ARCHIVED - Canada's Energy Future: Infrastructure Changes and Challenges to 2020 - Questions and Answers

1. What is the purpose of this report?

Studies such as Canada's Energy Future: Infrastructure Changes and Challenges to 2020 are part of the National Energy Board (NEB)'s mandate to monitor all aspects of energy supply, transportation and use in Canada. Providing this information is part of the NEB's overall goal that Canadians benefit from efficient energy infrastructure and markets.

The Board initiated this report to discuss the possible energy infrastructure implications, including the risks and challenges associated with development, based on the supply and demand forecasts presented in the 2009 Reference Case Update.

2. Why is there a need to construct energy infrastructure in Canada?

Energy supply sources are often located great distances from demand centres. For example, the oil sands in Northern Alberta are a major growth area for Canadian oil production and new gas supply is located in frontier regions of Canada and in Northeast B.C. In addition, hydroelectric and wind generation facilities are sited close to the resource which is not necessarily close to major population areas. Finally, a significant portion of energy produced in Canada is exported to the U.S. and other offshore destinations, contributing to Canada's economic wealth.

3. How much energy is exported to the United States and other destinations?

In 2008, roughly 65 per cent of Canadian crude oil production, over half of Canadian natural gas production and nine per cent of Canadian electricity generation was exported.

4. How do growing energy exports contribute to Canada's GHG Emissions?

Environment Canada reports that since 1990 the growth in GHG emissions from Canada has increased from 592 Mt to 747 Mt, and increase of over 26 per cent. Upstream fossil fuel production (oil, natural gas and coal production) accounts for about 20 per cent of Canada's GHG emissions.

5. With slowing oil sands production growth, what are the next steps for potential development of crude oil pipeline infrastructure?

In the last several years, crude oil pipeline expansions and new pipeline construction has targeted the traditional markets in the U.S., such as Washington State and the Midwest. Pipeline projects beyond 2012 will likely target markets such as the U.S. Gulf Coast and Asia.

6. How is the oil industry managing CO₂ emissions? What does this mean for infrastructure development?

Carbon Capture and Storage (CCS), also known as carbon sequestration, is a process that collects carbon dioxide (CO₂) emissions before they enter the atmosphere and stores them in geological formations deep underground. CCS is acknowledged as one of the major ways by which the world can significantly reduce GHG emissions.

In order for CCS to proceed on a large scale, pipelines will have to be built to transport the CO₂ from source to major enhanced oil recovery (EOR) and other permanent storage sites.

7. How is declining natural gas supply impacting existing infrastructure?

Canadian natural gas production increased significantly through the 1990s, stabilized until mid-2007, and has since begun to decline. It is expected to decline more steeply in 2009 and 2010 due to a drop off in gas drilling caused by lower prices. Existing pipeline and processing infrastructure should have adequate capacity and there may possibly be excess capacity in some locations. Capacity exceeds current utilization on natural gas pipelines to move gas out of the Western Canada Sedimentary Basin (WCSB) and should the forecasted decline in production materialize there could be further declines in the capacity utilization of the WCSB and deliveries to export markets could decline. It is expected that most infrastructure requirements through 2020 will be regional in nature and will be integrated into existing infrastructure.

8. Natural gas pipelines and production infrastructure is a significant source of GHGs, how is the industry dealing with this?

Reducing flaring and venting of solution gas are major initiatives by provinces and the petroleum industry. In Alberta, overall flaring and venting was reduced by   and 41 per cent, respectively since 2000. The governments of B.C, Alberta and Saskatchewan currently all have programs to reduce solution gas flaring and venting.

9. How are natural gas demand and market changes impacting potential new pipeline infrastructure?

In addition to changes in existing supply, Canadian natural gas infrastructure requirements are also influenced by expected changes in natural gas demand. Increasing demand for natural gas in Alberta may require additional infrastructure to transport natural gas to the oil sands. In Ontario, increasing use of natural gas for electric power generation may require access to additional gas supplies and improved flexibility through greater storage and service enhancements in order to meet the variable demands of the electricity market. In addition, pipeline infrastructure delivering into the eastern Canadian transportation hub located near Dawn, Ontario has become increasingly diverse in recent years, accessing gas from growing shale gas supplies in the U.S. Consequently, future gas supply developments in the WCSB may become less important to eastern Canadian markets.

10. How is the NGL demand changes expected to impact current and future infrastructure?

NGL supply dynamics and growing oil sands production are the main factors shaping future infrastructure requirements for NGLs. Falling propane and butanes exports could put pressure on companies to rationalize existing pipeline and rail export infrastructure. Increasing condensate imports will likely require not only new import pipelines, but also new installations for reception, storage and distribution of these volumes to oil sands producers.

11. What are main impacts on electricity infrastructure development resulting from the industry's goal to maintain reliable power systems?

Electric reliability can be divided into two related components: supply adequacy and system security. Ensuring adequate supply involves procuring generation resources and transmission lines to provide consumers with electricity when it is demanded. Maintaining system security involves adhering to operational standards, replacing or refurbishing old facilities, and safeguarding facilities against potential hazards (e.g., near-by vegetation). In many provinces there is currently a need for new transmission facilities, including international power lines, as aging infrastructure and the need to ensure a reliable and affordable supply of electricity become a greater concern in many jurisdictions.

12. How will environmental concerns impact electricity infrastructure development?

Environmental concerns and climate change initiatives will put pressure on the North American grid to increase the transmission of electric energy from remote sources (e.g., hydro, wind) to demand centers. Major projects requiring international infrastructure could be useful for the provinces and states to reach their goals of more sustainable development and GHGs emissions control.

13. What are the key issues and challenges in infrastructure development?

There are number of issues and challenges in infrastructure development that are common across the energy sector, they include:

• Environmental considerations
• Respect rights and interests of all parties
• Regulatory processes
• Safety
• Security
• Labour and Skill Shortage
• Energy pricing volatility; and,
• Financing

Date modified:

2020-09-29