Canada Will Never Be An Energy Superpower

These facts and figures discredit claims that Canada is poised to become one of the world’s largest exporters of energy.

First things first: Canada is not now, nor is it ever likely to be, an “energy superpower.” Prime Stephen Minister Harper first used this term on the eve of the 2006 G8 meeting.

Harper is an economist by training. Mainstream economics demands growth, and growth in GDP is historically highly correlated with growth in energy consumption. Notwithstanding the fact that they are finite, fossil fuels currently provide more than 80 per cent of Canada’s energy. Mainstream economic assumptions that the “invisible hand” of the markets will somehow find an alternative to fossil fuels at the scale they are currently used is a pipedream. No combination of renewable and nuclear energy can come close to the energy throughput currently provided by fossil fuels. The Canadian practice of liquidating non-renewable energy resources as fast possible to stoke economic growth is a sell-out to the energy security of future generations. Let’s look at some facts that put Harper’s statements into perspective.

Gas:

Canada may be the third-largest producer of gas, but its amount of proven reserves ranks twenty-first in the world, according to BP’s Statistical Review of World Energy 2010. We are liquidating our gas reserves far too quickly, a process dictated by the markets rather than any coherent energy policy. In Alberta, which produces 80 per cent of Canadian gas, the average initial productivity of a gas well has declined by 72 per cent since 1995 – meaning we have to drill nearly four wells today to equal the output of one average well in 1995.

Statistics Canada reveals that Canada’s gas production is declining at 8.7 per cent per year, and the Alberta Energy Resources Conservation Board projects a further 35% overall decline from 2009 levels in Alberta’s gas production by 2019 – likely a best-case scenario.

Of the major gas producers in the world, only Canada has a lower reserve-to-production ratio than the U.S.

Oil:

Comparing Canada’s oil sands to Saudi Arabian light oil is like comparing apples to oranges. The purported 174 billion barrels of recoverable oil in the oil sands requires much more time, energy, and capital to produce than conventional oil. As a result, oil sands require much longer timeframes to ramp up production. Exuberant forecasts of five million barrels per day by 2025 have been toned down to perhaps three and a half, which is still nearly triple the current rate of production. The BP Statistical Review of World Energy includes only “Oil Sands under Active Development” in its yearly global reserve reporting. This puts Canada eleventh, not second, to Saudi Arabia.

The Canadian International Council's Open Canada report states that “...oil sands produce $30 billion to $40 billion in annual revenues (depending on oil prices)”. These are gross, not net, revenues. At an average oil price of $70 per barrel, including discounts for the price of bitumen, and an all-in average production cost of $40 per barrel, the oil sands net about $14 billion. Only a very small fraction of this net revenue is recovered by governments in the form of royalties.

The Open Canada report also fails to note that Canada imports 0.77 million barrels per day into the Maritimes. This oil is purchased on the world markets in competition with other major oil importers such as the US and Japan. As of March, 2010, if one subtracts imports from exports, Canada is a net exporter of 1.1 million barrels per day, according to Statistics Canada. BP’s report reveals that Canadian net oil exports currently amount to less than 3.6 per cent of the global oil export market.

Uranium:

Although Canada ranks number one in the world for uranium production, it ranks fourth in uranium reserves. Canada has a reserve-to-production lifetime of 35 years, the lowest of any major uranium producer.

Hydro: It is true that Canada is the world’s biggest hydro-electric generator, but more than 60 per cent of available sites have been developed, and hydro developments have major environmental impacts.

This fact sheet complements J. David Hughes’s article on the Canadian International Council’s Open Canada report. Read it here.