Canada increases oil production to replace Russian fuel


Canada’s oil and gas producers could increase output by the equivalent of 300,000 bpd by year-end to help displace Russia’s fossil fuels, Environment Resources Minister Jonathan Wilkinson said on Thursday.

Wilkinson, speaking at the end of a meeting of the International Energy Agency in Paris, said two-thirds of that is oil and the rest is natural gas.

“Canada’s European friends and allies are going through an energy security crisis that could affect industry, mobility and even heating homes,” Wilkinson said. House. “This crisis must be addressed.”

As part of economic sanctions aimed at punishing Russia for its aggression in Ukraine, Western allies are also trying to cut off any dependence on Russia for oil and gas.

Canada and the United States can do it without much difficulty because they have imported very little. However, Europe depends on Russia for about a quarter of its oil supply and 40% of its gas.

The IEA says the European Union will import about 380 million cubic meters of natural gas and 2.3 million barrels of oil per day from Russia by 2021.

What Canada can provide will replace less than 5% of European gas imports from Russia and less than 10% of Russian oil imports.

Wilkinson said the extra Canadian production would displace Russian fuel, so it would not lead to an overall increase in greenhouse gas emissions. It is being done with careful attention to Canada’s climate change commitments, he said, but Canada cannot turn a blind eye to Europe’s plight.

“We have our European allies who are facing the prospect of not being able to heat their homes or load up their trucks serving groceries and restaurants,” he said. .

“It would be extremely irresponsible for Canada to say, ‘we don’t care, we’ll put our fingers in our ears and we’ll basically pretend that crisis doesn’t exist.’ That is not what we are trying to do. That is not what allies do.”

Canada lacks the infrastructure to ship oil or gas directly to Europe. Instead, it will go through existing pipelines to the United States, which has agreed to take it to the Gulf of Mexico for export to Europe, either before or after it is completed.

Ben Brunnen, vice president for oil, financial and economic policy at the Canadian Petroleum Producers Association, which represents the country’s largest oil producers.

While the industry is likely to increase output and exports slightly, the figures cited by Wilkinson are a “best-case scenario,” Brunnen said.

“It is important to emphasize that this is a potential capacity, not necessarily what the industry will do. Other challenges and concerns include inflation costs, rig accessibility, labor costs,” he said. “So even if a company is encouraged to increase output, they may not do it, because the economics may not make sense.”

While Brunnen said he appreciates the federal government’s willingness to acknowledge Canada’s short-term role in the current energy supply crisis, he said the real question is what happens in the middle. and long term.

“Any company that is looking at increasing output will face additional risk as the investment community is not necessarily supportive of this growth, which has been the case over the past few years,” he said. “. “So unless there is a clear signal from the government that support for the development of manufacturing and growth development, it is very likely that the investment community will not support these companies and any any growth plan.”

Alberta Energy Minister Sonya Savage echoed those thoughts, saying the federal government has “haunted” the oil and gas industry for too long, and as a result the industry’s ability to grow is limited.

“We have to be much more ambitious in the long run. We should look at adding a million or a million and a half barrels in the long term to replace Russian oil,” Savage said. “But we need the federal government to step back and stay out of the way.”

Wilkinson said Canada is “very open in discussion” about what it can do to help, including potentially building new terminals on the East Coast to export Canadian liquefied natural gas to Europe. .

However, he said those investments are highly dependent on understanding how long it takes to get up and running and being able to ensure any new gas infrastructure is “ultra-low emissions.” so it doesn’t increase Canada’s carbon footprint along the way.

They will also have to be able to eventually convert to hydrogen, “which is where everyone wants to be,” he said.

Canada is aiming to become a net exporter of hydrogen as an energy source, but its domestic projects are still in the early stages. Wilkinson said Canada and Europe are both committed to accelerating the transition to renewable energy.

Europe is looking at a number of other options to reduce gas demand in the short term, including accelerating wind and solar projects, increasing bioenergy use, delaying shutdowns some nuclear power plants and accelerate the use of heat pumps.

Keith Stewart, senior energy strategist at Greenpeace Canada, said new renewable energy sources “can be deployed much faster than new oil and gas infrastructure”.

He said Canada needed to create an urgent program to build heat pumps and wind turbines for Europe, the same way it did with planes and tanks during World War II.

He also wants Canada to implement the International Energy Agency’s 10-step plan to cut domestic oil demand.

Those steps include cutting highway speed limits by 10 kilometers per hour, requiring employees to be able to work from home at least three days a week, and encouraging public transit by reducing costs. and implement policies to reduce car use in city centers, such as alternating days when people can bring their cars downtown.

Wilkinson said the agency asked all energy ministers at the meeting in Paris to implement the plan and noted Canada’s ability to help Ukraine and the rest of Europe with energy security means Canada ” certainly can and should” seek to cut our own use of fossil fuels.

– With files from Amanda Stephenson in Calgary

This Canadian Press report was first published on March 24, 2022.

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