The Globe and Mail by Nathan VanderKlippe / Jun. 08, 2017
It did not take long after Donald Trump said he would pull the United States out of the Paris climate agreement that Canada and China leaped into the breach, promising to lead the way to a different future.
The fight against rising temperatures is first among “shared human imperatives,” Canadian Foreign Affairs Minister Chrystia Freeland said. Emissions reductions are an “international responsibility,” Chinese Premier Li Keqiang said.
But when Natural Resources Minister Jim Carr arrived in Beijing this week, he had a very familiar item on his agenda: promoting a pipeline and the hope that Canadian crude will one day sail across the Pacific in large volumes.
We have to expand our export markets in all of our natural resources,” he told an audience of energy executives and Chinese investors. “And that is why China is so important to us. That’s why we approved a pipeline to take Alberta crude to the West Coast, and then on to Asia.”
It was a theme Mr. Carr revisited in meetings with his Chinese counterparts as he stressed Ottawa’s desire to move oil west over the objections of the NDP-Green Party coalition seeking power in British Columbia.
“The government of Canada is committed to the Trans Mountain expansion project,” Mr. Carr said in an interview. “We believe it’s in the national interest for all of the reasons that we have expressed – job creation, expansion of export markets.”
At meetings for a Clean Energy Ministerial forum, Mr. Carr also advocated for the greater use of carbon capture and storage and for the potential of Canada to export clean technology.
But behind the rhetoric, the continued promotion of Canadian oil and gas in China underscored the degree to which neither country shows any sign of giving up fossil fuels any time soon.
“At the moment, China represents only a fraction of our oil exports and none of our natural gas. We’re looking to change that,” Mr. Carr said.
Canada and China, he added, are “perfect partners,” aligned in pursuing a low-carbon economy and using fossil fuels to get there.
It’s a controversial position, particularly among environmental voices who say Canada is pouring political and financial capital into an endeavour that will deliver a product China may not want in years to come, particularly as Beijing sets course for a less carbon-heavy future.
But the International Energy Agency (IEA) predicts China’s oil demand will continue to rise – so much so that, by the early 2030s, it will surpass the United States as the world’s largest consumer. And China’s dependence on imported crude will grow – rising from roughly 65 per cent today to 80 per cent in a decade, estimates Bo Qiang Lin, dean of the China Institute for Studies in Energy Policy at Xiamen University. That means “China will try to diversify its oil demand,” he said.
Meanwhile, dwindling supplies from places such as Venezuela will add to China’s appetite for heavy oil, the kind extracted from Canada’s oil sands. “They have the demand for this crude, they can process it,” said Sushant Gupta, the director of Asia Pacific refining at energy consultancy Wood Mackenzie.
It all has the makings of a plush welcome mat for Canadian crude. Mr. Gupta expects the expansion of the Trans Mountain pipeline from Alberta to British Columbia will direct 500,000 barrels a day of Canadian crude to Asia, primarily China, some time after 2020. For the oil patch, new profits will follow, he said. “Those producers will get higher netbacks going to China.”
But Canada’s pipeline plans are being drawn on a changing landscape.
Canada faces growing oil supplies out of the United States that can be pumped more cheaply and in great volumes.
Barring war or other shocks, the future “supply of oil will exceed demand, and so the Chinese don’t need to buy our oil,” said Mark Jaccard, a Simon Fraser University scholar who has served on the China Council for International Co-operation on Environment and Development.
The IEA has said it will review demand forecasts in light of major new efforts by both China and India to move away from gasoline-powered transportation. India this week committed to selling only electric cars by 2030. China, already the world leader in manufacturing and installing wind and solar power, said in April that it expects domestic sales of alternative-energy vehicles to hit roughly seven million by 2025.
The IEA has forecast that global oil demand will rise until 2040, but the agency is “categorically wrong,” said Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis.
“We’re in a creative destructive technology transition, and there’s going to be a lot of losers in that environment,” Mr. Buckley said, adding that China has two powerful reasons to move away from gasoline: a desire to reduce foreign-energy dependency and an ambition to become the global leader in the next generation of transportation.
“We are going to stop powering cars with gas and shift to electricity and other non-carbon sources,” said Merran Smith, the executive director of Clean Energy Canada, a think tank. “Those who lead on clean-energy technologies now will be the winners. If you’re not in the vanguard of this energy transition, you risk being left behind.”
Still, it takes a lot of Teslas to shut down oil wells. The IEA estimates that 150 million plug-in cars equal 1.3 million barrels of oil a day – just 1.3 per cent of the global demand forecast for this year.
In the meantime, Mr. Carr argued in an interview, “we should use the revenue from conventional sources to finance the transition to renewables. And China understands that.
“This is a transition,” he added. “It’s going to take a while.”
Mr. Carr was joined in China by a contingent of clean-tech firms and environmental thinkers, which Ms. Smith, who was among the group, called a first.
“So that is a good sign and first step that the government is seeing the need to sell Canada’s resourcefulness, not just resources,” she said. Canada has 11 companies on the most recent Global Cleantech top 100 list, she pointed out. The United States has 52 and Britain has seven, while China has just two.
Also in Beijing with Mr. Carr were energy-company executives and Tim McMillan, president of the Canadian Association of Petroleum Producers.
The Natural Resources Minister pointed to the Canada’s Oil Sands Innovation Alliance, which shares green technologies between companies extracting bitumen, as evidence that Canada is also moving toward a cleaner future. And Canada’s pursuit of crude exports, he said, is balanced by its investment in an ocean-protection plan and Ottawa’s commitments to cut greenhouse gas emissions.
“We’re working across governments in Canada to achieve that common goal,” he said. “So I don’t see it as a contradiction in direction at all.”