Canada Can't Supply Gas to Europe Quickly

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With Europe seeking more gas supplies to makeup for the loss of Russian volumes, Canada is not able to meet these requests in time, Alberta’s energy minister Sonya Savage told Energy Intelligence in an exclusive interview.

As winter approaches in Europe, officials from European states have been scrambling to secure additional oil and gas volumes as disruption of Russian supplies continues.

Last month, German Chancellor Olaf Scholz visited Canada, the world’s fifth largest gas producer, asking for more LNG supplies. However, the feedback Scholz got was that he couldn't count on it.

“Our problem and our challenge is that we are behind on building LNG infrastructure … [this isn’t] going to be in enough time to get gas to Europe for this winter when there’s going to be a shortage of supply,” said Savage, speaking from Alberta.

Savage said that Canada at one point had some 18-19 LNG project proposals on the table but that right now only one — the LNG Canada project — was under construction on the west coast, with completion expected by 2025.

Record High Oil Output

Canada’s oil production meanwhile has hit an all time high of around 4 million barrels per day, with a target to reach 4.2 million b/d by the end of the year as higher oil prices are helping upstream companies boost their capex spending, Savage said.

Around 82% of Canada’s oil production comes from the province of Alberta from oil sands which produce heavy crude grades. Savage said the province of Alberta bases its budget on $70/bbl oil and any price above that means more revenues for the province in royalties.

“So we are at an all time [oil output] high, investment is up, drilling in the conventional sector is up and our companies’ balance sheets are in a much healthier place,” said Savage. “Most importantly we’re making progress on reducing emissions in Alberta and across Canada,” she added.

Canadian Supply in Focus

Recent higher oil prices due to tighter global spare capacity and geopolitical tension amid the conflict between Russia and Ukraine has lead the US to seek help from Opec states in the Mideast Gulf region to add more supply.

Savage said she was “baffled” by that, especially as Canada is the US’s closest trade partner and ally, sitting on the fourth largest oil reserves in the world.

“We have to do more between our two countries to ensure energy security, affordability, reliability … we were a little baffled why they [US officials] were going so far away when we are right next door,” said Savage.

Striking an Energy-Climate Balance

At the same time, Canada has to strike a balance between energy and climate policies. The country has a target to reduce methane emissions by 45% in gas production by 2025 and so far the industry managed to cut the emissions by 35%, according to Savage.

“We have to find a very careful delicate balancing of energy and climate policy reflecting that we do need to lower emissions, we do need to move towards net zero, but we have to do it in a way that’s feasible both technologically and economically,” said Savage.

“[Otherwise] we get into that situation where climate ambitions hit reality and reality has pretty sharp teeth, and we end up in an energy crisis.”

Recently, European oil majors including BP and Total have divested out of their oil sands projects in Canada, a decision which Savage says doesn’t make sense

“Just to be clear that makes no sense because they are still holding assets in investments in oil and gas projects that are actually at a higher emission than the oil sands is right now. And you have to remember that the oil sands are on the pathway to net zero,” said Savage.

Six of Canada’s largest oil companies which make up 95% of the country’s oil sands production are part of an alliance called the Pathways Alliance which aim to meet the country’s climate goals though an actionable plan to reduce greenhouse gas (GHG) emissions from oil sands production in phases, with the ultimate goal of net-zero emissions by 2050.

Savage said that so far emissions from the oil sands has been lowered by 36%.

“We have the cleanest most ethically produced, most responsibly produced oil anywhere on the planet committed to net zero,” she said.

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