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2011/97

Notes for a Speech by

The Honourable Joe Oliver, P.C., M.P.
Minister of Natural Resources

"Natural Gas: Its Place in Canada's Energy Future"

Economic Club of Canada

Ottawa, Ontario
September 28, 2011

Check against delivery


Introduction

It's pleasure to be here, and I'd like to thank the Canadian Gas Association and the Economic Club of Canada for the opportunity to speak to you today.

I'm here to talk about the place of natural gas in Canada's energy future.

That's a message I can sum up in a few words: natural gas has a very prominent place in Canada's energy future-- and in our nation’s economic future.

The economy

On the world stage, Canada is increasingly being recognized for the strength and dynamism of our economy.

The global recession hit Canada later and affected us less severely, and we emerged stronger than other G7 countries. Our economy has created nearly 600,000 new jobs since July 2009.  And the International Monetary Fund predicts that Canada, along with Germany, will have the fastest growing economy among the G7 over the next two years.

There are a number of reasons Canada has continued to out-perform so many other nations. A big one, of course, is that we have paid attention to the basics — the economic and fiscal fundamentals that are essential in building a strong, resilient economy.

Thanks to our government's prudent approach to fiscal management, Canada was in a position of strength when the recession hit at the end of 2008.

Because we were in a position of strength, our government was able to respond with an Economic Action Plan of unprecedented size and scope.

And because we were in a position of strength, we were able to intervene with targeted measures to stabilize the economy and protect Canadians' jobs. 

In these uncertain times, it is a real advantage for governments to have that kind of fiscal flexibility — and we do.

The IMF Fiscal Monitor released last week, forecasts that Canada will continue to have the lowest total government net debt-to-GDP ratio in the entire G-7 — and not just the lowest, but the lowest by far.

We are now implementing the Next Phase of the Economic Action Plan for Canada. Our focus remains firmly on the economy — a low-tax plan for jobs and growth, and a speedy return to balanced budgets in order to maintain Canada's advantage in the global economy.  

A major part of Canada's advantage is its resource sector, of which the energy sector accounts for nearly 7% of our GDP.

Now, we are all well aware of the current uncertain state of the global economy. And as a trading nation, we know that Canada is not entirely immune to the malaise. But, one of the keys to our economic strength is our natural resource sector.

Natural gas

Now, I know the oil sands get most of the headlines these days — and I suppose that is to be expected, considering they are the third-largest proven oil reserve in the world — but Canada's energy endowment goes far beyond oil.

We are the third-largest producer of hydroelectricity in the world, and the second-biggest producer of uranium. We are only beginning to tap into a massive capacity to generate renewable power from the wind, the sun, and the tides.

And then there is natural gas:

  • Canada is the world’s third-largest producer of natural gas — 14.2 billion cubic feet per day in 2010.
  • We are the world's fourth-largest exporter of natural gas — nearly nine billion cubic feet per day last year, worth $15.6 billion.
  • More than half of all Canadian homes are heated by natural gas.
  • We use natural gas to make fertilizer, so it plays a key role in the agricultural industry.
  • I mentioned the oil sands — without natural gas, we would be extracting very little of that massive and strategic resource.
  • Natural gas is a cleaner form of energy — 30% fewer greenhouse gas emissions than oil, and 45% fewer than coal. That makes natural gas an important transition fuel as the world begins to move towards a lower carbon economy — a transition that we know will be several decades in the making.It is therefore a very good thing that Canada's  marketable natural gas resources increased from 390 trillion cubic feet in the year 2000 to an estimated 700 to 1,300 trillion cubic feet today — well over 100 years of natural gas resource potential.

For all of these reasons and more, I will say again that natural gas has a very prominent place in Canada's energy and economic future.

Shale gas

Natural gas prices in the Intra-Alberta market averaged $7.73 per Gigajoule (Canadian dollars) in 2008, but fell to $3.95 in 2010, and are currently in the $3.50 range, while prices at the Louisiana Henry Hub, another important reference point, are currently in the $4 range.  Most analysts agree these relatively low prices are driven by the ongoing strength in shale gas production, mainly coming from the US. 

Predictions of North American natural gas prices and production for the next few years vary widely. 

We shall see how accurate some analysts predictions turn out to be — in any case, I believe we can be very confident for the long-term since one point is certain; Canada has enormous natural gas resources combined with the technological and human resources needed to produce it.

I would suggest that what we are seeing now is similar to the situation in the U.S., where production has increased significantly in the past few years as the sector begins to exploit unconventional gas resources.

In that regard, the U.S. is perhaps a bit ahead of Canada — in the sense that the U.S. industry felt the push to pursue development of unconventional resources earlier than we have in Canada.

That movement is now beginning in Canada — and shale gas must be recognized as an important strategic resource that could provide numerous economic benefits to the provinces and Canada as a whole.

We've heard shale gas referred to many times as a “game changer,” and it certainly looks that way. Look at how the game has already changed in the U.S. — they've gone from building terminals to import liquid natural gas, to planning terminals to export it. 

The same thing is starting to happen in Canada.

The National Energy Board is currently looking at two applications for liquefied natural gas – LNG -- export licenses for projects on the west coast — both of which are aimed at the Asian market and both projects would be supplied mainly by shale gas.

The KM LNG General Operating Partnership, for example, has proposed a pipeline to carry LNG from the Horn River Basin to an export terminal to be built in Kitimat. That one project alone represents an investment of some $4.1 billion. 

Our government is committed to the safe, responsible, and sustainable development of Canada's natural resources , and we will ensure that development proceeds safely, responsibly, and to the benefit of all Canadians.   

Government of Canada role

Our government is also committed to diversifying markets for all of our energy resources -- in particular, the rapidly expanding economies of the Asia Pacific region.

When this industry succeeds, Canada succeeds.

I can assure you that when I was at the APEC Transportation and Energy Ministers’ Conference earlier this month, I made a point of making sure our Asia-Pacific friends understand the extent of Canada's energy resources.

My department was also part of a major LNG trade mission to China and Japan and South Korea last June, to promote new natural gas export markets as well as Asian investment in Canada.

Natural Resources Canada also makes a significant contribution to the natural gas industry through the resource mapping and science carried out by the Geological Survey of Canada.

My department also leads delivery of the Government of Canada's commitment to ensure we are not only responsible producers, but also responsible consumers of energy.

Working with the industry

And I have to commend the members of the Canadian Gas Association for their contributions in support of that commitment, and for their collaboration in a number of key areas — from promoting energy efficiency to partnership in driving innovation.

Energy efficiency

On energy efficiency, an important priority of this government, the support we've enjoyed from CGA members has been outstanding and, I am sure, will continue to be going into the future.

Over the past 10 years, natural gas utilities in Canada have invested more than $450 million in demand-side management, conservation and energy efficiency. It is estimated that, since 2000, the industry's efforts to improve efficiency have avoided more than 16 million tonnes of GHG emissions.

As one of the founders of QUEST — Quality Urban Energy Systems of Tomorrow — the CGA is playing a lead role in our partnership for the development and adoption of Integrated Community Energy Solutions.

QUEST works with partners across Canada to promote the economic and environmental benefits of an integrated approach to land-use, energy, transport, water and waste management in communities and urban centres.

I'm happy to say that Natural Resources Canada is a partner and supporter of QUEST.

As a cleaner fuel, and with extensive distribution infrastructure, natural gas is a perfect fit for an integrated, community-based approach to energy use and management.

Natural gas can power high efficiency combined heat and power facilities that provide heat as well as electricity to supplement solar and wind generation.
The industry can put its expertise and infrastructure to work to produce and deliver renewable natural gas.

Natural gas vehicles

The Deployment Roadmap for Natural Gas Use in the Canadian Transportation Sector is just one example. Natural Resources Canada facilitated the project, which included significant contributions from industry and others.

With up to 30% lower GHG emissions than diesel-powered vehicles, there's a very good environmental case to be made as well. Cleaner burning also means longer engine life and reduced maintenance costs.

We are now in the process of putting together an implementation committee, and I expect many of the stakeholders who took part in developing the Roadmap will be sitting on that committee.

This year, we provided $1.4 million to fund the ecoENERGY for Alternative Fuels program, which will encourage the use of natural gas through the development of codes and standards, and through education and outreach to Canadians.

Support for clean technologies

Support for the development and deployment of cleaner energy technologies like these is one of the most effective ways we can reduce harmful emissions and create high-quality jobs for Canadians. Investment in energy efficiency and cleaner energy technologies continues to be a priority for our government, and a key element in the Next Phase of Canada’s Economic Action Plan.

In just the past few weeks we have announced two significant new initiatives:

  • Through the ecoENERGY Innovation Initiative, we will invest up to $97 million in clean energy research, development and demonstration projects. The focus will be in five key areas, including energy efficiency, and unconventional oil and gas.
  • We've committed $78 million over two years to the new ecoENERGY Efficiency initiatives. This investment is aimed at implementing cost-effective measures to help Canadians use energy more efficiently — from labelling and training to standards and regulations.

For example, we will be working with the provinces and territories to establish a more stringent National Energy Code for Buildings, and to implement new energy management system standards for industrial facilities.

Conclusion

I look forward to the contributions CGA members will make to the success of these new initiatives.

I also look forward to exploring new opportunities for collaboration and partnership with the industry based on the Letter of Cooperation signed between the CGA and my department earlier this year.

That Letter of Cooperation is an indication of the importance we place on our relationship with the natural gas industry.

In setting out the ways we can work together in the future, it also underscores our recognition natural gas can be and must be a key ingredient in Canada's energy mix for many years into the future — and that this industry will continue to be a central partner in maintaining and enhancing Canada's status as a global clean energy superpower.

Thank you very much.