| Notes for remarks by Tim J. Hearn, Chairman, president and chief executive officer, Imperial Oil Limited to the Public Policy Forum Energy Conference, Ottawa, Ontario
| | Ottawa, ON | November 29, 2004
| Good afternoon, ladies and gentlemen. It's a pleasure to be here and an honour to chair a panel of such distinguished individuals.
The panelists are:
George Anderson, Deputy Minister, Natural Resources Canada
Val Mirosh, Vice-president, Nova Chemicals
David Manning, Senior Vice-president, KeySpan Energy
Tom Marr-Laing, Policy Director, Pembina Institute for Appropriate Development
I'm personally looking forward to hearing each of their views, and I'm sure all of us will leave this session with a more informed perspective on the important issues at hand.
As you know, the subject of this session is North American energy demand. As chair of the panel, I will provide a brief overview of the subject, against which our panelists can address their individual perspectives.
We cannot discuss the North American energy picture without putting it in a broader, global context. Imperial's forecast of world energy supply and demand over the next few decades is essentially in accord with the IEA outlook summarized by Dr. Skinner in his plenary address.
Basically, global population and economic growth will continue to increase demand for energy, particularly in the developing world. History has demonstrated that this linkage is inescapable. The ratio can vary from region to region, and can be moderated by improvements in energy efficiency and conservation. However, you cannot have a growing population, expand industrial activity and meet the legitimate aspirations of people in the developing world for improving standards of living without consuming more energy.
The world's population, which is now about 6.3 billion, is projected to increase to about 8 billion by 2030, or by about 25 percent. Gross Domestic Product is projected to grow by about 2.8 percent a year on average. This is not very different from the trend over the last quarter century of about 2.9 percent a year. However, growth will be much stronger in developing Asia, especially in China and India.
Energy use will grow by about 1.7 percent a year, or almost two-thirds of GDP growth. Global consumption of all forms of energy will rise by about 50 percent by 2030 -- to around 325 million oil-equivalent barrels a day. North American energy consumption will grow by about 30-35 percent over the same time frame.
This outlook takes into account expected further improvements in energy conservation and efficiency. In fact, without these expected improvements, global energy demand by 2030 would be more than a hundred million oil-equivalent barrels day higher, or close to 450 million barrels a day.
The fossil fuels -- oil, natural gas and coal -- will continue to be world's dominant sources of energy, at least through 2030 and probably well beyond. Other sources -- hydro- and nuclear-generated electricity, biomass fuels and renewables such as wind and solar power -- will be important and may see significant growth. But based on current technology and infrastructure, only hydrocarbon-based energy can be produced and delivered on the scale required to maintain a balance between demand and supply.
Oil in particular will remain the dominant source of transportation fuels. It has clear advantages in energy density, cost, availability, ease and safety of handling, and the existing infrastructure for production and distribution.
Again, the outlook for transportation fuel demand takes into account significant expected improvements in fuel efficiency. Even without widespread growth in fuel-cell-powered vehicles, technological advances could improve new-car fuel economy by as much as 80 percent by 2030.
In fact, we see fuel-efficiency improvements more than offsetting growth in vehicle population in both North America and Europe. As a result, total light-duty fuel volumes will decrease in both regions, with total oil demand remaining relatively flat.
Globally, however, we expect oil demand to rise by about 50 percent -- to about 120 million barrels a day by 2030 -- due to rapid growth in developing Asia.
Given this demand outlook, it's clear that both globally and in North America, we need to take a two-pronged approach to our energy future. First, there is a need to strongly encourage all economically-viable options to reduce unnecessary consumption -- to ensure that every unit of raw energy produced is used efficiently and productively.
It's important to bear in mind, however, that in North America, a great deal of progress has already been made in improving energy efficiency. Overall, energy consumption per unit of economic activity in North America has been reduced by more than 35 percent over the last quarter of a century.
In transportation, the efficiency of the automobile engine has improved steadily, at roughly 1.5% per year since 1980. However, this hasn't translated into comparable improvements in vehicle efficiency, because consumers have been opting for larger and heavier vehicles. This highlights the important role that consumer preferences can have on energy consumption.
Industry has also steadily improved its energy efficiency steadily. In our industry, petroleum refineries today are some 40 percent more energy efficient than they were thirty years ago. And those improvements are mirrored in many other industries.
Achieving further dramatic reductions will be a challenge. In any case, it's clear that we cannot just conserve our way to supply-demand balance and energy security. Any progress made in improving energy efficiency will be outweighed by global demand growth.
So in concert with efficiency and conservation efforts, we also need to mount an all-out effort on the supply side. All available and economically-viable energy-supply options must be vigorously pursued -- in oil, gas, coal and nuclear as well as with other alternatives and renewables.
I'd like to emphasize that the world is not running out of oil, as some say. The current recoverable resource base is sufficient to meet demand for decades to come. Global natural gas resources can also easily meet projected increases in demand. However, with existing fields generally declining, about one half the oil and gas that the world will need in just ten years must come from fields that are not in production today.
For Canada, this presents both huge opportunities and challenges. In a world where more energy is increasingly essential, we are blessed with abundant resources of all forms of energy. We also have the human capability and the basic technologies needed to develop our resources -- to become a more significant supplier of energy. These are advantages that many other nations wish they had, but don't.
That's the opportunity side. The fundamental challenge is to develop Canada's energy resources in ways that meet two critical tests. One is to do so at costs that are competitive with other potential suppliers. The other is to ensure that we meet relevant environmental responsibilities -- and I stress that these are parallel and equal objectives.
Huge amounts of investment capital will be needed. Much of Canada's resource base is of the high-cost variety -- the oil sands in particular, but also for offshore and northern oil and gas resources. Development requires huge investments and long lead times, which in turn requires a sound fiscal and regulatory environment.
Another critical factor -- on both the supply and demand sides -- is technology. The best scientific minds need to be brought to the challenges of using energy more efficiently and developing energy resources at acceptable costs and minimal environmental impact.
This means searching for and investing in new ways of doing things. For example, Imperial recently committed $10 million over five years to the University of Alberta for breakout research aimed at developing Canada's oil sands in ways that are both economically viable and environmentally responsible.
The other fundamental requirement for meeting the challenge is a supportive public policy environment. This is why I'm pleased to see energy policy once again on the agenda of Canada's policy makers, as reflected in this conference.
I hope that our policy-makers will recognize that in order to attract the levels of investment and technological innovation that will be required, we need a policy environment and regulatory and fiscal regimes that are expeditious, fair, competitive and encouraging to market-driven investments.
More than anything, we need to ensure that Canada remains closely linked with and has open access to global energy markets, as we do today under NAFTA.
Canada is a trading nation, and the well-being of Canadians is closely connected with the well-being of the global economic system. That system runs on energy, and Canada has the opportunity and the capability to contribute to a healthy global economy by developing its energy resources.
At the same time, the development of Canada's energy resources has contributed strongly to our own economic growth and overall prosperity -- prosperity in which all Canadians share. We have the opportunity, and the capability, to make an even greater contribution in the future, and I am confident that we will.
Thank you.
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