Nova Scotia and the International Energy Agency

In late November, Dr. Fatih Birol, the Chief Economist of the International Energy Agency was in Budapest, Hungary, discussing the IEA’s most recent World Energy Outlook report with the Hungarian government. After his meetings he gave a public lecture on the challenges facing energy importing countries over the next 25 years.

The main focus of the lecture was on oil demand and production. His most striking example of the world’s increasing demand for oil products was China and the automobile. Today, 500 out of every 1,000 Europeans own a car, in the United States, 700 out of every 1,000 people own a car, while in China, only 30 people in every 1,000 own a car. By 2035, Dr. Birol estimates that Chinese car ownership will increase to 240 per 1,000. The majority of these cars are expected to run on oil products.

In order to meet the growing demand for oil from Middle Eastern and Asian countries, as well as that from developed countries (which are experiencing limited growth), the world will need to produce more oil.

The IEA expects world oil production will continue to grow because of a gradual increase in production from non-conventional oil sources (notably Canada’s tar sands and Venezuela’s heavy crude deposits) and the supply of more natural gas liquids from shale gas, primarily in the United States.

That was the good news. Dr. Birol went on to present some sobering observations. First, conventional sources of crude oil (such as those found in the Middle East and Western Canada) which have in the past contributed to the growth in world oil production will no longer be able to do so because they have reached a production plateau. Second, conventional crude oil fields are in relentless decline, meaning that for conventional production to maintain its plateau new conventional fields must be brought on stream to offset the decline. The one country that the IEA is counting on to do this is Iraq; however, if there are delays in bringing Iraqi oil to market, total world oil production will begin to fall. Third, world oil prices are expected to climb because of increasing production costs of both conventional and non-conventional crude.

So what do the concerns over oil supply and prices that Dr. Birol raised in his lecture mean to Nova Scotia? Apparently very little—in fact, Nova Scotia appears to be living in some form of splendid isolation when it comes to energy. During the signing of the Lower Churchill agreement, Premier Dexter claimed that the one terawatt-hour of electricity per year starting sometime late in the next decade would “stabilize energy prices for Nova Scotia families and businesses well into the future.

One terawatt-hour of electricity is a great deal of energy, but is it enough to stabilize energy prices for Nova Scotian families and businesses?

According to Statistics Canada, Nova Scotia consumes about 48 terawatt-hours of energy a year from a variety of sources (primarily refined oil products and electricity) to meet the final energy demand of its energy services (that is, transportation, heating and cooling, and electricity supply). One terawatt-hour, the total energy to be supplied to Nova Scotia by the Lower Churchill, is about 2 percent of the energy Nova Scotians use each year to meet their energy service needs—not enough to stabilize energy prices.

To be fair to the Premier, he may have meant “electricity prices” when he said “energy prices”. But believing that one terawatt-hour of electricity will stabilize electricity prices may be wishful thinking, especially in light of Dr. Birol’s observations.

Oil meets about 70 percent of Nova Scotia’s final energy demand, most of which is used for transportation and heating. If oil becomes difficult to obtain or oil prices increase substantially, or both, Nova Scotians can be expected to turn to electricity, initially for heating, and for those who can afford it, transportation. A significant and unplanned increase in electricity demand will impact hospitals, schools, industries, and other businesses. It can also be expected to raise, not stabilize, electricity prices.

In his talk, Dr. Birol also discussed renewables, not only for meeting electricity demand, but for the demands of all energy services. The same holds true here—the energy challenges facing Nova Scotia over the next 25 years will require more than renewable energy meeting part of the province’s electricity demand. The Premier can begin to address these challenges by developing a new energy strategy with the goal of improving the energy security of all the province’s energy services.

Submitted to and Chronicle-Herald, 9 December 2010. Unpubished.