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The Honourable Joe Oliver
Minister of Natural Resources
Canada and the United Kingdom:
Growing our responsible energy partnership
May 9, 2013
Good afternoon, ladies and gentlemen.
Welcome to Canada House.
It is a true pleasure for me to once again visit the great City of London and to be hosted by Canada’s High Commission.
Our Government is very proud of the work of our High Commissioner. Gordon Campbell has become the face of Canada in London.
Mr. Campbell and his staff are constantly working to strengthen the ties that bind Canada and the United Kingdom — particularly our commercial and economic relations.
This dynamic economic relationship is what I wish to discuss with you today — specifically, energy economics and Canada's views on responsible energy development and the importance of fair and transparent rules for energy.
Because in addition to Mark Carney, the incoming Governor the Bank of England, Canada has some very significant energy resources for export. And we are about to become a major player in global energy markets through our exports of liquefied natural gas and oil — a role in which Canada can offer energy security and economic stability to the world.
However, to achieve these shared benefits, there must be a level playing field for how Canada’s energy resources are received, regulated and used.
Our government is a vigorous proponent of free trade. Since 2006, we have concluded new trade agreements with nine countries.
As you know, Canada and the European Union are negotiating a comprehensive economic and trade agreement (CETA) that will take the Canada-EU trade relationship to new heights!
In fact a joint study concluded that an ambitious agreement could bring a 20% boost in bilateral trade. Canada-EU merchandise trade was $89.2 billion in 2012, and we look forward to increasing this exchange with the world’s second largest market.
Today, I want to focus on three key points: Canada’s role as a global energy leader; our nation’s unequivocal commitment to the protection of the environment as part of our plan for Responsible Resource Development; and our perspective on the proposed Fuel Quality Directive.
First, let me talk about the economic importance of Canada’s abundant natural resources, specifically our role as a global energy leader and its relevance to Britain.
Canada is the world’s second largest producer of uranium and we rank third in terms of natural gas production. Our oil sands represent the third largest oil reserve in the world.
To put that in context, the International Energy Agency projects that global energy demand for crude oil will increase by more than one third by 2035. Fatih Birol, the IEA’s chief economist, recently said that to meet projected demand for oil, the world will need “every drop” of growing production from Canada’s oil sands.
While much of the growth in demand will occur in the developing world, it will nonetheless be important for the United Kingdom to maintain a safe, stable supply of oil and gas.
Traditionally most of the fuel that we supply to the European market has come in the form of diesel refined in the US Gulf Coast. However, that could change very soon. A Canadian pipeline company has announced that it intends to pursue a west to east pipeline that would deliver oil to Canada's East Coast where the oil that isn’t used by Canadian consumers could be sent to India and Europe.
As OECD European production and traditional sources of oil supply (e.g. Russia) decline over the next 20 years, the reality is that Europe could replace this supply by importing oil from Canada’s East Coast.
Economies around the world need long-term access to secure and competitive energy sources to satisfy growing demand and that means diversified and efficient global markets.
Canada is a politically stable, friendly and reliable source of energy and the only major oil exporter outside the EU that is committed to the responsible development of its resources and that has a rigorous, transparent, environmental monitoring regime of its oil and gas production.
But the economic importance of the oil sands reaches beyond its role as a crucial source of global supply. 80% of the world’s oil reserves are controlled by national governments or state-owned oil companies. Of the 20% that remains open to investment about, 60% is found in Canada’s oil sands.
As a free, open, democratic and stable country, Canada welcomes foreign investment in our natural resources sector. So, the oil sands offer significant opportunities to global investors, reflected in almost $160 billion invested to date by major international energy companies and planned investments in natural resources projects of $650 billion over the next 10 years.
Our Government has accepted all but three of thousands of foreign investment proposals we have received. We will continue to accept those that meet our tests, which were recently revised to take account of the special issues posed by state owned enterprises. However, I emphasize that the rules for foreign private sector investors have not changed.
Protecting the environment
The other important dimension to Canada’s role as a global energy leader is our unequivocal commitment to environmental protection.
Quite simply, Canada believes natural resource development and environmental protection can and must be accomplished simultaneously.
One does not happen at the expense of the other. In fact, just the opposite. The most effective way to invest in the crucial science, technology and innovation needed to protect the environment is by having a growing and dynamic economy. And, I believe we are leading the world by example.
In fact, the International Energy Agency ranks Canada fifth in the world in terms of per capita R and D investment in the energy sector, ahead of the Netherlands, Sweden, France, the U.K., Germany and most European nations.
We are proud to be leaders in green energy. Canada has one of the cleanest energy systems in the world, with more than three quarters of our electrical power coming from emission-free sources.
Our government is supporting research and development that is helping to bring renewable energy technologies from concept to marketplace.
We are also a world leader in energy efficiency. Again, the IEA ranks Canada as second only to Germany in its rate of energy efficiency improvement among 16 countries over the 1990-2008 period.
Canada is committed to attaining the goal of reducing our greenhouse gas emissions by 17% from 2005 levels by 2020. This is challenging because Canada has a strong, growing economy and rising population. In spite of that, by taking focused and specific action, we have successfully delinked GHG emissions from economic growth.
Since 2005, Canada’s GHG emissions have decreased by 4.8% while the economy has grown 8.4%.
We have implemented a world-class, science-based air, land and water monitoring regimes for the oil sands.
All land disturbed in oil sands production must, by law, be reclaimed to a natural state and up to 90% of water used in oil sands production is now recycled.
And our efforts are paying off: per barrel GHG emissions dropped by 26% between 1990 and 2011.
The oil sands are not just a massive reserve of oil – they are also the world’s largest technology project. The evidence of the oil sands as a driving force for innovation is Canada’s Oil Sands Innovation Alliance.
This groundbreaking corporate initiative, unseen anywhere else in the world, has brought together the 14 major oil sands producers – including Total from France, Statoil of Norway and Royal Dutch Shell – to find innovative solutions to improve environmental performance.
By sharing technology and intellectual property, COSIA is demonstrating an unparalleled commitment to ensuring the oil sands are developed in an environmentally sustainable manner.
With coal, the largest source of GHG emissions in the world, Canada is taking action with the toughest regulations in the world. Canada is the only nation with regulations banning the construction of new coal-fired power plants that use traditional technology. And we now require all existing plants to shut down on a schedule, the first country in the world to do so.
Canada, along with the U.S., U.K. and Norway, are the only major oil producers to have emissions reduction measures in place, and Canada’s environmental regime will be strengthened with our plans to bring in new regulations for GHG emissions in the oil and gas sector.
And we will continue to do more. In collaboration with our partners, we have protected almost a million square kilometres of land, an area more than twice the size Sweden. By any measure, Canada is taking great strides to protect our environment through tough new laws and investment in science that is world-leading.
Finally, I would like to directly, and frankly, address the European Commission’s proposed Fuel Quality Directive.
Let me state at the outset that Canada fully supports any efforts to achieve real, tangible global GHG reductions. But the implementing measures being contemplated not only fall short of that goal, but, I believe will lead to worse, not better, environmental outcomes.
As currently proposed, the FQD unfairly singles out Canadian oil sands crude. Recent studies have demonstrated that oil sands crude emits less GHG than some Californian or Venezuelan crude. Yet, the fuel quality directive forces European refiners to pretend that Canadian crude is dirtier than Californian, when in fact the reverse is true. The end result is that other heavy crudes are given a 22% break by this proposal, removing any incentive for them to reduce their emissions.
Then there is the issue of transparency. Europe buys a lot of crude from Russia, Angola and Nigeria, which rely heavily on flaring and venting – the burning and release of natural gas. This adds significant emissions to their oil – emissions that are ignored by the Fuel Quality Directive.
In contrast, Canada has reduced flaring and venting by 70% to limit environmental impacts. We know this because we publish the data in a transparent manner online for the world to see. But many of Europe’s oil suppliers do not practice transparency. When a producer burns off or releases gas into the atmosphere that is ignored, the Fuel Quality Directive pretends it didn’t happen and makes sure that it is never reported and never will be.
We have made a very simple request to the European Commission: if a country refuses to disclose their emissions numbers then they should be penalized, not rewarded. That is bad policy.
For this reason alone, the fuel quality directive is a perverse measure that will result in perverse outcomes.
A fair and effective FQD be based on the following key principles:
First: non-discrimination. It should treat all crude oils proportionately to their actual GHG emissions intensities.
Second: transparency. The FQD should encourage, not discourage, full reporting of emissions by those countries shipping to the EU.
Third: efficiency. The measure should meet its environmental objective — lowering GHG emissions in transport fuels by 6% — in the least trade-restrictive manner possible.
Finally: energy security. The FQD ought not to single out oil sands crude in an arbitrary manner. This would potentially reduce EU energy security by having it rely on less stable and secure sources of oil.
The best available science directly contradicts the FQD’s assumptions about Canadian oil sands crude. Studies, such as the one done by Jacobs Consultancy, have repeatedly shown that oil sands is a heavy crude with GHG emissions similar to other heavy crudes found and produced elsewhere in the world — and consumed in the EU. And this week, the California Air Resources Board’s modeling provides further evidence that FQD understates carbon intensity of most conventional crudes and overstates the carbon intensity of oil sands crudes.
We know how many greenhouse gasses are produced by our crude oil development and this is a crucial point. It makes up for 0.1%, or one one-thousandth, of global greenhouse gas emissions.
It is wrong to penalize Canada for presenting the unvarnished truth for all to see, while other sources either hide their emissions data under a cloak of secrecy or don’t even seek to ascertain what they are. It is particularly unfair in that Canada is the only major oil exporter with serious requirements to reduce GHGs and comprehensively and transparently monitor production.
Yet, Canada has been singled out for more onerous treatment of our oil sands crude, while ignoring the problems posed by high GHG emitting crudes already used in the EU.
Let me be clear: Canada supports measures designed to achieve real GHG reductions and would be happy to collaborate with the EU in developing such measures. We ask only that the FDQ be fair and effective to everyone and based on sound science.
The coming years and decades will pose real challenges for energy consumption and security, particularly as we move more and more toward cleaner energy solutions. We look forward to cooperating with the EU and other global partners on solutions to these challenges.
Countries around the world are looking for safe, secure energy sources to satisfy growing demand, and Canada will continue to be an important source of that supply.
Many of the FQD’s implementing measures being proposed, would throw a wrench into this progress, without scientific justification. Any measure that unfairly restricts the access to oil sands crude to the EU will undermine global and EU energy security and introduce unwelcome costs to already-struggling economies.
If unjustified and discriminatory measures to implement the FQD are ultimately put in place, Canada will not hesitate to defend its interests.
The way forward on energy supply and environmental protection in the EU is to have everyone working together, playing by the same rulebook, without double standards. In this framework, Canada is prepared to do its part.
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