From the Editor: Just what does a low-carbon future look like? [Gas in Transition]

The global race to net zero by 2050 has generated quite a substantial volume of opinion from those on both sides of the debate, ranging from a climate holocaust in the making if not enough is done to meet the target of the Paris Agreement to limit global warming to 1.5°C to financial ruin for oil and gas producers if that goal is achieved.

The answer, of course, lies somewhere in the middle, and depends, to a large extent, on how global the global race to net zero really is.

Will only the most developed countries – those that can afford a wholesale shift to renewables and whose citizens can afford the costs net zero will mean to their lives and lifestyles – actually reach the goal?

Will emerging economies – those that can least afford the energy evolution and whose citizens have been desperately trying to claw their way out of energy poverty for decades – throw up their collective hands in defeat?

What if?

Most recently, Canada – one of the world’s “wannabe” energy superpowers led by a prime minister whose main goal is to burnish his image as a champion of the global fight against global warming – has produced some thoughts on what the energy transition might look like for its oil and gas industry.

In its latest Canada’s Energy Futures series, EF2023 – the first to model the future based on net zero assumptions – the Canada Energy Regulator (CER) offers its “what if” opinion on what the race to net zero might look like under three scenarios: Global Net Zero by 2050, Canadian Net Zero by 2050, and a Current Measures scenario, which contemplates no requirements to reach net zero and no additional measures to reduce future greenhouse gas (GHG) emissions.

As with most opinions on the future of energy, or indeed of mankind, the CER offers a caveat: “The results in EF2023 are not predictions about the future, nor are they policy recommendations. Rather, they are the product of scenarios based on a specific premise and set of assumptions. Relying on just one scenario to understand the energy outlook implies too much certainty about what could happen in the future.”

With that out of the way, EF2023 suggests that the energy system of 2050 – in both net zero scenario – will be “very different” than the energy system of 2023.

Electricity, hydrogen and biofuels will make up a much larger share of energy use: 41% of total energy end use under the Global scenario and 39% in the Canada-only scenario. Fossil fuel use will fall sharply: by 65% under the Global scenario and by 56% in the Canada-only scenario.

Not surprisingly, Canada’s crude oil sector takes the brunt of the net zero punishment, with total production under the Global scenario falling to about a million barrels/day by 2050 from more than 5mn barrels/day in 2025. Under the Canada-only scenario, the decline is less abrupt, to about 4mn barrels/day by 2050.

In the Current Measures scenario, oil production continues to climb, reaching about 6.2mn barrels/day in 2035 before slipping to 6.1mn barrels/day by 2050.

Cleaner gas

The impact on gas production is more muted than for oil, largely because of the lower-carbon nature of natural gas compared to oil and emissions reductions achievable from the deployment of technologies like carbon capture, utilisation, and storage (CCUS): GHG emissions will be cut by 90% from 2021 levels under the Global scenario and by nearly that much under the Canada-only scenario.

“This is largely because of falling natural gas production, but also because of various climate policies, including federal regulations aiming to reduce methane emissions by 75% by 2030,” the CER says in EF2023. “Electrification of the sector, where feasible, and the use of CCUS at larger natural gas processing plants also contribute to declining emissions.”

But once again, there are caveats, the CER notes.

Canadian producers are largely dependent on export markets, mostly via pipeline to the US but starting in a few years through LNG exports to Asia as LNG Canada enters production, followed by the smaller Cedar LNG and Woodfibre LNG projects. Export opportunities from all those facilities could falter if global LNG demand patters change in the face of climate considerations, the CER notes.

“In the Global Net-zero Scenario, the rapid decline in LNG exports from 2044 to 2046 could happen earlier if Canadian LNG exports are more costly relative to remaining global LNG supply, or exports could continue past 2050 if secured through long-term contracts.”

In the oil sands, which are facing much stronger environmental headwinds than natural gas, small modular reactors might be deployed to fill the power and steam generation needs now taken up by natural gas. “We do not project that these technologies are applied in the oil sands but if they become more attractive, western Canadian demand for natural gas could significantly fall, reducing natural gas prices and production.”

The CER’s scenario report is just that – a possible look at what the future may hold for Canada’s oil and gas industry. But as Gitane De Silva, the regulator’s CEO, points out in her introduction, the pathway to net zero – in Canada and around the world – is much broader than the technical and economic considerations at play in developing any possible scenario.

“Policy choices, the regulatory landscape, Canada’s journey towards reconciliation, and societal preferences will each play a critical role in Canada’s energy future.”

The same, it can be said, holds true for the world’s energy future.