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Notes for a Keynote Address by
The Honourable Joe Oliver
Minister of Natural Resources
32nd Executive Conference
March 6, 2013
Good afternoon, ladies and gentlemen. I’d like to thank Sarah and Dr. Yergin for inviting me to this annual gathering of distinguished energy decision-makers from around the world. It’s an honour to be here.
I understand that one of the focuses of this year’s conference explores changes in the competitive landscape for oil, natural gas and other natural resources. And as a country with vast energy resources, especially oil and gas, the transformation we’re seeing in global energy markets presents Canada with outstanding economic opportunities — opportunities to deliver our energy to new markets and to set the foundation for a new era of responsible energy security in North America.
Today, I want to talk about that opportunity and to share some facts in the debate over Canada’s oil sands and their importance to energy security in North America.
At the heart of this opportunity is the simple law of supply and demand. Canada has supply — the third-largest proven oil reserves in the world, some 173 billion barrels. Most of that — 169 billion barrels — is in the oils sands. As extraction technologies advance, the oil sands could yield nearly twice that much — more than 315 billion barrels. And that would make the oil sands the biggest oil reserve in the world.
Our recoverable resources in natural gas are currently estimated at 1,300 trillion cubic feet. As new shale deposits are discovered and quantified and as offshore exploration continues, that number is expected to grow significantly. It’s been estimated that total gas in place in our province of British Columbia alone could be as much as 1,200 trillion cubic feet. This is more oil and gas than our country could consume in 200 years.
The International Energy Agency projects global energy demand will increase by more than one-third by 2035. Significantly, the IEA also projects that 25 years from now, even under the most optimistic scenario for the development of alternatives, the world will still rely on fossil fuels for 63 percent of its energy needs.
As Fatih Birol, the Energy Chief Economist for the IEA, said recently, to meet projected demand for oil, the world will need “every drop” of growing production from Canada’s oil sands.
The vast bulk, over 90 percent, of the growth in demand will be from non-OECD markets, driven in large part by the rapidly emerging middle class in countries such as China and India.
Canada intends to compete in these new markets and compete aggressively. Already, two LNG projects have all the regulatory approvals they need to export to Asian markets. The first of five LNG export terminals proposed for our West Coast could be in operation within two years.
Two pipelines have been proposed to move crude from the oil sands to the West Coast for exports to markets in the Asia–Pacific region, and there are proposals to reverse the flow or convert from gas to oil and existing pipelines to bring oil from Western Canada to Quebec and Atlantic Canada for refining and potential export. Canada’s Atlantic coast is closer to the west coast of India than any other point in North America.
At the moment, 99 percent of Canadian crude oil exports and 100 percent of our natural gas exports go to the United States. The U.S. gets more oil from Canada than from any other single source — more than from Saudi Arabia and Venezuela combined.
Same with natural gas. Ninety percent of the natural gas imported by the U.S. comes from Canada.
But this is not a one-way street. Canada and the U.S. have what is arguably the closest and most important bilateral energy relationship in the world. Electricity flows north and south through a tightly interconnected grid. Oil and gas pipelines criss-cross and connect through both countries to provide the most efficient links between energy resources and energy markets. As a result, not only is Canada the biggest supplier of oil and gas to the United States, it is also the biggest consumer of oil and gas from the U.S.
As we know, like the rest of the global energy marketplace, this relationship is also changing. Along with the rapid development of its own shale gas resources, the U.S. is projected to be the world’s biggest producer of oil as early as the end of this decade. As production rises and demand falls, the U.S. dependence on imported oil is expected to decline, but not to disappear. By 2035, the U.S. will still rely on imports for a third of its oil — some 3.4 million barrels a day. And this ratio will be maintained well into the future.
While it is up to the U.S. to choose how it will meet its long-term need for imported oil, by any objective measure, the most responsible source is Canada. The fact is Canada has the resources the U.S. needs. Based on the IEA projections, there’s enough oil in the oil sands to meet U.S. need for imported oil for at least the next hundred years. This can mean — with the additional U.S. oil — North American energy self-sufficiency by 2035. What a great thing this would be for both our countries.
And there is more to it than ample supply. As noted in the recent IHS CERA report on the oil sands, fully one-half of America’s refining capacity is located along the Gulf Coast and close to half that capacity — two and a half million barrels a day — is designed to refine heavy oil.
These refineries have long relied on heavy oil from Mexico and Venezuela, but the supply from Mexico is expected to decline and the reliability of supply from Venezuela is in question. Canada has the resources to keep those refineries going, to sustain the thousands of jobs that depend on it.
It’s no surprise then the IHS CERA analysis concludes that, from an American perspective, increasing the deliveries of Canadian oil sands crude to the Gulf Coast is highly desirable.
Now let me comment on Keystone XL. It would deliver more than oil to the United States. The pipeline would also attract substantial capital investment, generate tens of thousands of high-quality jobs, enhance long-term energy security and provide new transport capacity to serve U.S. crude producers — at least 20 percent of the crude carried by Keystone XL would be American from the U.S. Bakken.
Building Keystone XL would create an estimated 20,000 jobs in the U.S. — 13,000 in construction and another 7,000 in manufacturing. The pipeline would stimulate some $20 billion in new spending in the U.S. economy and the crude flowing to Gulf refineries and related economic benefits are expected to add more than $170 billion to U.S. GDP over the next 25 years.
Many of you are aware that the State Department released its draft Supplementary Environmental Impact Statement last week. This statement found that the approval or denial of this project will not affect the pace of oil sands development or demand for heavy crude in the United States. Further, it concluded that the pipeline would not adversely affect the environment and would be safer than typically constructed pipelines. It also recognized Canadian work to mitigate environmental impacts of the oil sands.
Ultimately, however, the draft statement represents a step — albeit an important one — in the American process, which Canada respects.
Now let me tell you about the relevant facts as the U.S. considers its long-term energy security.
Unlike some oil-producing regions, Canada is a strong, stable democracy where the free market is respected, the rule of law prevails and there is a long and well-demonstrated commitment to environmental responsibility.
The oil sands may be the most rigorously regulated and monitored industrial sector in the world — regulations and monitoring that are driving innovation — innovation that has achieved a drop of 26 percent in greenhouse gas emissions per barrel between 1990 and 2010.
Facts and science speak for themselves. But, in the public debate, opponents of Keystone based on greenhouse gas emissions engage, unfortunately, in misrepresentation and hyperbole — so let me make four points.
First, we need to put the oil sands in perspective. Total GHG emissions from the oil sands represent one one-thousandth of global emissions — about the same as emissions from the coal plants in Iowa, half the emissions from electricity generated by coal in the state of Illinois. Crude transported to the proposed Keystone XL pipeline would represent one two-thousandths of global emissions. And that means total emissions of oil sands crude transported by Keystone XL would be less than those of the largest coal-fired plant in the U.S. and considerably less than one-eightieth of coal generation in the United States.
Still, and second, Canada recognizes that every bit of GHG emissions matters. And we’re making progress reducing emissions. Between 2005 and 2010, our economy grew while Canada’s actual GHG emissions declined. And Canada has aligned its goals on greenhouse gas emissions with the United States and is committed to the same economy-wide 17 percent reduction target by 2020. In fact, projections show that Canada is already halfway there.
In some areas, we’re doing more than anyone else. Coal is the largest source of GHG emissions in the world, and Canada is the only country with regulations to phase out traditional coal-fired electricity. And we are regulating GHG emissions for passenger vehicles, light trucks and heavy vehicles in lockstep with the United States. Our next step will be to put in GHG regulations in the oil and gas sector.
Third, measures we are now putting in place mean Canada is one of the very few major producers in the world with a transparent environmental monitoring regime and regulations demanding strong environmental performance.
Fourth, Canada is the largest supplier of heavy oil to the United States and soon to be one of the few with stringent oil and gas GHG emissions regulations. In contrast, other suppliers are doing little or nothing to manage GHG emissions.
So the real fact is that in a future where all countries need to take action to manage emissions, Canada is the environmentally responsible choice for the U.S. to meet its oil needs for years to come.
And our efforts to protect the environment and safety of Canadians go further. For example, the National Energy Board inspections of oil and gas pipelines are increasing by 50 percent annually to improve pipeline safety and we’re doubling the number of comprehensive audits of oil and gas pipelines to identify potential safety issues before they occur.
In a future where all countries need to take action to manage emissions and to protect our air and our fresh water resources, Canada is the most and perhaps only responsible choice for the U.S. to meet its oil needs for years to come.
What’s more, our commitment to environmental responsibility breeds innovation, which in turn improves environmental performance, creating a virtuous circle where innovation leads to better economic as well as environmental outcomes.
Canada has long been the United States’ largest, most reliable, trusted and responsible energy partner. Canadian oil is a logical choice to maintain and strengthen that relationship. Together, we have an historic opportunity to generate employment, enforce environmental responsibility and achieve North American energy independence. Let’s take that opportunity.
Thank you very much.
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