Canada’s economy could miss out in the coming “age of gas”

Part 3 in the series The Natural Gas sector in Canada

June 29, 2011

LONDON, UK, June 29/ Troy Media/ – Shale gas exploration is a global energy game-changer and is also Canada’s best bet for keeping the nation’s economy buoyant and arresting the meteoric rise of home energy bills.

But highly vocal lobbies are threatening to drown out energy facts and economic realities. Indeed, if Canada allows a moratorium to be imposed on drilling – a path almost every other country with deposits has thus far refused – it is at risk of losing its place in the vanguard of global shale gas exploitation and costing the jobs and public revenues Canada currently enjoys as the world’s third-largest natural gas producer.

Around 70 per cent of the world’s surface rocks are sedimentary, and half of those are shale. Many of these formations have vast quantities of trapped natural gas and oil.

Shale gas hard to capture

While we have known about shale gas for years, harvesting it was commercially inefficient until hydraulic fracturing was introduced more than 60 years ago. Since then, more than two million fracturing treatments have been pumped without a single case documented case of treatments polluting a water aquifer. Ninety per cent of all gas wells drilled in the U.S. since 1949 have utilized the hydraulic fracturing technique, paving the way for potential major shale gas production from Beijing to New Delhi to Warsaw and Buenos Aires.

According to the BP Energy Review 2009, about 42 per cent of Canadian (shale and conventional) gas was exported to America, Canada’s only current international market. In June 2010, the Massachusetts Institute of Technology predicted that U.S. gas production was, due largely to shale, on course to double – from 20 per cent to 40 – its share of the U.S. energy. Taken together, growth in production across the border and the consequent fall in global gas prices is on course to see demand for Canadian gas from the U.S. fall by about a half over the next five years.

That’s something around C$15 billion lost from the Canadian balance of payments – a reflection of how disruptive shale can be in the energy market. If the trend persists, then it’s only a question of time before the U.S., Canada’s chief trading partner, becomes self-sufficient in gas, leaving Canada seeking markets much further afield.

Meanwhile, in the fall 2010, while gas prices surged in Europe, the shale gas glut helped keep the gas price in the U.S. flat. During the Big Freeze that hit at the end of 2010, U.S. citizens were paying half as much for their heating fuel as their shivering northern European counterparts, thanks to abundant supplies of domestic shale.

Canada, at a conservative estimate, sits atop 4,000 trillion cubic feet (tcf) of natural gas, according to the Canadian Society for Unconventional Gas (CSUG). To put that in perspective, domestic use accounts for around just 3 tcf per year, with a similar amount going for export. On the CSUG’s very lowest estimate of Canada’s domestic gas deposits, that’s enough gas to meet home and export demands for 100 years.

Markets like Asia could prove very receptive to gas exports, given Canada’s current levels of productions and early exploitation of deposits.

Yet, in Canada, environmentalists question the safety of hydraulic fracturing. This “uncertainty” has the process mired in a heated public debate, and a push to suspend exploration. A year’s moratorium on shale gas drilling in Canada and the Asian market could dry up – and quickly.

We are already seeing it in the LNG (liquefied natural gas) market. While Canada was the first country to propose LNG export driven by shale gas development, other countries have been exporting LNG to Asian markets for years. The prevalence of global deposits of gas, particularly shale gas, has sent geologists scrambling to identify the level of domestic shale resources in Poland, China, the Ukraine, India, Brazil, Argentina, and a hatful of other countries. Many have already claimed significant potential reserves.

Global energy consumption is fast switching in favour of gas. In an interview with Fortune magazine, Shell Oil Company President Marvin Odum stated that by 2012 his company would be producing more gas than oil. Speaking at the “Prospects for Shale Gas” forum in Berlin in mid-January, Mike Stephenson, head of Science (Energy) at the British Geological Survey, noted India has already begun to build a new generation of huge gas-fired power stations.

The reasons are as obvious as they are numerous. Not only can shale gas provide a cheaper, more productive energy return than any renewable source, but it also can do so without the economically draining public subsidies on which renewables entirely depend. And there’s a CO2 emissions dividend, too.

“Kiss goodbye” to Cancun goals

At a London conference in January 2011, Dr. Fatih Birol, chief economist with the International Energy Agency (IEA), stunned his audience with the stark admission that it is “virtually impossible” for the world to keep CO2 emissions within the limits agreed by world governments in Cancun recently. He identified two reasons: a broad lack of international political will and the impact shale gas is having on investment in alternative energies.

He said the world can “kiss goodbye” to the global CO2 emissions targets set for 2020.

Just a few months before, the international carbon markets were in turmoil as the Chicago Exchange closed its carbon credits business. At the same time, the EU’s European Trading Scheme, the world’s longest running carbon credit scheme, was reported to be delivering miniscule carbon savings of less than one-third of one per cent of total emissions over its entire five-year existence. Against such an abysmal failure in the current war on CO2, natural gas offers a 50 per cent cut in carbon emissions compared to coal and 25 to 30 per cent compared to petroleum and diesel. Against such an abysmal failure in the war on CO2, natural gas guarantees a 50 per cent cut in carbon emissions compared to coal and 25-30 per cent cut compared to petroleum and diesel. Against such an abysmal failure in the war on CO2, natural gas guarantees a 50 per cent cut in carbon emissions compared to coal and 25-30 per cent cut compared to petroleum and diesel.

In Canada, environmental lobbies who oppose shale gas have gone light on these facts and heavy on the emotion, particularly in Quebec. It’s compounded by eco-alarmist movies, like Gasland, which purports to expose environmental problems created by hydraulic fracturing.

Hydraulic fracturing risk miniscule

Contrary to the impressions they create, the risk associated with hydraulic fracturing is considered by most to be miniscule. A strident anti-hydraulic fracturing movement in Quebec pressured that province’s Environment Minister, Pierre Arcand, into requesting a new study into the procedure. In March, the Bureau d’audiences publiques sur l’environment (BAPE) duly reported. Though it did not call for a moratorium on shale gas drilling, it can only be done with the approval from the SEA committee and only to provide information for a study that is being conducted.

If Quebec’s action were to be replicated elsewhere in Canada, the 18+ month time delay could seriously diminish Canada’s prospects in an international gas marketplace, where the global players are jockeying for position. There will also be an impact on domestic gas prices.

Shale gas is the energy story of the 21st century so far; and the global energy narrative has switched focus from lack to glut, from supply to demand.

Canada will miss out on the global “age of gas” at its economic peril.

Peter C. Glover is International Associate Editor, Energy Tribune and co-author, Energy and Climate Wars (Continuum, 2011). He has no links with shale gas companies or the energy industry.

The Natural Gas sector in Canada