from Canada or beyond, isn’t the only option on the table.
Many environmental organizations argue that relying solely on fossil fuels creates instability in Ukraine and does not combat climate change.
Europe’s energMany countries commit to switching to renewables as a way to address y crisis
Where some see the need for increased oil and gas to choke Putin and his forces, others see an opportunity to swiftly decrease reliance on fossil fuels across the globe — and certainly in Europe, which is heavily dependent on Russian oil and gas.
“One thing that really is frustrating here is instrumentalizing the crisis, the war, for private interests,” Eddy Pérez, the international climate diplomacy manager for the Climate Action Network, told The Narwhal.
He said it’s not the first time the oil and gas industry has used a crisis to further its objectives, including a Encourage relaxation of regulations2020, at the height of pandemic.
The Climate Action Network is one of many organizations that calls for more investments in renewable energy sources in Europe. This will help to reduce Europe’s dependence on Russia and prevent it from becoming a long-term consumer of fossil fuels.
“The climate crisis is not going anywhere,” Pérez said. “So trying to ignore it, it’s not going to do us any good.”
Pérez points to an International Energy Agency ReportThursday’s publication included a 10-point plan to help Europe reduce its dependence on Russia’s gas in the coming year.
The report estimated that the plan could reduce Russian gaz imports by one third in a single year. It includes measures such as increasing wind and solar capacity, building efficiency retrofits, heat pumps installation across the continent, and using biofuels.
According to the report, all of these recommendations are compatible with the path to net zero that was outlined last year by the agency. They would accelerate the energy transition while reducing Russian influence, wealth, and influence.
“I think what the [International Energy Agency] report said is, not only is it possible to accelerate this transition at scale, but it’s also good for the planet,” Pérez said.
However, the report also recommends increased imports from other sources and increased storage to handle fluctuations. The report also suggests that the demand for Russian energy could drop as much as 50% if certain climate targets in the near-term are abandoned and European countries return back to coal and other fuels.
According to the agency the risks and complexity of this issue are substantial.
Analyst: Rising energy prices can lead to further instability
Just as the Intergovernmental Panel on Climate Change (IPCCC) released its Climate Change Report, the invasion of Ukraine happened. Recent reportStressing the importance of taking immediate action to stop the worst effects the climate crisis has on the world. The secretary general of the United Nations called the report “an atlas of human suffering and a damning indictment of failed climate leadership.”
The panel report and the invasion highlight the need for serious consideration of the geopolitical consequences of both the short-term and long-term responses to the invasion.
If the long-term outcome is greater global instability due to climate change, should governments and industry be focusing on solving instability in one region using fossil fuels? Given Russia’s reliance on oil and gas for its economy, is simply shutting it out for a time enough to have a significant impact?
In Canada, Steven Guilbeault, Environment Minister, said climate change was not going to go away, “and if we’re thinking we can solve the crisis by exacerbating another one, those people who think that are clearly mistaken.”
There are short-term impacts that need to be addressed that go beyond choking off Russia’s revenues.
Speaking at a Calgary Chamber of Commerce conference on the energy transition on March 2, Kevin Birn, an oil analyst with market intelligence company IHS Markit, said high prices might be good for some who stand to profit, but they’re disastrous for most.
“For many reasons, for developing nations, affordability is absolutely critical,” he said.
“Higher energy prices contribute to inflation that drives up the cost of our essentials of life — food, water even,” Birn added. “Higher prices can be the spark which ignites broader issues of geopolitical instability and even affect the toppling of governments.”
And while there’s Strong reasons to believeWhile renewables can stabilize international relations and reduce conflicts related to energy over the long-term, there will be an interim period when there may be instability. The possibility of locking out of the world’s second-largest fossil fuel exporter and subsequent price spikes has made this clear.
The International Energy Agency argued in its 10-point plan for Europe that a short-term tax should be implemented on what it calls “windfall profits” from suppliers as gas prices soar. It claimed that the tax could raise as much as $200 billion euros and could be distributed to people who are struggling to pay their bills. Perez suggested that similar discussions should be held to reduce the impact on global communities.
In the meantime, this renewable capacity will be costly and will require ongoing political will.
Renewable energy may mean ‘freedom’ from Russia’s oil and gas — But it comes at a price
Frank Jotzo, a professor from the Australian National University and head for energy at the Institute for Climate, Energy and Disaster Solutions, stated in a recent article for The Lowy Institute that the Ukraine crisis would lead to a rapid shift towards renewables.
In that article he quoted Germany’s finance minister, Christian Lindner, who said during a special meeting to discuss the invasion: “Renewable energy resolves dependencies. Renewable energy is freedom energy.”
But it won’t be cheap.
In a ReportAccording to the International Energy Agency, last year’s report, investment in clean energies must triple from current levels, to US $5 trillion annually, by 2030, to achieve net-zero global carbon emissions by 2050.
The agency also estimated that 2021 energy project expenditures would amount to $1.9 trillion.
The shift is already underway and Europe could be more determined than ever before to move away from long-term dependency on fossil fuels. This would require the kind of investment that the Canadian oilpatch, and its supporters, want.
“Germany, they already have a target of 80 per cent of renewables, that was already agreed,” Perez said. “Now with this crisis, their response has been not only to cut their dependence on natural gas from Russia, but also to say that they’re going to accelerate efforts to have 100 per cent renewable power by 2035.”
Oilpatch workers are not entirely unaware of the momentum for renewables.
Alberta business leaders discuss how they can spend their windfallsIncreasing oil prices
On March 2, a crowd of business people sat in the Telus Convention Centre downtown Calgary listening to speakers talk about how they need to reduce emissions.
The focus was on carbon storage and storage, hydrogen solar, wind and energy.
Calgary’s mayor, Jyoti Gondek, took to the stage to extol the benefits of rapid investments in clean technologies and said it could add up to $61 billion to Alberta’s GDP by 2050.
“If we continue to invest appropriately, this means we would need to invest $2.1 billion annually until 2030 and then ramp that up to 5.5 billion by 2050,” Gondek said.
She said that current investments are less than $1 million.
Shortly thereafter Kent Ferguson, cohead global energy for RBC Capital Markets stated that the sector holds approximately $75 billion of cash after recent price rises and years spent on cost cutting.
But it’s unclear where that money will flow, how quickly and to what end. The rising oil price can be a lure for anyone whose business is producing oil. A lot of the discussion in that conference room was about reducing the intensity of emissions while arguing for Canada’s ethical value. At the moment, oil companies are busy using their wealth to increase payouts and reduce debt.
The world is rapidly changing as that conversation unfolds in Calgary’s boardrooms. The war in Ukraine has exposed fault lines that will need to be addressed — and addressed immediately.
Alberta has been a constant voice in the call for more production.
Writing for Alberta’s so-called war room on Feb. 25, the day after the invasion, oil and gas consultant and writer David Yager asked whether the real war in Ukraine would force Canada to rethink its energy policy.
This question could have profound consequences for Russia, Ukraine, and Europe as well as for the long-term stability and security of the planet.
It might not be the solution the war room or the provincial governments that support it were looking for.
