Despite the best efforts of the federal government to stifle it, Canada’s natural gas industry could be worth upwards of USD$500 billion in government royalties and capital spending to 2050 — Canada’s official net-zero target under the Paris Accord.And that’s assuming those targets will be met, according to the latest fact sheet from the Canadian Energy Centre.“With ongoing public discussions focusing on net-zero emissions from Canada’s natural gas sector, it is a good time to examine projected government revenues and capital expenditures expected from the sector through 2050,” it said.“This analysis illustrates how investment in low emitting technologies will help preserve government revenues and (capital spending) in Canada’s natural gas sector.”Depending on prices, governments could reap a cumulative $227 billion in royalties and taxes — or $10 billion per year — along with another $297 billion in capital investments including exploration and development costs, and new technology to offset emissions.Those numbers are predicated on a long-term average natural gas price of $4 per thousand cubic feet at the main trading hub in Louisiana.Based on present prices of about $3, those numbers would amount to $85.4 billion and $188.8 billion, respectively, assuming a 2.5% inflation rate discounted 10%. As of Wednesday morning, New York Mercantile Exchange gas futures were trading at $3.53..That’s assuming demand forecasts from the Paris-based International Energy Agency (IEA) are wrong.In its latest World Energy Outlook released in October, the IEA predicts fossil fuel demand — including natural gas — will peak before 2030 and start gradually declining about 15% by 2040 as it is displaced by renewable energy sources in power generation.Advanced economies, led by Europe, account for around three-quarters of the overall downward revision in gas demand, it said.Those numbers are significant because they’re the same ones the Canadian Energy Regulator (CER) is using to inform its ‘just transition’ to net-zero in this country. Canada is a member of the IEA.Under those forecasts, Canadian gas production falls by 68% to about 5.5 billion cubic feet (bcf) per day from 19 bcf per day at present. Under the so-called ‘current measures’ scenario, however — assuming the present status quo — production actually rises to about 22 bcf per day..The global industry, not just Canada’s, is banking on the latter. That’s because buyers in Europe and Asia have been signing long-term supply deals at a furious pace, catapulting the US into top spot as the world’s largest LNG exporter.Various forecasts by S&P Global, McKinsey & Co. and others, predict Asian demand alone to increase anywhere from 30% to 50% as countries such as China move to eliminate coal in their power systems. Asia presently accounts for more than 70% of LNG demand.Even Shell, the main backer of the LNG Canada project near Kitimat, sees global LNG demand to nearly double by 2040. Alberta Premier Danielle Smith has touted Canadian gas exports as a way to reduce Canada’s emissions by helping countries such as China wean off coal under Article 6 of the Paris Accord.“The war in Ukraine has had far-reaching impacts on energy security around the world and caused structural shifts in the market that are likely to impact the global LNG industry over the long term,” Shell’s Executive Vice-President for Energy Marketing Steve Hill said in the report’s preamble.“It has also underscored the need for a more strategic approach, through longer-term contracts, to secure reliable supply to avoid exposure to price spikes.”
Despite the best efforts of the federal government to stifle it, Canada’s natural gas industry could be worth upwards of USD$500 billion in government royalties and capital spending to 2050 — Canada’s official net-zero target under the Paris Accord.And that’s assuming those targets will be met, according to the latest fact sheet from the Canadian Energy Centre.“With ongoing public discussions focusing on net-zero emissions from Canada’s natural gas sector, it is a good time to examine projected government revenues and capital expenditures expected from the sector through 2050,” it said.“This analysis illustrates how investment in low emitting technologies will help preserve government revenues and (capital spending) in Canada’s natural gas sector.”Depending on prices, governments could reap a cumulative $227 billion in royalties and taxes — or $10 billion per year — along with another $297 billion in capital investments including exploration and development costs, and new technology to offset emissions.Those numbers are predicated on a long-term average natural gas price of $4 per thousand cubic feet at the main trading hub in Louisiana.Based on present prices of about $3, those numbers would amount to $85.4 billion and $188.8 billion, respectively, assuming a 2.5% inflation rate discounted 10%. As of Wednesday morning, New York Mercantile Exchange gas futures were trading at $3.53..That’s assuming demand forecasts from the Paris-based International Energy Agency (IEA) are wrong.In its latest World Energy Outlook released in October, the IEA predicts fossil fuel demand — including natural gas — will peak before 2030 and start gradually declining about 15% by 2040 as it is displaced by renewable energy sources in power generation.Advanced economies, led by Europe, account for around three-quarters of the overall downward revision in gas demand, it said.Those numbers are significant because they’re the same ones the Canadian Energy Regulator (CER) is using to inform its ‘just transition’ to net-zero in this country. Canada is a member of the IEA.Under those forecasts, Canadian gas production falls by 68% to about 5.5 billion cubic feet (bcf) per day from 19 bcf per day at present. Under the so-called ‘current measures’ scenario, however — assuming the present status quo — production actually rises to about 22 bcf per day..The global industry, not just Canada’s, is banking on the latter. That’s because buyers in Europe and Asia have been signing long-term supply deals at a furious pace, catapulting the US into top spot as the world’s largest LNG exporter.Various forecasts by S&P Global, McKinsey & Co. and others, predict Asian demand alone to increase anywhere from 30% to 50% as countries such as China move to eliminate coal in their power systems. Asia presently accounts for more than 70% of LNG demand.Even Shell, the main backer of the LNG Canada project near Kitimat, sees global LNG demand to nearly double by 2040. Alberta Premier Danielle Smith has touted Canadian gas exports as a way to reduce Canada’s emissions by helping countries such as China wean off coal under Article 6 of the Paris Accord.“The war in Ukraine has had far-reaching impacts on energy security around the world and caused structural shifts in the market that are likely to impact the global LNG industry over the long term,” Shell’s Executive Vice-President for Energy Marketing Steve Hill said in the report’s preamble.“It has also underscored the need for a more strategic approach, through longer-term contracts, to secure reliable supply to avoid exposure to price spikes.”
