Canada must give the world what it wants — more natural gas

Canada is an energy power capable of meeting a large part of the world’s growing energy needs for decades to come

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This winter, Europeans are faced with a difficult choice: to heat themselves or to eat. Due to Russia’s weaponization of energy, natural gas prices in Europe have soared, up more than 250% in the past two months and are trading at the equivalent of over $500. US per barrel.

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The resulting impact on the cost of producing electricity is enormous: French one-year electricity futures contracts traded last week at 1,000 euros per megawatt, a staggering 22 times increase over compared to its 2010-2020 average of only 45 euros.

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This rate of energy inflation is absolutely devastating for the European economy, with businesses closing and politicians pleading with citizens to reduce demand, take cold showers to limit heating, all to help strategically store gas natural before winter. French President Emmanuel Macron even told his cabinet that France was experiencing “the end of the era of abundance”.

Calling it a “crisis” doesn’t seem to do it justice. Underlining how desperate the situation is, the German Chancellor visited Canada last week to advocate for more Canadian energy, as the current situation is literally a matter of economic and personal survival.

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Canada is an energy powerhouse capable of meeting much of the world’s growing energy needs for decades to come. We are blessed with an abundance of oil and natural gas, both produced to the highest environmental standards anywhere in the world. Additionally, the energy sector is a massive contributor to the Canadian economy, providing extremely well-paying jobs that directly and indirectly account for up to 15% of Canada’s GDP.

By 2023, according to the Royal Bank of Canada, the energy sector is expected to generate more than $60 billion in royalties and taxes, paying for the construction of much-needed new hospitals and schools from coast to coast.

With such enormous energy wealth in a world that literally begs us to produce it, it is extremely frustrating to see us not taking full advantage of it.

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Last February, even as Russia financed the purchase of cruise missiles with sales of natural gas, the Canadian government rejected a liquefied natural gas (LNG) project in Quebec, saying that the negative effects on the environment were “in no way justifiable”. And our response last week to the German Chancellor coming hat in hand and saying “we hope Canadian LNG will play a major role” in helping them move away from Russian energy, was that there is “ never had a solid business case” for Canada. LNG. Excuse me?

Canada is the fifth largest producer of natural gas in the world and when you count the unaccounted for reserves in our Montney natural gas play, it has decades of inventory remaining. In a world that desperately needs more energy, as evidenced by the burning of more coal this year than at any other time in history, LNG has the unique ability to reduce global carbon dioxide emissions. , as it generates about half of the CO2 in the form of coal, even after accounting for the energy required to liquefy and transport it, while raining the riches of royalties and taxes on Canadians. Don’t we need money?

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Canada’s national debt is now $1.25 trillion, which is about $32,300 for every man, woman and child, and it’s increased 65% since the pandemic began in March 2020. With the rise interest rates, the cost of servicing our debt is rising significantly, challenging the Treasury and threatening our standard of living.

The business case for LNG has long been established. Canada has been dithering for 14 years and has yet to produce its first molecule of LNG, while the United States currently exports around 12 billion cubic feet (bcf) per day, equivalent to 70% of current production. natural gas from Canada. at the spot price of European gas amounting to more than one billion US dollars in revenue per day. It could have been us.

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The opportunity cost to Canada of royalties and taxes lost because it did not take advantage of this generational opportunity is almost incalculable.

Canadian LNG, if given the regulatory opportunity, could both significantly reduce global CO2 emissions while generating much-needed royalties and taxes in a world where demand for natural gas will continue to grow as it constitutes the reliable part of the energy mix until nuclear power may become more significant decades into the future.

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With 1.8 billion cubic feet per day of future LNG production already projected by 2025, Canada, if given the chance, could triple that figure by the end of the decade. For every billion cubic feet per day of LNG production, Canada could move 15.4 million tonnes of coal burned in one year to places like China, resulting in a net reduction in CO2 emissions of 22 million tonnes, the equivalent of transporting 9.5 million passenger vehicles off the road.

At the same time, each billion cubic feet of new gas production would generate more than $400 million in additional annual royalties. This is enough to build about 13 new schools or a large hospital per year.

Abandoning our wealth of energy resources and ignoring our allies’ global call for more energy produced to the most ethical and cleanest standards anywhere in the world is tantamount to economic betrayal. The world needs more Canadian energy.

Eric Nuttall is a Partner and Senior Portfolio Manager at Ninepoint Partners LP.

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