Speech: The future of the petroleum industry in Alberta
March 6, 2020
It’s such a great pleasure to meet students from all across Alberta, across Canada, and from around the world. I had no idea just how international this student body was.
It reminds me that what we say is true, that we, here in Alberta, have done something amazing. We have built a model for the world in so many ways. Yes, in education, but also with the kind of world-class skills that we have developed, the world-class energy industry, the expertise that we develop and export around the world.
SAIT is very much at the heart of that. Congratulations to all of you in the Student Petroleum Society for choosing a vocation that will lead to a fulfilling lifetime career being responsible producers of energy that the world needs, now and in the future.
This spectacular Johnston-Cobbe Energy Centre, one of the architectural gems of SAIT’s sprawling trades and technology complex, is a monument to Alberta’s amazing economic growth and success. No province in Canada, and few places in the world for that matter, have enjoyed such a rapid rise in population and prosperity over the last century. When SAIT was born as the Provincial Institute of Technology and Art back in 1916, during the First World War, a time of tremendous adversity, there were just 11 students here in two programs: auto mechanics and metalworking.
Today, this institution serves more than 50,000 students a year, through over 100 career and apprenticeships programs and 1,300 continuing education and corporate training courses. This institution is a perfect example of what we are trying to expand with our Skills for Jobs agenda, because I believe we need to convey enthusiasm to young people about the dignity of all kinds of work and all kinds of education. We need to convey that hands-on experiential and apprenticeship learning have every bit as much value as academic classroom learning, and we need to convey, and we must believe, that trades, including skilled trades, have every bit as much value, merit, and worth as professions.
In fact, trades are a profession, and students who’ve gone through programs like the Petroleum Engineering Technician program here have gone on to amazing fulfilling lifetime careers of leadership and careers of great opportunity. So thank you to those of you who’ve chosen this program. Thanks to your instructors, your teachers, the faculty who support you. And thank you to the private-sector sponsors, many of whom are represented here at this industry night, for your generosity, the partnership that you’ve shown with SAIT, and the foresight, the vision, to invest in the next generation that will lead this industry and fuel our economic growth.
Now, SAIT’s progress over the past century mirrors the outstanding rise of this province. It’s been through two world wars, a global flu pandemic—I don’t mean the current one but the one that was a hundred years ago—we’ll make it through this one, too. A Great Depression, several booms and busts, and a handful of constitutional battles over control of Alberta’s destiny.
Well, these were mere speed bumps on this province’s journey to where we are today. We have the youngest, best-educated population in Canada, the highest incomes, the highest grow economy per person, the most productive labour force, our population is growing. According to StatsCan, Alberta will be the fastest-growing province for the next 25 years, and we will surpass B.C. as Canada’s third-biggest province. You can’t hold down Alberta.
So, I think it’s important to keep this long view of Alberta’s past and our future in mind, especially for young Albertans just starting out in their careers, and to newcomers including many foreign students who hope to become Albertans, particularly for those who are planning a career in the petroleum sector.
In light of the economic headwinds that we’re facing, including constraints on investment and development in the oil patch, it’s reasonable, it’s understandable, for some of you to wonder about the future of the industry that you’ve chosen. I’m not going to sugar-coat it. We’re obviously in the midst of a tough political and economic battle over developing our enormous resources and building the infrastructure needed to get them to international markets. The last four or five years especially have been challenging. If you’re only in your twenties, that’s about a quarter of your total life expectancy, and it may seem like a long time already.
But for perspective, consider what happened in Alberta during the first decade and a half of this century, the first three quarters of your lives if you’re in your early twenties. In that period, our GDP grew by over a third in Alberta, from $200 billion to over $300 billion. Our population grew from three to four million people. Oil and gas investment rose from $20 billion to $80 billion a year. And crude oil production increased from about two million barrels a day to three and a half million. As energy booms go, that was one of the longest and strongest in our history.
Now, given the cyclical nature of commodities markets, that boom was bound to pause at some point. The 2014 oil price downturn was normal and it was inevitable. It was inevitable as Calgary potholes in springtime. But what is not normal and inevitable is what happened since then.
In 2015, Alberta and Canada elected governments that were naïve about the importance of our resource-based economy. They effectively adopted policies of a movement growing in the world that targeted Canada and our oil sands in particular to land lock this resource.
The reason they did so, by the way, is because the oil sands are the third-largest hydrocarbon reserve on the planet, with 178 billion barrels of proven and probable reserves, and it is uniquely vulnerable to political pressure, because it is located in a rights-respecting, transparent, liberal democracy rather than in a dictatorship. Because that resource is developed by privately owned, publicly traded companies, rather than sovereign state-owned enterprises. And so, those who have wanted to bottleneck resource development decided to ironically focus on the country with the highest environmental human rights and labour standards of all of the major energy producers on earth.
Now, those governments capitulated to those forces seeking to land lock our resources on just about everything, including taxes, industry-crippling regulation, the killing of the Northern Gateway and Energy East pipelines, the no-more-pipelines law Bill C-69, the northern tanker ban Bill C-48, and we got nothing in return except more and more opposition to responsible resource development. They called it social license, but it’s been a couple of years since you’ve heard that term.
Now, the point is this. We’ve got nothing in return for these policies except more policies locking in our energy. How’s that working out for us? Well, in the last few weeks, we saw those seeking to land lock our energy blockading huge parts of Canada’s national economy, affecting not just Alberta’s oil and gas industry, but automakers down east, the aviation sector, farmers from coast to coast, all of our industries affected by that. The blockades were aimed at B.C.’s Coastal GasLink pipeline, and that should be a wake-up call for anybody who thought they’d be satisfied with trying to keep Alberta’s oil sands in the ground. Like their hashtag says, their goal is to “shut down Canada.” To shut down its energy industry, to shut down its transportation network, and to shut down its free market economy.
Now, Canadians are a patient, tolerant people, to a fault sometimes. But now they’ve seen the true agendas of groups like Extinction Rebellion and Climate Justice and their fellow travelers. Now that ordinary Canadians have seen this, I believe that we are set for a political course correction. Alberta led the way last year, as we’ve always done, and will continue to do.
So let me be perfectly clear. Our government and the vast majority of Albertans believe that climate change is a clear and significant danger that we must address seriously. We believe that reducing global greenhouse gas emissions is necessary and doable. In this we are fully aligned with the worldwide scientific consensus on climate change, including the scientific consensus that the world must and will develop energy technologies that emit far lower carbon emissions and atmosphere pollutants than our energy technologies do today.
It is because we believe these things that we are so strongly at odds with those marginal organizations trying to land lock our economy. The most irrational of those groups are possessed by a fantasy of an immediate end to fossil fuels, but they have no comprehension of the fact that their cell phones would die, they’d freeze in the dark and, if we did that, civilization would be transformed into a kind of primitive dystopia. I call them the mud hut crowd.
Here’s the reality. Billions of people in China, India, Russia, South America and other developing countries in Asia and Africa will not slow their march to opportunity, to prosperity, to technology, to energy. They will not refuse to have the same opportunities that those of us have enjoyed in advanced western and northern countries.
Even the most conservative projections by the International Energy Agency and forecasters peg global oil demand at upwards of 70 million barrels a day through to at least the middle of this century. That is the International Energy Agency’s most bearish scenario about a Paris-compliant world 20 years from now, with 68 million barrels of oil being consumed then, down only 30 per cent from where we’re at now. Global natural gas demand is projected to double to 700 million by 2040.
There is absolutely nothing that Alberta or Canada can do to change this, but there is something Alberta and Canada can do to lower global greenhouse gas emissions and that is to produce and export energy that emits much less carbon than much of the energy currently used in the world. The only solution they can imagine is turning off the engine of the global economy, halting progress, throwing billions of people into energy poverty, and retreating to a mythical pre-industrial utopia. But that’s not how we think in Alberta. We are rational. We are optimistic. We are problem-solvers. We are not timid and hopeless. And that’s why we are so frustrated with those who want to land lock our energy and prevent us from helping to solve the problem of climate change.
Government and industry, in partnership with brilliant scientists and technological innovators in our academic institutions like SAIT, are investing massively in research and development of technology and processes to make Alberta energy competitive with any in the world on price and emissions. This is our moonshot, to achieve the highest environmental social and governance ratings of any energy-producing place on the planet.
We’re already making tremendous progress toward this goal. In the 33 years since the Kyoto Accord was signed, oil sands producers have reduced the carbon intensity of a barrel of synthetic crude by over 40 per cent. We are dedicated to reducing emissions even further and accelerating the pace of reductions through more investment and low-carbon energy technologies. Great strides are occurring in areas like carbon sequestration and storage, the use of nuclear power and solvents in the extraction process, for example. The objective is to make production faster, less energy-intensive, more economical, and of course, to strive for ever-lighter environmental impact.
Alberta was actually—and we don’t get any credit for this—we were the first place on the planet to bring in a tax on industrial greenhouse gas emissions back in 2007. And we are increasing that levy, and our emissions competitiveness, through this government’s Technology Innovation and Emissions Reduction program, TIER. And under TIER, Alberta’s large emitters will have to either reduce their emissions intensity by 10 per cent compared to their recent levels, or pay a levy of $30 for every tonne by which they miss that target. And that is scheduled to go up to $50.
Revenue generated by TIER will finance new technologies, including those developed here at this institution, that will achieve even more reductions. Alberta’s oil sands’ greenhouse gas intensity has already declined by 21 per cent since 2009 and it’s projected to fall another 16 to 23 per cent over the next decade.
But we are aiming even higher, much higher. Some of our largest oil sands companies, including CNRL, Cenovus, MEG Energy, have already committed to the net-zero goal by 2050. This government will support them in that vision, as we’ve said in our recent throne speech. Our ambition is for our entire industry eventually to achieve that goal, including on the conventional side.
Here’s how Alberta will do its part. The first is carbon capture utilization and storage. There are currently only 18 large-scale CCUS facilities in the world, and two of them are right here in Alberta. Shell operates an oil sands upgrader near Edmonton, Scotford as you know, that captures over a million tonnes, one megatonne of carbon a year, and it has sequestered four million tonnes so far.
Our second big CCUS play is the Alberta carbon trunk Line. It’ll take 1.7 million tonnes of carbon each year from another oil sands refinery near Edmonton and send it via pipeline to central Alberta, where it will be injected into depleted wells in our sedimentary basin for enhanced oil recovery, which could produce conventional light sweet crude at negative carbon scores. Ninety-nine per cent of the injected carbon will stay underground. That will more than offset all of the carbon emitted in the upstream production and downstream combustion of oil from those wells.
Another big step toward net-zero was announced last year by Suncor, operator of one of the biggest and oldest oil sands mines. It’s investing $1.5 billion in natural gas-fired cogen for its base plant, replacing petroleum coke. This will reduce emissions from that facility by 25 per cent, and feed excess lower-carbon power into the province’s electrical grid, hastening our transition out of thermal coal and producing more low-cost, affordable power to help us diversify our economy and attract new investment.
Imperial Oil is using solvent-based steam-assisted gravity drainage at its Aspen oil sands operation, dramatically reducing the need for steam and thus reducing emissions by up to 60 per cent. These and other new technologies are not only rapidly reducing the carbon footprint of the oil sands, they are also significantly helping the bottom line by lowering energy and water inputs, reducing waste including atmospheric pollutants, and enabling greater resource recovery. Finding solutions that lower GHGs while generating economic value will ultimately be the key to solving the global climate challenge.
There are other technological solutions on the horizon including the direct air capture of carbon. Now, let me pause to say whenever one of these new technologies comes on stream, at the pilot stage, there’s no shortage of cynics calling it out, saying it will never work. It’s not scalable, it’s too expensive. That’s what they were saying about CCS 10 years ago, and now it’s reached a point of efficiency where we truly believe it can become economical and scalable.
I mean, quite frankly, that’s what they were saying about renewables not that long ago, and yet our government eliminated subsidies of renewables when we eliminated the retail carbon tax. We created a clear, market-based policy for power production nine months ago. Since then, we’ve seen over $2 billion of capital investment announced in wind and solar production in Alberta without subsidies on a strictly market basis
I believe that can be possible for other technologies as I’ve mentioned including, for example, CCUS and potentially direct air capture of carbon. One of the biggest investors in that technology is actually Canadian Natural Resources Ltd., The largest oil sands producer. This is also being advanced by a Canadian company called Carbon Engineering.
There is growing interest in small modular nuclear reactors that could provide emissions-free power to oil sands operations. For me, the litmus test of whether you are actually serious about fighting climate change, or you’re just a phony, trying to virtue-signal, is whether or not you support zero-emitting nuclear power generation. Here’s the thing. Extinction Rebellion, Climate justice, Greta and her friends, are all opposed to zero-emitting nuclear power. They are opposed to the thermal coal to gas conversion. They are opposed to these kinds of investments of technology. They are not about reducing emissions as quickly and as efficiently as they can. They are about shutting down the modern market economy and they will not succeed in that.
We will succeed in a different path. We will succeed in the real path of massive investments in technology that will get the job done. Using carbon levies as well from the TIER fund, we intend to help bring some of these next horizon technologies to market. None of our global competitors including the United States, are putting as much effort and investment into developing lower-carbon technologies. In fact, if all of the other oil and gas producing jurisdictions followed Alberta, Alberta’s rules for venting and flaring of methane, emissions from oil and gas production worldwide would be reduced by 23 per cent overnight. So why would we be land locking the jurisdiction with the best regulations in the world, when instead we should be exporting our regulations and our technology? That standard, our Canadian standard.
By the way, when I talk about these technologies, they follow in a long history of Alberta’s industry being at the cutting edge of innovation, horizontal drilling technologies, fracking technologies, which have revolutionized global energy production. Many of these were developed right here in Alberta and undoubtedly some of them were developed in part by SAIT graduates of programs like yours. You will be on the cutting edge of the technological future of this industry.
But we want to set the bar even higher across the board. We want Alberta to be recognized as home to the lowest-cost, lowest-emitting and lowest-risk energy on earth. And security is a key part of that competitive advantage for Alberta. Recent events in the Persian Gulf and elsewhere highlight the stability of supply from Alberta. Security is especially important to Asian energy importers and our oil is about to enter that market via the Trans Mountain expansion.
I met a number of foreign students from India here tonight, including several from the great Indian state of Gujarat. I call it India’s Alberta. It’s the beating heart of enterprise in India, and they have the largest oil refinery in the world. I visited it last year in Jamnagar, and it was partly built by Alberta’s Minister of Infrastructure, the Honourable Prasad Panda. He helped to lead the first phase of its construction.
Thirteen years ago is the first time I met Narendra Modi, the now prime minister of India. He was then the chief minister of Gujarat, like the premier of that state. And when I met Modi-ji 13 years ago, I was a federal minister for Canada.
Chief Minister Modi-ji said to me, Minister Kenney, we want natural gas from Canada. When are you going to get it to us? I said, well, as soon as we can. And I said, but why are you so keen for Canadian gas, Chief Minister? And he said, because right now we import almost all of our gas from Qatar and that regime funds extremism, which targets sometimes our citizens with terrorism. We do not want to be funding the security adversaries of our country, and we know we can depend upon Canada to be the safest and most secure form of energy for India.
Now, that’s the good part of the story. The bad part of this story is 13 years later, we still aren’t getting our gas to him, but we will get it done. And we will also get Alberta oil. I can tell you when I was in Jamnagar, Reliance, the major refinery there, confirmed for me that they have the capacity to process Alberta heavy crude. So security is so critical. Security of supply is also a competitive advantage for our gas industry as I’ve said, along with geographical proximity compared to many other exporters including the U.S.
But the big win for the planet, the big win, is the opportunity for western Canadian natural gas to replace thermal coal in countries like China, India and Indonesia. It has been estimated that Canadian natural gas could displace enough coal to reduce China’s emissions by 6 per cent, or India’s by over 23 per cent. That means we could, just by shipping Canadian LNG to those countries, help to reduce global GHG emissions by more than the entire Canadian economy produces in an average year.
For some people, these are inconvenient facts. With the International Transferred Mitigation Obligations, or ITMOs, these are contemplated in Article VI of the Paris Accord. With ITMOs, Alberta is positioned to obtain massive carbon credits from gas exports and from transferring CCUS and other pioneering technology to other jurisdictions.
We got all 13 Canadian provincial and territorial premiers, at the Council of the Federation this summer, to call unanimously on the federal government to demand that we get credit through Article VI of the Paris Accord for these technologies and for this energy. So we have all provinces and regions of the country behind us on this.
Clearly, we have a great story to tell about our environmental record and emissions trajectory, which matters to a lot of global investors, but they also need to hear about our performance on social and governance criteria.
Have you heard the phrase ESG? Environmental and Social Governance criteria? Our marks there are second to none. We already adhere to the world’s best human rights and labour standards, and the most stringent regulatory oversight. Canada ranks eighth out of 180 countries on Transparency International’s corruption index, and we are number one on that index amongst the top global energy producers.
We rank third behind only Norway and Denmark on the aggregated ESG performance of all oil-producing nations according to Yale University’s Environmental Performance and Social Progress index. Alberta has 50 per cent of the world’s free market oil reserves, because 79 per cent of global oil reserves are state controlled and many of those are states that have little or no regard for democratic values, for human rights, or for women’s rights.
We are also global leaders on consultation, opportunities, and equity participation for First Nations. Our government is stepping up those efforts with the recent creation of the Indigenous Opportunities Corporation, an unprecedented finance backstop of up to $1 billion to help our First Nations move their people from poverty to prosperity by having an ownership stake in the development of the resources that lie below the ground that their ancestors first inhabited.
We have a moral obligation in our time to make that happen, to – as one of my Indigenous chief friends says – move from reconciliation to reconcili-action. Poverty is not reconciliation. Prosperity, employment and opportunity is. For so many of our remote First Nations, that means being full participants in our resource economy.
I love telling this story, and we have a great story to tell. And the best part of it lies ahead. We’re now working with governments, industry and environmental groups to establish independent, auditable and science-based metrics for our ESG performance. We look forward with confidence to comparisons with the other major oil and gas producing nations. We expect to win the global competition to meet the world’s needs for cleaner fuel, led by the world’s best and most socially and environmentally responsible energy firms.
The same week that Teck Resources suspended its $20 billion Frontier project, which would have created 8,000 jobs and $70 billion of government revenue, Russian president Vladimir Putin—and this is not a nice guy, just so you know, his political opponents have a terrible tendency to disappear—announced a $150 billion oil field development mega-project in Siberia.
That was just a couple of months after the first gas started flowing from Russia to China through their new $180 billion gas pipeline. I don’t think I have to tell you what’s wrong with this picture.
The Teck project would have been the lowest-emission oil sands project yet. It would have been in the bottom quartile of CO2 emissions for global oil. It was supported by all of the local First Nations communities who would have benefited enormously from its economic impacts. That benefit was in part thanks to hard work our government did to sign up the Athabasca Chipewyan First Nation and the Mikisew Cree First Nation with strong benefit agreements.
It would have strengthened the economy of Canada, a country that hews to the highest human rights and labour standards on earth. And it would have captured a share of the global energy market that, instead, will be filled by producers like Russia, a corrupt autocracy that pollutes with impunity, with no transparency, is doing little to reduce carbon emissions, and which just introduced new legislation further restricting the rights of gay and lesbian people.
Ladies and gentlemen, I believe that we have to tell this message. Why would we abandon global energy markets to regimes like that, when we can take the brilliant young minds that are studying here at Petroleum Engineering, at SAIT, and put them to work demonstrating this cutting-edge industry for the rest of the world?
I believe you have a great future in the Alberta petroleum industry. You will be the workers and managers who will lead Alberta’s energy industry to its destiny as the cleanest and most competitive on earth.
So have confidence in yourselves. Have confidence in your industry. Have confidence on what you have learned here at SAIT. Have confidence in the great employers who are sponsoring this evening, who hopefully will hire many of you this spring.
Have confidence in our future to have that confidence is the Alberta way, and it will get us successfully through today’s challenges to tomorrow’s growth and prosperity.
Thank you very much.