There Will Be a Lot Less Crude Oil in Canada’s Energy Future

Crude oil will play a declining role in Alberta’s economy and emissions profile — that’s a key message in the Canada’s Energy Future 2023 report released by the Canada Energy Regulator.

In my last post, I reported on the Canada Energy Regulator’s latest read of energy markets. This week, let’s take a closer look at the crude oil production scenarios envisioned in EF2023 and the life cycle emissions of the crude oil that would be produced under those scenarios.

A Look Back at Canada’s Energy Future 2021

Before we explore the EF2023 scenarios, let’s review the findings of EF2021, which envisioned crude oil production for the period 2021–2050. We’ll focus on the Evolving Policies Scenario of EF2021 — the more conservative of the two scenarios examined that year, which envisioned rising levels of climate action worldwide and thus lower levels of production and emissions.

EF2021 Crude Oil Production

In this scenario, EF2021 envisioned Canada’s oil production rising until 2032, when it would peak at 5.8 million barrels per day (or 2.1 billion barrels for the year). About 85 per cent of that oil would come from Alberta, which would reach peak production in 2032 at 4.7 million barrels per day (or 1.7 billion barrels for the year). 

For the entire period of 2021–2050, the CER envisioned Alberta’s production at around 48.5 billion barrels.

You can review the EF2021 numbers here. The production chart for EF2021 looked like this:

EF2021 Life Cycle Emissions

Oil produces GHG emissions at every stage of its life cycle, from production to refining to combustion. Alberta exports most of its oil, which means that the downstream portion — the largest share of our emissions — is counted against other jurisdictions. But climate change affects every square inch of the Earth, including our province, so I take the position that all emissions matter.

I calculated the life cycle emissions that would result from the production levels envisioned under EF2021’s Evolving Policies Scenario. During this period, Canadian oil would result in the emission of 33,204.73 megatonnes of CO₂. Of this total, Alberta’s oil would contribute 26,975.05 megatonnes.

EF2023 Oil Production Scenarios

EF2023 is a major advance, the first national model of Canada’s energy transition in a world aligned with the Paris Agreement of 2015.

What does EF2023 tell us about our future oil production and the resulting emissions? Let’s look at each scenario.

Current Measures Scenario

Under the Current Measures Scenario, Canada’s oil production rises until 2038, when it peaks at 6.5 million barrels per day, or 2.4 billion barrels per year. Alberta’s production rises until 2041, when it peaks at 5.5 million barrels per day, or just over 2 billion barrels per year. 

Expanding production until the late 2030s or early 2040s would be reckless in our current climate emergency.

The chart looks like this:

Canada Net-zero Scenario

Under the Canada Net-zero Scenario — the unlikely scenario where Canada outpaces the rest of the world on the race to net-zero — Canada’s production peaks in 2029 at just over 6 million barrels per day, or 2.2 billion barrels per year. Alberta’s production peaks the same year at 5 million barrels per day, or 1.8 billion barrels per year.

The chart looks like this:

Global Net-zero Scenario

Under the Global Net-zero Scenario, peak oil arrives soon. Canada’s production peaks in 2026 at 5.7 million barrels per day, or 2.1 billion barrels per year. Alberta’s production peaks in 2027 at 4.8 million barrels per day, or 1.7 billion barrels per year.

From a financial perspective, that’s cause for great concern. If I were in government, I would make economic diversification a top priority. We’re going to need jobs, and we’ll have to replace the revenue we currently gain from petroleum royalties.

It’s important that we in Alberta understand this. In the Global Net-zero scenario, oil production in Canada and Alberta falls drastically. But not because we run out of reserves or we don’t know how to extract effectively. We can’t even blame it on Ottawa. Instead, the markets will collapse as the world moves away from fossil-fuel dependency. Alberta will have lots of oil, and nobody will want to buy it. In the words of EF2023:

In the Global Net-zero Scenario, we assume that global prices of oil and natural gas fall steeply in response to declining global demand for fossil fuels over the coming decades. In this scenario, we project that Canadian crude oil production falls to 1.2 million barrels per day … by 2050, 76% lower than in 2022.

From an emissions perspective, however, an early production peak is welcome news. What’s even better news is the steep decline that begins around 2030.

The production chart looks like this:

EF2023 Production Data

As I’ve mentioned before, you can download the CER data for each scenario in EF2023. That’s what I did. It’s a simple procedure, but I provide detailed instructions if you need help.

You can also view this Google sheet where I compiled the data and ran the calculations.

And if you really want to have some fun, use the CER’s interactive tools to explore the various scenarios, regions, energy sources, and emissions. Go ahead, Alberta, wonk out.

Greenhouse Gas Emissions

For us, the key question is how much CO₂ our oil will produce — not just within Alberta’s provincial boundaries, but worldwide, at every stage of its life cycle. Let’s look at the emissions for each of the scenarios under EF2023.

Here’s the equation I use to calculate emissions:

As before, I use the emissions factors identified by IHS Markit for the average Canadian oil sands barrel produced in 2012, about 557 kg CO₂/barrel of oil. In spite of the passing years, I believe that remains a realistic, yet conservative benchmark. If anything, it’s too conservative — with Alberta’s crude production coming increasingly from in situ sources driven by cyclic steam stimulation, our oil is among the most GHG-intensive refined in North America.

Under the Current Measures Scenario, Canada’s oil will result in the emission of 35,668 megatonnes of CO₂ between now and 2050. Alberta’s oil will account for most of those emissions —29,976 megatonnes of CO₂.

Under the Canada Net-zero Scenario, Canada’s oil will result in the emission of 30,332 megatonnes of CO₂. Alberta’s oil will contribute 2 megatonnes to that total.

Under the Global Net-zero Scenario, Canada’s oil will result in the emission of 21,415 megatonnes of CO₂. Alberta’s share will come to 17,226 megatonnes.

Here’s a chart of Canada’s cumulative emissions:

The World of EF2023

So there you have it. The world has changed immensely in just the last two years. We can expect more changes in the future. The transition away from burning fossil fuels is accelerating, and we owe it to ourselves to embrace these changes and position ourselves for success in a world beyond fossil fuels.

Under the EF2021 Evolving Policies scenario, Canada’s fuels would emit 33,205 megatonnes of CO₂, with 26,975 megatonnes of that total coming from Alberta’s fossil fuels. 

Under the EF2023 scenarios, Canada is poised to emit 21,415 to 35,668 megatonnes of CO₂ between now and 2050, with 17,726 to 29,976 megatonnes of that CO₂ coming from Alberta fuels.

EF2023 scenarios don’t predict the future, but they are important tools to help understand how the world is changing and how that could affect us here in Alberta. Given what we know about the impacts of runaway climate change, we should be doing everything we can to prevent further damage. Read the EF2023 report for yourself. It’s a nice overview of the many ways energy production and consumption are changing today, and it gives a clear analysis of possible futures. It explains some of the significant challenges and uncertainties we face. In the best possible future, we will reach and exceed the emission reductions shown in the Global Net-zero Scenario. EF2023 shows what it might look like as we work to get there.

Related posts:

The Carbon Budget for 1.5 Degrees Canada’s Energy Future 2023 Is a Wake-up Call for Alberta Alberta and the Carbon Budget Alberta Wildfires and Climate Change