Nova Scotia and the World Energy Outlook

Larry Hughes

According to the recently released World Energy Outlook 2012 from the International Energy Agency, the world’s energy markets are undergoing substantial changes, driven by technological developments, the decline of conventional sources of crude oil and natural gas, the ongoing de-industrialization of many developed countries, and the trend towards the increased use of electricity. Several articles in last Friday’s would suggest that Nova Scotia is already experiencing these changes.

For example, in Economic Notes, it was reported that Nova Scotia Power’s September electricity-production had declined since August and that during the first three-quarters of 2012, production had fallen relative to the same period in 2011. While both of these observations are true and can be attributed almost entirely to the complete or partial shutdowns of some of Nova Scotia’s pulp and paper mills, it overlooks the fact that the demand for residential electricity has risen markedly since 2005, due in large part to homeowners opting for electric heating—a direct result of rising oil prices and oil tank insurance rates and the lack of natural gas infrastructure in the province. (Commercial demand for electricity has also experienced growth over the same period, albeit to a much lesser extent.)

Another example was the story on the possible development of a liquefied natural gas facility in Goldboro. Somehow, the fact that low-cost natural gas from the United States (a consequence of the increasing use of fracking) will be shipped through Nova Scotia for export to Europe is seen as a good thing by politicians and other pundits. Granted, if the project proceeds there will be a short-term demand for construction workers; however, once completed, the number of jobs will be reduced to a limited number of highly-skilled workers employed at the facility. The mania to export energy from Nova Scotia seems to know no bounds; in this case, natural gas from the United States—despite its potential use in the province to heat buildings and act as a backstop variable sources of electricity (notably wind) for the production of electricity.

The final example was the article summarizing a BP shareholders’ meeting in London at which several vice-presidents spoke, claiming that BP will be exploring “in the world’s most prolific hydrocarbon basins” for “giant oilfields of over 250 million barrels” and plans to drill 15-25 new exploration wells a year. What was said to BP’s shareholders should not be surprising in the least, given the string of bad news associated with the company over the past twelve months, including further fallout from the Macondo rig blowout and subsequent disaster in the Gulf of Mexico and the seemingly never-ending debacle in Russia with TNK-BP and the Russian government. As a shareholder-owned oil major, BP needs to find new sources of oil in order to offset the depletion of its reserves at a time when new reserves are getting harder to find in traditional locations (hence the company’s move to offshore and frontier regions) in the sizes they once were (giant oilfields used to be those with reserves over 500 million barrels, now they are apparently down to 250 million). Assuming for a moment that Nova Scotia has a prolific hydrocarbon basin containing at least one giant oilfield and that BP is able to find it, one can only hope that the oil is able to benefit those Nova Scotians who use oil products for heating and transportation; however, despite coming from Nova Scotia, it will still command the world price.

Nova Scotia’s lack of a coherent energy strategy to address the changes to the world’s energy markets as described by the International Energy Agency is becoming increasingly apparent. Not only does the province need to ensure access to sources of energy to meet existing demand, it must also develop a realistic vision of a secure energy future and create the policies for the transition to it.

Published 12 December 2012