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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Canada Still Sees Future As Oil Exporter Despite Climate Ambitions

  • Canada has committed to reducing its emissions by between 40 and 45 percent from 2005 levels by 2030
  • Oil production is seen rising by as much as 18 percent by 2030
  • Canada’s Energy Regulator last month estimated that total oil production in the country could peak by 2032
Oil Exporter

Canada has one of the most ambitious climate commitments in the world. It is also the world's fourth-largest oil producer, with oil revenues accounting for 5 percent of GDP. It is not an easy situation to be in, but apparently, it is not an impossible one. Canada has committed to reducing its emissions by between 40 and 45 percent from 2005 levels by 2030. It has yet to draw a detailed plan about how to get there, but the Trudeau government has made the commitment.

Meanwhile, oil production is seen rising by as much as 18 percent by that year, the Financial Times reported recently, citing Canada's energy regulator. That would come in at a total of close to 4 million barrels of crude daily. Yet it seems that, according to the country's natural resources minister, the two are not entirely incompatible.

"For the [oil] demand that continues to exist, Canada needs to extract value from its resources, just like the United States, the United Kingdom in the North Sea, and Norway," Jonathan Wilkinson told the Financial Times this week,

At the same time, the minister added that the federal government was "going to be very aggressive in reducing emissions from the sector."

Prime Minister Justin Trudeau made a formal commitment to impose a cap on emissions from the oil industry of Canada at the COP26 summit last November. The industry has not expressed any unhappiness with the commitment, mostly because the biggest players in the field have already made their own emission-related commitments in a pre-emptive move.

Related: Russia May Be Nearing Limit Of Oil Output Capacity Indeed, the chief executive of one of Canada's top oil producers, Cenovus, recently said the company was fine with an emissions cap as long as the government realizes it will not happen overnight.

"It's kind of like the equivalent of the Marshall Plan after World War Two," Alex Pourbaix said in November, as quoted by the National Observer. "This is something that can be done, but there are limitations on how quickly it can be done, and it very much has implications on Canadians' quality of life with the cost of doing these things."

Oil sands production is the most emission-intensive form of oil extraction, and the industry has been the target of much criticism for its carbon footprint that eventually spurred it into action, especially as strong demand for oil despite the pandemic boosted bottom lines, freeing up more cash to invest in both production and emission-cutting.

The emission-cutting investments will need to grow, too. The federal government's emission cap plan for the oil and gas industry includes lowering the maximum allowed emissions every five years. In his interview with the FT, Wilkinson signaled that the government preferred a collaborative approach, saying, "We believe that we have the jurisdiction and the authority to bring into play both the cap and the commitment with respect to reductions every five years," but also noting that the government "would prefer to work collaboratively with our provinces."

Canada’s Energy Regulator last month estimated that total oil production in the country could peak by 2032, at a level of 5.8 million bpd of oil and condensate per day. That's seven years sooner than an earlier forecast for peak Canadian oil production. Current total oil production is around 5 million bpd, including oil sands, conventional oil, and condensate. Oil sands production alone was about to reach 3.5 million bpd by the end of 2021.

Related: U.S. Rig Count Rises Alongside Oil Prices

With the launch of new pipeline capacity, production will rise further. Cenovus and Suncor both expect production this year to rise by between 4 and 5 percent, to 800,000 bpd and 770,000 bpd of oil equivalent, respectively. And with demand still expected to remain robust, this would climb further in the next few years.

According to the Canadian Energy Regulator, another reason for the relatively bright future of Canadian oil sands is their very nature. "The resilience is really owing to the unique nature of the oil sands, once they are built they are very long-lived and operating costs are quite low," said CER chief economist Darren Christie, as quoted by CBC in December.

It is difficult to resist the allure of low-cost crude oil, a lot of which ends up abroad, bringing in substantial profits. And based on Wilkinson's stance as expressed to the FT, Canada does not intend to resist this allure even as its stance on emissions grows increasingly aggressive. 


Perhaps Canada could, because of this insistence on both cutting emissions and keeping the oil flowing, turn into an example of good practices. Of course, this would only happen if the industry and the government do indeed team up on reducing the emissions footprint of oil and gas production in accordance with the government's commitments or if the government sets targets that the industry considers more realistic. In either case, compromises will be needed.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on January 09 2022 said:
    With proven crude oil reserves estimated at 168.1 billion barrels (bb) and with oil expected to continue to run the global economy throughout the 21st century and probably far beyond, it will be difficult and unnatural for Canada and other major oil producers to resist the economics and allure of investing in and continuing oil production as long as there is a global demand for it.

    Oil producers should aim to maximize the return on their assets while simultaneously invest in and use the latest carbon-catching technologies to reduce emissions. Their motto should be similar to the American oil supermajors', namely the most effective way to combat climate change is to reduce emissions from oil and gas not their use.

    The way forward for Canada and other major oil producers is good practices in cutting emissions and keeping the oil flowing and not listening to the futile calls of the environmental activists, divestment campaigners and the IEA to ditch oil and gas.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Joa Falken on February 08 2022 said:
    Certainly, "once they are built they are very long-lived and operating costs are quite low," and this will also apply for a "greener" oil extraction using solar power to heat up the tar-sand mixture, power refineries and the like. But this is not where Alberta is now, so much investment will be needed already to keep and upgrade the current extraction values.

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